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Why the poor aren’t poorer after all

The study says the consumption rate of the poor isn’t declining


 

Why the poor aren’t poorer after allMany studies have come to the depressing conclusion that the rich are getting richer while the poor are getting poorer—but according to a new report from the Fraser Institute, it’s not happening here.

In The Economic Well-Being of Canadians: Is There a Growing Gap?, Chris Sarlo, an economist at Nipissing University, argues that most studies of the issue so far have been too narrow. The accepted figures show that the income gap between rich and poor has grown by nine per cent since 1969. But Sarlo says those reports don’t take into account the “underground economy” of unreported incomes common in the repair, renovation and hospitality industries. Sarlo values this economy at up to $50 billion a year, enough to seriously skew the statistics on incomes.

To overcome that shortcoming, rather than analyzing income rates, Sarlo’s report analyzes rates of consumption. By doing so, he found that Canadians with incomes in the lowest five per cent have actually purchased higher numbers of new “key facilities” (things like air conditioners and dishwashers that help increase quality of life) than those in the highest five per cent since 1985. Since that consumption rate isn’t declining, he says, it shows that the gap isn’t getting wider. “Given the data we have, as tarnished as it may be, it’s just not obvious that the rich are getting richer and the poor are getting poorer.”

Not everyone agrees with Sarlo’s happy conclusion. Armine Yalnizyan, an economist with the Canadian Centre for Policy Alternatives, says the rich under-report their incomes just as much as the poor. She also criticized Sarlo’s emphasis on consumption, claiming that the poor can afford more time-saving consumer goods because of a decrease in the price of electronics, not because their incomes are staying on par. “He’s using his skills to define away the issue of inequality,” she says.


 

Why the poor aren’t poorer after all

  1. Should we really be surprised that poor people bought more dishwashers and AC's than rich people did since 1985? Wouldn't most people with top 5% of incomes already have those things by 1985? And wouldn't they be more likely to buy more expensive (better quality, longer lasting) brands than poor people, so they don't have to buy replacements as frequently? It might not be perfect, but relative income is a pretty reliable indicator of inequality. Looking at consumption of specific items just seems like a case of starting with your conclusion and then generating data that fits.

  2. We're given two equally biased and unreliable sources here, from the right (Fraser) and left (CCPA), neither of which has ever found a single problem wherein they find their ideological presumptions challenged. This doesn't mean neither could be right, but unfortunately it is likely both are defining in or away key issues.

    The need is to pay attention to more moderate think tanks.

    • “We’re given two equally biased and unreliable sources here, from the
      right (Fraser) and left (CCPA), neither of which has ever found a single
      problem wherein they find their ideological presumptions challenged”

      Absolutely wrong. The Fraser Institute has a track record of consistently publishing bogus studies based on junk evidence. The CCPA, while they are certainly not perfect, does a much better job.

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