What’s really up (and down) with incomes

Soaring inequality would be terribly concerning if there were any factual basis for it

Weeks after the whole sorry mess began, we’re still being treated to deep thinkers pronouncing upon the Occupy gatherings as if they meant something Deeply Significant. This piece in the Vancouver Sun is a classic of the genre: inequality soaring, incomes stagnating, etc etc. All of which would be terribly concerning if there were any factual basis for it.

I’ve tried to deal with this elsewhere in prose, but sometimes there’s just nothing like a graph. Here, then, courtesy of Statistics Canada, is that runaway trend towards a society divided into haves and have nots, the “growing gap” you’ve been hearing all about:

That

Appalling, isn’t it? Why, in less than 20 years, the share of pre-tax incomes going to the top 20% has soared from 50% to … 52%. If this trend keeps up, by 2031 it will still be in the low 50s.

For those who’d like to check, the graph is from StatsCan’s CANSIM database. The numbers in HTML form are here (look under “All Family Units”), or you can have a look at my spreadsheet here.

Now, I’m cheating, of course. I’ve started the graph at 1991, a mere 20 years ago. Maybe widening income disparity is a more long-term phenomenon. Sure enough, if you pan back to 1976, which is where the CANSIM table I accessed begins, you see much greater gains for the rich.

Market Income - Quintile Shares.JPG

But that, surely, is the point. Most of the widening occurred decades ago: from 45% in the late 70s, the share going to the upper fifth rose to above 50% in the early-to-mid 1990s — and stayed there. So why all the caterwauling now, after nearly two decades of relative stability in income shares?

Why, especially, when the causes of the earlier widening are clear: the lingering effects of two brutal recessions. Have a look at the following graph. You can see two distinct phases. In the first, from the late 1970s to about 1993; the second, from 1993 onward. It’s in the first that all the widening occurred: not so much because the incomes of the rich rose, as because everyone else’s fell. They fell in two waves, corresponding to the recessions of the early 1980s and early 1990s, and the associated spikes in unemployment, to more than 11% each time.

It’s not hard to understand why: if lots of people are out of work, then lots of people are going to have little to no income to report. That drags down the bottom quintile in particular, but also other quintiles, so far as people earned no income for at least part of the year.

In between recessions, in the 1980s and again in the 1990s-2000s, incomes grew, in part reflecting a reversal of this trend: as people returned to work, the numbers reporting no or reduced income would have less and less effect on the average. Everyone’s incomes rise — but the incomes of the rich rise faster than everyone else’s. Much faster, it appears. So: growing gap, right?

Market Income - Quintile Averages (2009$).JPG

Not so fast. The chart above is deceiving, as it measures in dollar terms, rather than percentages. So higher incomes appear to grow much faster than everyone else’s, simply because they are dealing in higher dollar amounts. Index the numbers against a common starting point, and you get a better picture of whose incomes are growing faster or slower.

Relative Income Gains, By Quintile (1976=100).JPG

Again, you can see two distinct phases. In the first, everyone’s real incomes drop: the lower the income group, the faster — again, largely reflecting the influence of the two recessions. After 1993, everyone’s incomes rise — and the lower the income group, the faster. By 2007, just before the latest recession, average incomes in the lowest quintile, measured by the blue line, are nearly three times what they were in 1993. Average incomes in the next lowest, the green line, are up about 45% in the same time frame.

But the top quintile’s incomes do grow faster than some others: the middle (“third”) and second-from-the-top (“fourth”) quintiles. You can see that more clearly if we normalize the numbers using 1993 = 100. (I’ve left out the bottom group on this one, in order to be able to see more clearly how the top four quintiles move — the magnitude of the lowest group’s movements, down and up, so dwarf the rest as to make this necessary.)

Relative Income Gains (1993=100).JPG

So the incomes of the top quintile grew faster since 1993 than some (the next two quintiles) and slower than others (the bottom two quintiles). And in the earlier phase, they were largely spared the effects of the recessions that ravaged incomes lower down the scale. That’s a lot more complicated story than “the rich get richer while the poor get poorer.”

All of the above graphs are for pre-tax, or “market” incomes. The picture is not hugely different if you look at incomes after taxes and transfers. The increase in the top quintile’s share is more muted, but also more of it occurs in the later phase. A possibly explanation: in the recessions, incomes lower down are buttressed by unemployment insurance and welfare. After 1993, these decline in importance; after 2000, moreover, tax cuts disproportionately benefit the upper fifth (since they pay most of the taxes.)

Income After Taxes and Transfers, Quintile Shares.JPG

Finally, all of the charts above look at quintiles, based on family or household income. But what of the overall median? And what if we look at individual, rather than family income? Again, the picture is not hugely different: declining incomes during the recessions, rising otherwise.

Median incomes (2009$).JPG

Again, normalizing the numbers gives a sense of their relative fall and rise. Median family incomes have risen nearly 20% since 1993, median individual incomes somewhat less.

Relative income gains (1976=100).JPG

Still, it’s hardly an inspiring performance. Median incomes may have been growing for most of the last two decades, but they’re still below where they were in 1980. Yes: a couple of brutal recessions will do that to you. Unemployment spikes very rapidly, but subsides much more slowly. Answer: don’t have brutal recessions. Better answer: don’t allow the kind of accelerating inflation that leads to brutal recessions.

We forget how anomalous the experience of the 1970s to 1990s was. We didn’t have such nasty recessions in prior decades, because we never let inflation get so out of hand. We spent most of the 1980s recovering from the 1982 recession, and we spent most of the last two decades undoing the damage of the previous two. We were just about back to where we were when the financial crisis hit.

But still: we’re no further ahead than we were in 1980! And even the last two decades of growth didn’t produce that much rise in incomes. Take out the effects of declining unemployment, and real wages are only about 10% higher than they were in 1993. Two points need to be made about this.

One, real wages haven’t been rising very rapidly because productivity hasn’t. Our productivity growth is notoriously among the worst in the OECD. The reasons need not detain us here, but economics teaches us wages can’t exceed growth in productivity in the long run.

And two: the 1980 prosperity was an illusion. We were at the top of an inflationary business cycle: inflation was in double digits, and was headed higher if somebody didn’t put on the brakes. Deficits were on a similarly ruinous track. By contrast, the 2007 peak was characterized by low inflation and deficits: we may have had the same or slightly lower incomes than in 1980, but it was a much more sustainable track than before. Had the rest of the world not plunged us into a (mercifully brief) recession, that trend would be more apparent than it is now, but will reassert itself in time.

CODA: As I mentioned in my piece in the magazine, even the gains for the top 20% are almost all concentrated in the top 1%, or indeed the top 0.1%, or even 0.01%. The share going to the next 19.99% would look a lot like those of the other four fifths: more or less flat. You can find all the deets on that here.

[Slideshow image: Toban Black/Flickr]




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What’s really up (and down) with incomes

  1. Occupy IS Deeply Significant…it just has nowt to do with your taxes. So relax the death grip on your pearls….er wallet.

    • Oh but it’s just so convenient that these stats hide the real complaint eh? Using the top fifth allows the 1% to be averaged out, and the real disparity and silliness is obfuscated.

      Here’s what the Conference Board has to say:

      The top 1%:

      “…took home ALMOST A THIRD OF ALL GROWTH in incomes from 1998 to 2007, a decade that saw THE FASTEST ECONOMIC GROWTH IN THIS GENERATION. She notes that: “The last time the economy grew so fast was in the 1950 and ’60s, when the richest 1 per cent of Canadian took ONLY 8 PERCENT OF ALL INCOME GROWTH.”
       
      The phenomenal growth in incomes of the super-rich is not due to the assets they own. Yalnizyan points out that, while it is true that historically the super-rich relied mostly on unearned income from assets, “the income of the richest 1 per cent is due MOSTLY TO THE LAVISH SUMS THEY ARE PAID FOR THE WORK THEY DO…”

      http://www.conferenceboard.ca/hcp/hot-topics/canInequality.aspx

      Anyone who doesn’t see the difference between a 33% increase and an 8% increase, when each percent point is worth tens of thousands of dollars, need their heads examined.

      Meanwhile the income of the poorest has fluctuated wildly over the past few decades, with little or no over all gain. So not only are they not doing any better in the end, but they had to ride the bucking bronto of every five to ten year downturn that came their way.

      I mean come on, who’s fooling who here?

      • But how do you tax lavish salaries without hurting entrepreneurs, those who take risks and should be allowed to earn a lot  when they succeed, since the whjole economy rests on them ?

        Besides, we a living a particular time of developing economies catching up with industrial ones, with populations in the former totalling about 2 or 3 times that in the latter. Is it not enough of a challenge to manage that in a rather orderly manner ?
        I would be satisfied if we just could go through this transition without loss for our middle class…

        Especially considering the poor quality of our primary education.

        • At the present time the top 1% have never paid so little tax in this country as they do now, at a time when they’ve made more money that ever before, with stability no one else has, and increasing at a rate unheard of in the rest of the population.

          So frankly the excuses don’t really work for me.

          I am not suggesting massive tax hikes, but instead more of a policy shift with a moderate rebalancing.

          For example, why does it make sense to anyone to spend tens of billions on jails and policing at a time when crime is at a 40 year low, and dropping?

          This is a government that claims it can’t afford to fund infrastructure like the replacement bridge to Montreal, the only existing way to get onto the island, resulting is tolls for everyone regardless of income.

          Yet it has tens of billions for non-existent crime?

          So perhaps part of the answer is that our political regime isn’t doing the right things or providing salient rationales for what it is doing.

          Whatever the excuses, you cannot convince me, or indeed many others, that the 1% should see their already massive incomes increase by 33%+ when everyone else has seen effectively no gain at all over the same time period.

          They do not exist in a vacuum, but in a society that has made their lives and exorbinant salaries possible.

          All I’m advocating is some form of increased transfer to the bottom quintile that will ensure a basic standard of living and reduce the impact of the economic shocks that seem to hit them every five to ten years.

          It would have benefits for everyone. Benefits to the economy through increased and more stable consumer spending, and benefits in terms of the reduction of poverty correlated problems like petty crime.

          This is really not a lot to ask in such an affluent society, especially one which has obviously given so much to some and asking little in return.

        • If a greater share of existing wages went to the bottom and middle, there would be more demand for the goods and services “produced” by entrepreneurs who would make MORE money by selling goods and services rather than by stealing the labour of the people who do the actual work of producing goods and services.  If wages in the bottom 99% had kept up with growth, there would have been no need to eat away savings and increase debt in order to maintain the same standard of living as in the past.  We have been convinced to accept lower taxes and fewer or poorer services in exchange for stagnant wages and higher debt while the top 1% reaps all the benefit.  We have experienced higher and higher structural unemployment –in the 60s full employment was 2% unemployment, by the 80s it was 4% and before the last downturn it was 7% and we were told this was “normal”.  Meanwhile the 1% has outsourced the good jobs under the guise of “free trade” and pocketed the difference.  But really we’re supposed to believe it’s all because our “taxes are too high”?  Coyne should be intelligent enough to realize that his CODA is the story and that even most of the people in the top 5th ought to be pissed off, with everyone else, at the top 1%.

  2. But, but, but…

    All those wing nuts really really want a reason to have a fun camp out!

    • Yeah, the Iraqi vet who has a fractured skull is having a wonderful time. So are all the folks who got tear-gassed.

      • Canada doesn’t have Iraqi vets. And unless I missed something, we haven’t teargassed anyone (yet). This is an article about Canada, unless my reading skills have suddenly gone to crap.

        There are lots of places in the world where the Occupy movement has relevance and resonates. The more I see of the Canadian version, though, the more it seems like a  ”me too” copycat movement than a serious effort to accomplish anything.

        • Actually the ‘occupy’ movement was begun by Canadians…haven’t you been paying attention?

          • The idea was Canadian, yes (Adbusters) - but it was about the problems in the US and ” to protest corporate influence on democracy”, and was simply “Occupy Wall Street” when it started.

            That doesn’t take away from my impression of the Canadian “Occupy” groups as “me-too” types. Nor does it explain why you’re talking about US activities in relation to an article on Canadian incomes.

          • Because ’Occupy’ is not ABOUT Canadian incomes ….or taxes….and never was

            Nor is it about the US

            This is global…because everyone, everywhere, is fed up with the system, the ENTIRE system

          • @OriginalEmily1:disqus  Yes, yes; so you keep saying. And in the broader context I agree with you. But the Toronto effort, at least, seems to be largely a bunch of half-assed slackers who want their moment of fame. The first morning they were to protest, they set a 7 a.m. gathering time and no one showed up; most were still snoozing it up in their tents. Before that, I was generally supportive of the plans they had; after that, they lost me.

            I still support the worldwide movement, but as for the Canadian branch – well, each day I’m leaning more and more toward Turd’s viewpoint (and there’s a scary thought, as we rarely agree on anything).

          • @KeithBram:disqus 

            Oh…well if you’re turned off, I guess it’s over with.

            People all around the world can just go home….you don’t approve of one Canadian group.

        • We do have Iraq war vets. You aren’t allowed to know who they are, though, as they are/were members of JTF II. Niggly detail.

        • Actually, a lot of the Canadian Occupy movement is strictly in support of Occupy Wall St.  Although, there is also some relevance to the Canadian situation as well, but acknowledging that we aren’t (yet) as bad off as others.  But you do know Canadian rates of inequality are growing faster than other places, right?

          • Yes, I’m aware of the rate of growth of the disparity (and no, I can’t say as I’m happy about it, given that I’m not one of the recipients of that extra loot).

            Emily was commenting on Turd’s snark, which (as far as I can tell) was aimed at Canadian protesters and Emily came back with comments on what’s happening in an entirely different country – i.e., she had gone off on one of her little jaunts into her alternate reality, as she is wont to do.

            I’m very much in agreement that changes have to happen, and on a worldwide basis moreso than here in Canada. But it strikes me that the half-assed, lackadaisical approach of the Canadian (or at least the Toronto) movement does the movement more harm than good. When they call for a rally at a set time and place, as they did the first Monday, and no one shows up, it kind of strains their credibility.

          • Yeah, that’s the trouble with a leaderless movement.  It’s also the joyous beauty of it, in my opinion.  Who the hell did these people think they were to demand a ridiculous time like that?  Rather knocks them off their pedestal right from the get-go, don’t you think?  Mind you, I have a great deal of sympathy for the organizers who are, after all, doing an enormous amount of work for no guaranteed support at all.

    • I see there is a reason you call yourself “Turd”.

  3. Hehe… I am printing this and dropping it to Occupy YYC : )

  4. I don’t disagree that there’s not all that much to complain about in Canada, especially compared to the U.S.

    Still, for a movement who’s catchphrase is “We’re the 99%”, and who seem mostly concerned about the widening gap between the incomes of the top 1% and everyone else, surely someone’s going to find it ironic that this post contains graph after graph after graph, mostly looking at the top 20% or the top 25%, and then it’s not until the coda that it’s mentioned that for the top 20% group, that growth is “almost all concentrated in the top 1%“.  And you mention that almost all of the growth is in the top 1% as though that’s an argument in favour of the protesters having even less of a point.

    I think the 99%ers might argue that the fact that most of the growth is concentrated in the extreme of the top 1% is their point!

    • Oh, nuts.  I was so incensed at the shocking display of obtuseness that I wrote my rant before reading everyone else.  I should have known someone would have pointed out the obvious already.

      • Pointing out the obvious is obviously LKO special talent… however for Andrew

        |                                                       *  top one percent
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        | x         x       x        x           x         x     x   ROU
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        Also StatsCan data can be used to show that the top 1% have way more bathrooms than the rest of us. (at least up to this past questionaire)

        • Only in fascist dictatorships does the government ask you how many bathrooms you have. Get government out of the bathrooms of the nation!

        • My personal sense is additional bathrooms would be wasted on many of the Occupy folk anyway.

    • I find all the arguments entertaining so far, but Mr Coyne never mentions the following important words: advantage, monopoly, power, privilege, and control…these are what define balance in a democracy. Even if they (the 1%) have all the money, should they have a disproportionate amount of control, privilege, advantage (etc.)….

  5. income is only one indicator. The GDP has doubled or trippled in the same time period and the average worker, as you admint is back in 1980.

    Free trade makes the pie bigger, but it benefits those who own the means to produce what in abundant in a country. In Canada its natural resources.

    If you think about it like pie, there are now 3 pies, and the 99% are only sharing the first one.

  6. It’s difficult to see how one can compare normalized gains as Mr. Coyne does in this piece.  Whether I am rich or poor, a given loaf of bread, gallon of milk, a car, or a roof over my head will cost the same.  Now, a rich person might buy a more expensive loaf of bread or a fancier car, but that is a CHOICE.  By normalizing the income data, you imply that richer people SHOULD be buying more expensive bread, milk, cars, etc.  In other words, comparing growth in normalized incomes (in particular, I’m talking about graphs 4 & 5 – he does not number them, so you’ll have to count), Mr. Coyne is saying that the cost of living is proportional to your income (which, if you really think about it, is an endorsement of communism, but I digress). 

    What could the rich be doing with their money if they weren’t spending it in the way that Mr. Coyne’s analysis assumes (prescribes?).  Well, they could be doing what the capitalist system says they should be doing with it: is investing it back into the economy, creating more jobs and growth.

    Graph 3 is the real take-home message, and the remainder of this article is a sequence of data analysis to (poorly, IMHO) justify why Graph 3 should be ignored.  At the end of the day, the top quintile is making more money in terms of real dollars, and the rest of us aren’t.  Despite the myriad of ways in which Mr. Coyne permutes Graph 3 to convince us to ignore it, there is one graph that he doesn’t show us, and this, I believe, is the most important one.  There should be a version of Graph 3 in which all of the lines begin at $0 (i.e., zero the incomes in the first year), which would show how the absolute (NOT relative) quintile incomes have diverged.  And absolute income, folks, is all that matters.  The only people I know of who try to price things in terms of relative income are wedding ring retailers, and NOBODY buys that logic!

    • Sigh. I don’t think you understand the concept of “normalizing.” It hasn’t anything to do with whether the cost of bread is or is not the same for rich and poor, or whether it should or should not be, or any of the rest of this baffling post. It’s just a way of comparing *growth rates*. You start everyone off at 100, in whatever target year, and measure percentage increases (or decreases) from there. It’s perfectly simple, and widely used.

      In fairness, I think you may have been confused by the “relative income gains” in the title atop the graph. The shows average income for each quintile, and how it rose and fell over the years: that is it measures income in absolute terms, not as a share of the total. But it compares them to each other on a standardized scale, indexed to 100, rather than in dollars. Hence the “relative” bit: it allows you to see how fast they grew, not only absolutely, but relative to one another.

      • As I said in my twitter response to this, I am completely familiar with the concept of normalizing (hmm, perhaps I should insert my own sarcastic “sigh” at this point…).  My point, and this perhaps is why you don’t understand what the “occupy” movement is so upset about, is that relative income gains should NOT be the same for all income brackets.  Saying that people’s incomes should increase relatively is the same as saying that the income gap SHOULD be increasing.

        For example, if we think that, from one year to the next, everybody should get a 20% raise, then you’re saying that someone earning $10K should get $2K more, but someone earning $100K should get $20K more, and someone earning $1M should get $200K more.  You go from an income gap in the first year of $990,000 to $1188000 in the second year.  Its a simple geometric series, and ALWAYS leads to the 1% vs 99% situation people are worried about. 

        I completely understand the use of normalizing, but it does not make sense to compare normalized incomes WHEN THE TOPIC OF DISCUSSION IS THE INCOME GAP!!!  A similar problem occurs with the current government’s insistence on setting greenhouse gas emission targets that are intensity-based targets.  That is, the allowed emissions are normalized to industrial output, rather than being limited in absolute terms.  Similarly to incomes, an emitter can reduce it’s emission intensity while increasing its emissions absolutely.  By your logic, the gov’t could defend it’s decision simply by saying “its a standard scale”.  Absolute, nominal, relative – these are all “standard” scales, but each one has appropriate and inappropriate applications. 

        With regards to your thesis in this article, that “there is no factual basis to the complaint that incomes between the rich and the poor are diverging”, your use of a relative scale is plain and simply wrong.  Period.

  7. A lovely piece that completely misses the point, and then throws a “so there” in at the end as if this isn’t what people have been saying all along.  The Occupy movement hasn’t been saying “We are the 80%” because as your lovely graphs show, that isn’t where the problem lies.  I cannot believe that Andrew Coyne is so dazzled by the Kool-Aid that he fails to understand that all incomes OTHER than the top 1% are flat AND THAT IS THE PROBLEM.  Or, since the flat incomes isn’t really a problem, the problem is the growth in the 1%.  Because when you look at the total wealth and then how much of that total wealth is held in the hands of only the top 1%, and how the percentage of the total wealth has been moving to that 1% faster, you will soon realize that the economy can’t help but collapse as too little of the total wealth is available to keep it running and it is only getting worse. 

  8. Yawnfest

  9. Looking at those median income levels, housing prices REALLY don’t make any sense.  It really suggests that it is being driven by factors external to income i.e. credit expansion and foreign capital pouring into the country, which are both classic bubble symptons.  Certainly nowhere near the 70% of households that own today would be able to get into this market.

  10. Others have done a good job of pointing out the odd fact that AC only gets to the nub of the occupiers complaint in his coda. I think I’m in agreement that it is significant that most of us have done pretty well in relative terms; AC is right to point out it highlights the lack of productivity in our economy, although i’m impressed that ALL the govts since the seventies have done a  relatively good job of maintaining a stable level of egalatarianism. We have been governed pretty well – who knew!
    However much more specific info and context is required in order to grasp the state of play over the last 30 years.
    For the 99% there is considerably lesseconomic security available…less union influence, less pensions, more debt for all. Other disparities are also more noticeable – extended benefits for those with good jobs; not so much for those without. User fees have proliferated throughout the system. In short we are much less secure then we were 30 years ago. This might have been an exceptible trade off if the majority had actually acrued most of the benefits of income growth, growth that hasn’t happened - we haven’t. We’ve traded security for a ticket to ride on the roulette wheel known as the investment market. Some trade!
     As AC’s charts show, even discounting for recession, we haven’t seen a significant grow in income in 30 years. And yet the cost of maintaining a middle class life style gets ever more onerous to finance..
    * I confess to not fully understanding the complete significance of all the charts – are they adjusted for the cost of living or not?

  11. Two issues with the logic here:
    1. Unemployment rate of the young is skyrocketing in Canada. Its nearly double that national average. Occupy protestors are of a variety of age-ranges, but seems that many are definitely younger with few employment options. 
    2. Cost of living expenses for the 99% are having a greater affect. I’m not talking about inflation, but rather taxes have gone up, selling our homes is more expensive, gas & other energy prices have gone up. The way the government calculates inflation is terribly inaccurate and makes a poor baseline, I suggest you look it up. 

    Its easy to say that the middle-class has nothing to complain about because the rich aren’t getting much richer, but the reality is we have less disposable income today then we did 10 years ago. Significantly less. 

    I also don’t think these stats take into account investment income. I’m sure they don’t, because they would be fluctuating more with the stock-market. Guess what? Investment portfolios have a big affect on people’s spending habits and comfort of living, as well as retirement plans. 

    Nice charts, but this is a partial story trying to prove a point. The 99% have less now, they’ve had less before the banks crashed the world economy, and with that crash it made things much worse. 

    Easy to say people shouldn’t be protesting, but when the unemployment rate of the youth is well over 15% and it has been climbing quickly, this doesn’t provide much hope for those that are actually protesting. 

    Hey, I’m fine, I’ve got a house and drive a German car (that’s not a VW) and all is well in the world. I had to cut down on a few things here or there, but they’re luxuries I can do without. Reality is, though, much of us living the good life would be screwed if we were younger. We’d have no opportunities. In the US, as an example, even law school graduates are only finding jobs 65% of the time. That’s 35% unemployment among law grads… 

    Your children are going to have a hard time. If you don’t see that now, you’ll see it soon enough. 80% of kids are still getting jobs, but as that unemployment rate is trending its going to get much worse. And then you’ll have a situation like in the UK. 

    • It is a constant complaint of mine. That the inflation numbers seem wonky. The rapid growth in the cost of housing and the cost of food alone should set off alarm bells. The present low cost of borrowing is hiding  structural fractures –  eggs that have yet to hatch.

  12. Nice to know the old adage about the rich getting richer and poor getting poorer has been put to rest forever. 
    But I would still like to hear from Linda McQuaig.
    Seriously Emily is right.  A lot of people these days think in terms of the world wide web so to speak. Remember the old quote from the young “the whole world is watching”.

     

  13. AC, (notwithstanding other comments about top 1%) this analysis is at such a high level, its value is questionable. Still, if you wanted to see any trends more definitively, how about normalizing not to a time frame, but rather as a ratio, using the bottom quintile as the denominator? And then picking an appropriate y scale/range to better illustrate any divergence?

    As an aside – why not look at how the top executives are compensated in corporations? If they are compensated mainly with stock options, then EPS and P/E ratios are important. And so is short term performance (perhaps neglecting longer term investments). More to the bottom line (net profit – goosed by , for example, high commodity prices, lower taxes) gets reflected in the stock price and hence compensation. Same with profit sharing within companies – when times are good, their bonuses go up substantially. And profit sharing is an iterative process – run accounts without profit sharing – determine net profit – then divvy up profit (say 20% to employees/execs pre-tax) and run again – see effect on EPS etc.  That, I believe, is how these things are determined.

  14. What strikes me most looking at these graphs and others I’ve seen recently, is just how much of a lack of stability the lowest quintile seems to have. Over any ten year period in the last century there’s some kind of downturn that rocks their world.

    Why, in a society as affluent as ours, wouldn’t there be more mechanisms in place to ensure that the poorest could at least count on SOMETHING when the “fit hits the shan”? So far as I’ve seen there is no real mechanism in place for this group as a whole, which ultimately affects us all given that drops in consumer spending and crime rates in a recession can be correlated to the well being of this group more than any other.

    It is especially galling given that the economic fluctuations are mostly over seen by the highest quintile, who ironcially have the least fluctuation.

    Moreover, someone correct me if I’m wrong, but it seems to me that the parameters of the upper quintile in these examples is deceiving to a large degree.

    Where’s the upper 1% in all this? We can use averaging to hide them all we want, but the fact remains that they’ve made out like bandits, and yet they would have nothing if our society didn’t have the lower quintiles there for them to use to make this money.

    Therefore, I don’t think it’s much to ask that we have some form of basic living wage policy in this country that keeps people out of poverty, while using appropriate incentives to ensure that working always brings added benefits to people in a way that encourages them to do so.

    Over all there has, in my opinion, been a lack of consideration for the core human elements of our society in our race to “compete” in the global economy with “efficient taxation” and other buzzwords for enriching the rich.

    One issue in particular that galls me, is that we seem to consider using lower wages in third world countries as some sort of virtue, when clearly we’re just taking advantage of the developmental differences and the lack of organized labour in those countries, while impoverishing our own and undermining our own labour rights. And that’s only one issue. There are many others.

    There’s a greater societal equality balance here that needs to be addressed, and this analysis seems to completely blow over and obfuscate what’s at the core of this topic: Increasing disparity in the standard of living between the poorest and the richest of society, not the bottom fifth and top fifth nonsense this analysis presents.

    It’s a real problem, and pretending it isn’t is just an insult to our intelligence.

    Careful my fellow top 10 percenters. Movements like this tend to gain steam over time. Revolutions aren’t born in a day, and I suspect this one’s going to hit like a hurricane once it really gets going.

    • IF some set of circumstances were to come about that actually caused the principle beneficiaries of globilization[ eg CEOs] to actually be in a falling market for their skills, you’d see some arguements for why we couldn’t afford to have that situation continue to exist, toute suite.
      Right now i don’t see the movement gaining any serious traction with the wider public – but should stag flation return and our collective exposure to high debt levels really begin to bite – watch out elites – you can’t say you weren’t warned. 

      • Yeah no kidding eh? Of course they hold the levers of control don’t they?

        As far as the average public, I suspect things are much worse in the US than it seems to many, and that this is likely to boil over sooner rather than later.

        I mean look at the housing market down there and the over one million who’ve lost their homes, and tell me this isn’t a problem whose scope has been underestimated.

        People have greater expectations today than thirty years ago, partially because of social hype, but mostly because that’s what the business leaders have sold us.

        “…He that dances should always pay the piper” is as true today as centuries ago.

        The bill’s come due. LOL

    • The naysayers who are directing their criticism towards the people camping out don’t seem to realize that there is support for the movement from lots of people who would never think to demonstrate publically. 

      • Another excellent point. Cheers.

  15. Wow, Andrew, I didn’t realize Macleans was still paying you by the word.

    At least, that’s the only reason I can think of that you’ve used so many words to say “If you avoid looking at where income inequality is increasing, you won’t see it increasing at all.”

    • Ace! LOL

  16. Did I miss the memo where “We are the 99%” changed to “We are the 80%”?

    • Apparently, though this is obviously obfuscating the great disparity that is occuring between the 1% and everyone else.

      Check out this from the Conference Board of Canada:

      “… Most gains have gone to a very small group of “super-rich.” To understand this, we have to look in more detail at the top quintile group—the top 20 per cent of Canadians.
       
      For this we need a different data set, one that provides more information on this group of super-rich. In a study for the Canadian Centre for Policy Alternatives, researcher Armine Yalnizyan uses tax file data to track the richest 1 per cent of Canadians; that is, those whose income was higher than 99 per cent of Canadian tax filers.
       
      She found that this group—the 246,000 people whose average income was $405,000—took home ALMOST A THIRD [IE NEARLY 33%] OF ALL GROWTH IN INCOMES FROM 1998 TO 2007, A DECADE THAT SAW THE FASTEST ECONOMIC GROWTH IN THIS GENERATION. She notes that: “The last time the economy grew so fast was in the 1950 and ’60s, when the richest 1 per cent of Canadian TOOK ONLY 8 PERCENT OF ALL INCOME GROWTH.”
       
      The phenomenal growth in incomes of the super-rich is NOT DUE TO THE ASSETS THEY OWN. Yalnizyan points out that, while it is true that historically the super-rich relied mostly on unearned income from assets, “the income of the richest 1 per cent is due MOSTLY TO THE LAVISH SUMS THEY ARE PAID FOR THE WORK THEY DO.”

      http://www.conferenceboard.ca/hcp/hot-topics/canInequality.aspx

      • So I guess that means you have a huge problem with what professional athletes, entertainers and other celebrities earn.  Funny though, I don’t hear much talk of that.  All I hear about is evil CEOs etc. 

        • Nice dodge, or attempt at one anyways.

          Whether you “don’t hear much talk” about something is irrelavent.

          The issue is not whether some people should make a lot of money or not, but about the disparity between the top and the bottom.

          As such it is a much higher level discussion than you seem to recognize.

          I expect that in any highly competitive work environment there will be highly competitive wages. This is especially true in an economy that has gone from encompassing a handful of countries to something more global in nature.

          People are willing to pay whatever it takes to feel they’ve got the right person in place to protect their interests, and I’m good with that.

          However, when you see the kind of growth that has taken place (reference my comment above) and then note that the poorest in that society are actually worse off in real terms despite the increasing affluence of that society, then alarm bells should be ringing.

          I think it’s past time to recognize that the good of society is best served when we use some of those gains to ensure a basic standard of living for said society. We have the capacity to do so, and the gains would be palpable in real terms.

          So I’m not suggesting so much that the over all gains are not justified, only that there has been oversight in terms of sharing these benefits with society as a whole.

          • Phil, I think our biggest failing is we don’t empower enough vulnerable people to take advantage of student loans and other opportunities to better their situations.  Sometimes it is necessary to relocate to get a decent job and to get an education in a field that is in demand. 
            I am all for providing better benefits and more money to the disabled but the only solution I can see for able-bodied poor to to help them improve their situation by developing skills and an education….teach a man to fish.

          • It’s not just about the disabled, whom we treat very poorly in this country all things considered, or even the extremely poor, but a whole swath of society that one can’t reasonably argue are terribly mobile or able to advance beyond a certain point. Life isn’t that cut and dry for many.

            The best way to lift future generations out of poverty is to start lifting the present generations out of poverty. That way their children are much more likely to grow up minus the many issues that come with poverty.

            The best way to do this is to ensure a basic standard of living befitting our affluence.

            Generally speaking people rise or fall on our expectations of them, and a society that doesn’t invest in people is setting those expectations very low to begin with.

            And frankly, basic schooling should be free. Full stop. And I don’t just mean highschool.

            In an age where many factory workers now require a Bachelor of Arts degree, we can no longer claim that undergraduate degrees aren’t neccesary to basic employment.

            We’ve gone backwards in this regard. When I was young and poor, one was given grants to cover tuition. Now we expect the poor to take out tens of thousands in loans? When a basic degree isn’t worth half of what it was 30 years ago? Insanity.

            We keep saying we want an educated mobile work force for the “knowledge economy”, but we’re burying these kids in debt before they even enter the workforce?

            In a country this affluent?

            Honestly, we need to get our priorities straight, and letting the top 1% walk away with 30%+ raises while the poor are worse off then ever, and then burying them in debt if they try to improve themselves, is asinine.

            We should be trying to motivate people to improve, and frankly, telling someone who has never lived on more than $20K a year in their whole lives to take on $30K or more in debt is not motivating in the least.

            So if we want to talk about “teaching a man to fish” let’s get real about it.

            There needs to be a basic standard of living and active support for kids to get whatever form education they think will improve their job prospects in the future.

            It’s the least a society like ours should be providing, and nations that do this have been far more successful at advancing their society’s interests.

          • Needless to say, I disagree completely with you Phil.  For one thing, I am not talking about an “Arts degree”.  I am talking about an education in a field where there is work.  I know I have brought his up before but….healthcare is growing field….there is a global shortage of nurses and in Alberta, BC and Ontario, they make approx. $80 K a year.  I’m sorry but $30K debt to make $80K a year is a good investment.  Even a person who only makes $20K a year can understand those calculations.  I also understand there is a shortage of auto mechanics across the country.  Trades are something that you allow you to work while you get an education and despite what people are saying it maybe decades before robots take over all the trades so the investment will still be a wise one if you are living in poverty.   In Alberta, we have a great demand for Power engineers…a 2 year course that results in a wage of $80K a year.  
            I would like you to explain to me what makes someone who is able bodied “not mobile or able to advance beyond a certain point” beyond their lack of confidence in their ability to do so. 
            As for providing free education….you want to provide an MBA to a future CEO?  You want to provide a physician with a specialty and then have him go to the US and never pay Canadian taxes?  Our education system is already highly subsidized by taxpayers.  I do not know that many would embrace the idea of paying more out of pocket so the “20%” can ensure their affluent standard of living.
            I might have mentioned this already but in Alberta often times student loans are deferred by up to 1/2 or 2/3 if the recepient has made the payments faithfully. 
            As for factory workers needing a Bachelor of Arts…that only proves my assertion that such a degree is worthless and further that young people need to relocate to where there are better job opportunities even if they find the West repugnant in their imaginations.  It is amazing to me how immigrants with nothing come to this country in ship holds and Canadians are afraid to move across the country.

        • True, but if there was a move by the government to bail out a professional sports team, or a failing movie company, I bet we’d hear screams about that.

          I think we’d hear a lot more about the salaries of professional athletes if the professional sports leagues had received billions and billions of dollars in bailout money from the taxpayers to save them from the consequences of their own irresponsible actions, only to keep right on trucking with very little change to how they run their businesses, while simultaneously still rewarding the people who caused the failures in the first place at virtually the same levels they were compensated at before they almost destroyed the entire professional sports industry.

      • I see OrsonBean has already brought up the fact to you that some of these people earning more than $405,000 are not CEO’s.  There was an article in the newspaper a few years ago stating that every dermatologist in Alberta earns over 1/2 million dollars per year.  Also, some of this high income earners are commission sales people who sell high end real estate and expensive equipment.  They earn alot of money because they clock in a lot of hours.  Some big commission earners travel an unbelievable amount.  Are you going to say that people cannot work harder to make higher incomes…they are not allowed to work excessive overtime even if that means essential services like the ER won’t be covered?

        • Unfortunately we seemed to have jumped each other with our comments, so I won’t go on at length. (At least by my standards!) LOL

          Of course I recognize the top 1% is a diverse group. My issue isn’t really their incomes per se, but dealing with the disparity between the top and the bottom.

          Society is a group deal. Whether we like it or not, ultimately we’re all in this together. A huge disparity in over all gains does not serve our best interests for a great many reasons.

          I think it’s well past time for a living wage tax policy. Even just from a straighforward economic position, the stability and gains in terms of the economy would be noticeable.

          The gains in terms of elevating our society as a whole: priceless.

          (sorry, couldn’t resist!) LOL

          • Not to mention that a living wage tax policy would end one of the largest arguments for minimum wage legislation.

            The big question is what, exactly, is a living wage? I mean, technically you can survive on an income in the bottom quintile. A fifth of us do, after all.  But that does nothing to address the growing inequality between the top 1% and the rest, nor the dissatisfaction people will increasingly feel as their increased effort makes very little difference until they can surpass the 98th percentile or so.

            I dunno the answer. I know trickle-down isn’t working, and that supply-side economics is a joke, but I don’t have any really solid ideas on how to revamp things to curb the excesses.

            I mean, ultimately it’s us that pay celebrities and CEOs so much, right? We’re the ones that consume their products, and do so in such quantities that those who control their wages feel not only able to provide them with these absurd amounts, but justified in doing so. And why should these people be altruistic and go “No, no, that’s an absurd amount to pay me. It wouldn’t be right, give it to the employees or stage hands or whatever”, it’s not like we provide them any incentives for doing so.

            So how do we essentially stop the consumer culture? Does the system have to collapse entirely before enough people realize it doesn’t work to stop doing it?

          • Okay…but you have to give people who’s skills are difficult and expensive to acquire some sort of reason to acquire them.  ie.  I met a pediatric cardiologist..he started university when his little brother was a baby crawling on the floor.  When he finished his studies and became a pediatric cardiologist, his brother was graduating highschool.  How much did all of that education and years of lost earning cost him?  What “priceless” skills and knowledge does he bring to society?  What wage should he make?

          • I think that more or less goes without saying, and is in fact the case already.

            From my perspective this isn’t the question we’re discussing, but instead the issue of basic living standards in a society that is highly affluent.

            When our society is making such amazing gains, there becomes less and less of an excuse for not sharing some of those gains equitably to a population that together forms the potential for those gains.

  17. Here’s a cute example of why this matters.  The 2012 CPP rates have just been announced.  “The maximum pensionable earnings for 2012 will be $50,100–up from $48,300 in 2011.  The new ceiling was calculated according to a CPP legislated formula that takes into account the growth in average weekly wages and salaries in Canada”

    Put that into your graphs and tell me that the income inequality of the top 1% makes no difference to me.

    Presumably, they used this same legislated formula last year as well. Also presumably because I haven’t seen any figures, the graphs for 2010-2011 look remarkably similar to those above. The CPP maximum pensionable earnings for 2011 was $48,300–up from $47,200 in 2010.

  18. Mr Coyne seems to exemplify the phenomenon of cognitive bias with his manipulative categorization and presentation of statistical data. While it is apparent that the distribution of wealth and income in Canada is appreciably more egalitarian than the hideous polarization rate of wealth in the USA, a closer look at the income strata indicates that the top 1% of income earners are ‘pulling away’from the pack’in Canada as well. (GINI coefficient Canada 32  USA 45) .
    Mr Coyne should realize that the concern is not only the disproportionate increase in the top 1% of income earners but the stagnation of middle class earnings exasperates the growing problem in America–and to a lesser degree Canada.
    Mr. Coyne should also take into consideration the fact that TRUST and CONFIDENCE in our business and political leadership is diminishing very quickly. This in concert with the wealth disparity should alarm politicians, corporate executives and economists etc. When trust is lost neither capitalism or democracy functions efficiently or fairly..
    References: 
    http://www.policyalternatives.ca/newsroom/news-releases/richest-1-income-shares-historic-high

    http://ywcacanada.ca/data/research_docs/00000192.pdf

     http://www.conferenceboard.ca/hcp/hot-topics/canInequality.aspx

    http://chartsbin.com/view/559

    I am an avid proponent of free markets and adhere to the tenets expressed by Adam Smith and David Ricardo. Free markets are the most efficient and just method of distribution of wealth in a society but capitalism is cyclical in nature. Currently we are at a point of imbalanced allocation of resources–largely brought about by universal greed and the misuse of credit–which will be rectified through economic contraction, albeit with much pain to be suffered by many of Canadians.
    Perhaps Mr. Coyne should read Book II of Smith;s Wealth of Nations.

    • Hey it could have been worse.  He could have posted graphs showing the relative disparity between the top 1% and the top 19% and then used that to argue how the people in his income bracket need more tax breaks.

  19. I’d really like to hear Mr. Coyne’s reaction to the criticism of his post vis a vis the top 20% versus the top 1%.

    While I certainly agree that the problem of the concentration of the wealth among the top 1% of earners is not nearly as bad in Canada as it is in the U.S., this post nonetheless seems to me to be a somewhat strange criticism of the concerns of the “Occupy” crowd.

    It seems to me that the whole point of the “Occupy” crowd is that the percentage of wealth in the hands of the top 1% is too high, and that it is growing too quickly relative to the other 99%.  And it would appear to me that Mr. Coyne has responded to this criticism with 1300 words analyzing the situation of the top 20%, followed by a 69 word coda that seems to confirm the complaints of the “Occupy” protesters (i.e. that “the gains…are almost all concentrated in the top 1%).

    I do think there’s some merit to the criticism of Coyne’s piece that points out that he has purported to show that the protesters are wrong about the top 1% largely by simply not looking at the top 1%.  (Except that, ironically, it would seem that his coda acknowledges that the protesters are correct about the top 1%).

    I’m not sure how to get my head around this post.  Twenty-one paragraphs and eight line graphs purporting to show that the protesters are wrong (by analyzing a demographic that’s twenty times larger than the one the protesters are complaining about), concluded with one sentence that seems to acknowledge that the protesters are right.

  20. Richest 1% income shares at historic high
    National Office | News Release
    Issue(s): Economy and economic indicators, Inequality and poverty
    Projects & Initiatives: Growing Gap
    December 1, 2010TORONTO – Canada’s richest 1% are taking more of the gains from economic growth than ever before in recorded history, says a report by the Canadian Centre for Policy Alternatives (CCPA).The Rise of Canada’s Richest 1% looks at income trends over the past 90 years and reveals the 246,000 privileged few who rank among the country’s richest 1% took almost a third (32%) of all growth in incomes between 1997 and 2007.“That’s a bigger piece of the action than any other generation of rich Canadians has taken,” says Armine Yalnizyan, CCPA senior economist and the report’s author.“The last time Canada’s elite held so much of the nation’s income in their hands was in the 1920s. Even then, their incomes didn’t soar as fast as they are today. It’s a first in Canadian history and it underscores a dramatic reversal of long-term trends.”Post-war, Canada became more equal with the rise of the middle class but by 2007, the richest 1% reversed equality trends, amassing incomes gains reminiscent of the 1920s.   Among the report’s findings:From the beginning of the Second World War to 1977, the income share of the richest 1% dropped from 14% to 7.7%;
     By 2007 they’d made a comeback: the richest 1% held 13.8% of incomes;
    Since the late 1970s, the richest 1% has almost doubled its share of total income; the richest 0.1% has almost tripled its share of total income; and the richest 0.01% has more than quintupled its share of income.The study looks at the source of incomes for the richest 1% and finds another surprising trend: 67.6% of their income comes from working wages, just like the rest of Canadians. In 1946, only 45.5% came from wages.“The incomes of the richest Canadians are increasingly reliant on their jobs,” says Yalnizyan. “They work, like the rest of us, but their work is more richly rewarded.”The study notes Canada’s tax system is playing a different role, too. In 1948, the top marginal tax rate was 80% but by 2009 it had been cut almost in half, to 42.9%.“The last time the richest Canadians were taxed at this level was in the 1920s,” says Yalnizyan. “Combine record-breaking growth in incomes with historically low top tax rates, and the richest 1% is truly breaking new frontiers of income inequality.”  – 30 –The Rise of Canada’s Richest 1% is available at http://www.policyalternatives.ca.

  21. The real question both Coyne and the OWS sympathizers should ask is this: did the Canadian 1% get rich at the expense of, or through the exploitation of the 99%. If so, what is your mechanism. Then we can look at the evidence.

    I really don’t care how rich the rich are, I care how they got rich. If it was from innovating, from bringing new products to market, and from creating jobs that’s not a bad thing. If it was through crony capitalism, maintaining a ponzi scheme, or exploiting people that’s another thing. 

    At the end of the day I think the “99% vs. 1%” rhetoric misses the boat. There are good and bad capitalists. The problem isn’t companies like Google or Ford, it is the financial aristocracy. And the beneficiaries of casino capitalism are not just the super-rich (though they benefit somewhat). 

    • I generally agree with your point, with a minor nit. The rich don’t create jobs.  At best, they spot unfulfilled demand and capitalize on it. At worst, they waste resources.  However you don’t need to be rich to do either of those things.. it’s just that if you’re rich, you can waste a lot more resources looking for that unfulfilled demand.

      The other quibble I have is that there is a problem with just the level of disparity between the top 1 and the rest. The problem is this: With that much money floating around for these people that is essentially not needed, it creates distortions in the market where the marketplace doesn’t realize how much things are needed because those who need them don’t have the resources to afford them, while the guy who can afford them doesn’t need any more.  This is of course a fundamental problem with capitalism, in that it doesn’t distribute resources according to who needs them most, but rather who can afford the most for them.  So the 99% vs the 1% is indeed valid.  How we solve it though? I haven’t a friggin’ clue.

      • This is an excellent and important point. For all of Coyne’s talk about investment, it is DEMAND that creates jobs. If there’s no market, there won’t be any firms hiring to supply it.

        • Demand actually comes from supply. Demand is defined as the willingness and ABILITY to pay for something.  In order for someone to have the ability to pay for something, they need to have something to offer in trade.  This means that they need to supply before they can demand.

          Think about it this way.  Hundreds of years ago, humans worked most of their lives just to feed themselves.  The subsequent revolutions in agriculture led to huge increases in supply.  When people can feed themselves fairly easily, they then demand new things.  Manufacturing has become so efficient that most of our daily needs are taken care of on a fairly small income.  This leads to demand for TVs, travel, etc.  As these wants become filled, then even more “demand” is created. But the previous wants need to be supplied first.

          So this is why supply is an important part of the picture.

          • Demand comes first. That’s why there’s an entire industry devoted to *creating* demand.

            Look at it this way.. you can make a flavour additive that tastes like vomit. you can devote millions in resources to it, and get it so that it tastes *exactly* like vomit, and can be made in massive quantities extremely cheaply. You can patent the process and copyright the formulae so extensively that not only are you the best maker of vomit-flavoured food additives, you’re the *only* maker of them.

            You’re still gonna go out of business.

  22. Problem is, I’m not worried about the top “20%”. Apparently only Coyne notice the catch phrase is about the top “1%”. Wonderful straw man he’s created. I don’t consider everyone in the top 20%, elite, or part of the super-wealthy. Hardly anyone does.

  23. income charts are nice, but how about exposing the tiny percentage of society who profits during recessions and when the stock markets dip? alot of people lose alot of money during those times and i wouldn’t be surprised if there are consistent ‘winners’…i bet those fatcats are the 1%.

  24. @Healthcare Insider

    You’ve clearly missed what I’m saying and who I’m talking about. This is part of the problem across the board, people seem to assume everyone is the same, when they are not, and assume to tell people what is best for them when they don’t even know their personal circumstances.
     
    First, I am not talking just about “arts degrees” but all bachelor degrees. I merely referenced the BA as an example. When you start requiring them of people working in factories as I’ve seen in southern Ontario, then you know things have changed and these things are neccesary for basic employment. As basic education therefore, it is beyond wise to make it free, it should be a no brainer.
     
    Second, no one is talking about funding graduate degrees. You want to go there, then I agree loans make more sense at this juncture. They are essentially what having a university degree was 20 years ago and represents special training with special pay offs.

    You cite apprenticeship, but clearly have no idea how hard it is to even get one these days. All the programs in the world don’t mean a hill of beans if you can’t get someone to mentor you/hire you. There’s a very protectionist attitude in the trades aimed at keeping labour expensive for obvious reasons. Again, it’s easy to rip of a list of “what people should do” when you don’t have to consider their individual case.

    As far as who isn’t mobile, there are of course the older poor and the disabled poor, but also there are the people taking of them, who can’t simply pick up and move either, but frankly, even getting into that debate is a red herring.
     
    Itt’s not for you or I to decide what is reasonable in a person’s life. You and I have no idea what various responsibilities a person in their life that informs their choices.

    Last time I checked, the mandate of the government is to support people and communities. You don’t do that by telling people to “get out of dodge”. It’s a ridiculous notion from the get go. If areas want to attract labour, do things to attract labour!

    The job of government in my opinion is to provide basic services and ensure equality of opportunity. Beyond this it’s their job to ensure that there isn’t a return to a class system of lords and serfs, because surely that’s why we created democracy in the first bloody place!

    Sorry, but in a society as affluent as ours, ensuring certain basic standards shouldn’t even be in question, let alone presuming to judge what is reasonable by the standard of your own life.

  25. Krugman has nailed Coyne:

    “Inequality is back in the news, largely thanks to Occupy Wall Street,…. And you know what that means: It’s time to roll out the obfuscators! Anyone who has tracked this issue over time knows what I mean. Whenever growing income disparities threaten to come into focus, a reliable set of defenders tries to bring back the blur.” 

    http://www.nytimes.com/2011/11/04/opinion/oligarchy-american-style.html?hp

    • I suspect that’s why Coyne tries to stay away from American information, going so far as to try to dismiss Occupy Wall Street based on Canadian data. There’s no way that he could ignore an opinion writer who’s far better known and better respected than he is.  He’d have to try to rebut Krugman…and there’s not a shot in hell that he could do it. 

      (No matter how many of Stephen Gordon’s blog posts he linked to.)

  26. Well isn’t this cute. Andrew does a whole big rebuttal to this Vancouver Sun piece without a single mention of the four economists (David Green, Kevin Milligan, Thomas Lemieux and Craig Riddell) whose work and insights were backing it up. Nor the work of the Canadian Centre for Policy Alternatives, OR any of the American or international experts who’ve written on the subject and how important it is.

    In fact, as far as I can tell, the only economist whose existence Coyne deigns to acknowledge is Stephen Gordon. Again. 

    (Oh, and what’s this stuff about how recessions are supposedly due to “brutal inflation”? I’d say that Coyne is outing himself as an Austrian…but even Austrians don’t try to pretend that there were no depressions under the gold standard!)

    As for “why all the caterwauling now”? Well, obfuscation using NHL players aside, most of those fabulous incomes are internationally (and certainly in America) tied to the financial sector. People were willing to go along with it because they had thought that the people working on Wall Street had earned it: that they were providing innovative, useful services to the economy, and that they had used their smarts and skills to win big while providing those services. (A bit like Steve Jobs. Nobody resents his being rich, because of what he created.)

    We now know that neither assumption’s true. We’ve found out that their “innovations” ended up seeming to be little more than a destructive spiral of of arbitrage and speculation. We’ve also found out (as Matt Taibbi lays out in exhaustive detail) that the “captains” of the financial sector they didn’t “win big”. They cheated their butts off, and they got away with it. We wuz had.

    People found out that they’ve been had. They’re FURIOUS about finding out that they’ve been had. People love a winner, but they HATE a cheater. And since Washington clearly doesn’t want to do anything about this mob, everybody else will just have to pitch in; and since it’s demand that drives an economy and demand comes from the middle- and working-class people that actually buy things , they’re also realizing that this wealth concentration just ain’t healthy.

    Good on’ em.

    • By the by, if anybody’s interested and it hasn’t already been posted, here’s what the actual economists said would be a good idea: 

      • End programs such as the Temporary Foreign Workers Program that artificially encourage low wages in service industries.

      • Recognize that unions — once a bulwark of the middle class — have encouraged better wages not only for unionized workers but non-unionized workers as well, and reconsider government policies that have made the process of union certification more difficult.

      • Concentrate efforts for income equality where it is now most needed, not with seniors, who have fared relatively well, but with younger workers, young families and single parents, who have suffered most from income inequality.

      • Improve the tax-and-transfer system to increase social assistance to those in the lowest income brackets.• Re-examine the flatness of our tax structure, which lags behind that of the U.S. in that regard, and the fact we don’t have increasing tax rates for very high incomes. Said Riddell, “We definitely should be looking at higher tax rates at the very top of the income distribution.”

      • Begin a national conversation to look at the issue of income inequality, to consider if Canadian society is going in the direction we want it to go. It needn’t be something so cumbersome and official as a Royal Commission, but a task force, perhaps, that shines a more focused light on the concerns the global Occupy movement has brought to the public eye.

  27. Dear Mr Coyle

     

    #1:  The
    ‘Occupy’ movement is a global movement, drawing its strengths from the American
    original and protesting the very thought of certain native cultures going the
    same way as the US one has done over the last 10/ 20 years.

     

    Democracies can become corrupt and fail, as witness the
    Weimar culture, a period we should increasingly look to as exemplary for our
    present global culture.  And better
    to protest such corruption early rather than late.  Can you really look to the current set of crises we
    (globally) face and tell me you are optimistic about democracy’s chances?

     

    #2:

     

    http://faculty.arts.ubc.ca/kmilligan/research/centax6.6.pdf

     

    - took less than five minutes to find – and a reasonably
    detailed reading took me mebbe 20 minutes to complete.  And guess what?  It is a trio of economics researchers
    from UBC arguing against your hard-boiled reasonableness (that actually ain’t)
    and for my own (and I think many others’) perceptions, that our lifestyle – unsustainable
    in environmental terms in any case – is becoming more and more constricted
    while a hedonistic uber-class struts its stuff on our television screens which
    not too long ago would have been showing either serious drama or the results of
    other endeavours in the field of human knowledge, i.e. documentaries
    (incidentally keeping many others of your stripe – though I’m sure less
    incisively – in business).

     

    S.

  28. Atta boy Andrew, Pompous and Entitled sums up your latest rant about the occupiers and their “focus on the wealthy”.
    Talk about talking past the point: these people are simply saying exactly what you willingly admit, that we need to focus on the poor and the permanently poor relative to the rest of us.

    The contrast is merely  a starting point to get your attention… apparently it worked!

  29. Reality alert Andrew:

    Watch Monday Nov 7 Steve Paiken.

    Call Frum; call Kay; call Blond etc

  30. S.Gordon’s bar graphs cut off on right side, on my screen.  I don’t like needles.  When my cat was working poor it had trouble finding and affording drugs…was more shelter space and Insite the demand (I like political org ability but what is demand?!)?
    The income argument is an American one.  The Canadian argument is savings acrue to rich, but ours were highly taxed in 1980s I assume, and no tar back then.  Also need better personal finances for poor.  I like the idea of turning a portion of S.Harper’s tax-free savings account into an account protected from liens, top it up for low income Canadians and offer portfolio management for high income ones.  Let’s face it, Canadian portfolio managers at present give good ROI.  Then pay it out as an annuity at some point IDK when.
    Newspaper biz section could be packaged like a magazine and sold with some basic stock screens.  The tricky part is finding out when companies owe debt.

  31. Great article Andrew.

    It’s also worth noting that to say “we’re no better off than in 1980″ is not exactly true as the real income numbers don’t paint the whole picture. 

    How many people had iPhones in 1980?  Better yet, how many people had cell phones in 1980?  Computers, the internet, big flat screen TVs were all unavailable then, but yet today even most in the bottom income range either have these things or at least have access to them.

    Look at what a basic vehicle comes with today compared to 1980.  Compare vehicle safety and fuel efficiency to vehicles from the 1980s. 

    Even if our incomes are roughly the same, our standard of living has much improved.

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