Why the poor aren’t poorer after all

Many 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.