Crawl Across the Ocean

Friday, September 23, 2005

About that Inequality Thing...

After the B.C. mini-budget that came out last week, I commented, "I'm not sure the biggest priorities in B.C. right now are corporations (especially with corporate profits as a % of GDP at record highs - see page 8) and seniors. I would've been more inclined to devote the money to child care and education, but that's just me, I guess."

Recently, I ran across a StatsCan study which provides some statistical backup for why spending on children should take priority over more money for seniors.

If you look at the chart on page 10, you'll see the following statistics on low income rates (where low income is defined as being less than half the median income, a relative measure):

U.S.: % of families with children (one parent) with low income: 41.4%
% of families with children (two parents) with low income: 13.1%
% of seniors with low income: 28.4%

U.K.: % of families with children (one parent) with low income: 31.3%
% of families with children (two parents) with low income: 8.9%
% of seniors with low income: 24.6%

Sweden: % of families with children (one parent) with low income: 11.3%
% of families with children (two parents) with low income: 2.1%
% of seniors with low income: 8.2%

Now look at the (1997) figures for Canada, they are quite different:

Canada: % of families with children (one parent) with low income: 38.9%
% of families with children (two parents) with low income: 9.5%
% of seniors with low income: 5.2%

Now, I realize that old people vote and children don't, but when the low income rate for single parent families is over 7 times that for seniors, that's why I say that instead of extra money for seniors we should be finding extra money for families and children.

A final note, for those who are skeptical of the power of government to effect change, consider the following paragraph,
"The Canadian decline in the overall rate [of people with low income] is accounted for by two offsetting trends. While rates for children were somewhat higher by the late nineties, the decline in low-income rates among elderly households from 35 to just over 5 percent was dramatic, the single largest change of any reported in Table 5 [which compared trends in low income rates in 8 countries]. Until the late seventies, low-income rates among the Canadian elderly were higher than in most affluent democracies, including the United States. Yet by the 1990s, low income rates among Canadian seniors were among the lowest observed anywhere. As has been shown elsewhere (Myles 2000), it was during the 1980s that Canadian pension reforms of the 1960s began to exert their full effect. Specifically, by the late 1970s, more and more retirees had qualified for benefits under the Canada and Quebec Pension plans, the result of legislation introduced in 1965, and this has greatly hastened the change in low-income rates of the elderly."


% of Canadian seniors with low income in the late seventies: 34.7%
% of Canadian seniors with low income in the mid eighties: 10.8%%
% of Canadian seniors with low income in the mid nineties: 4.9%
% of Canadian seniors with low income in the most recent data: 5.4%

----
The study is primarily about inequality, so if you are interested in that topic it is worth a read. The writing is clear, to the point, and backed up by lots of relevant figures and data.

In general, inequality in Canada has been fairly steady, but it has begun rising somewhat in the last 10 years or so. Inequality is commonly measured using the Gini index (which varies from 0 if everyone has the same income to 1 if one person has all the income). Canada's Gini index has varied from 0.29 in the late seventies, down to 0.28 in the mid-eighties and mid-nineties and back up to 0.29 by the end of the nineties.

The study notes the reason for the Gini index turning upwards in the nineties,
"Census data suggest little change in family incomes among lower income
families between 1990 and 2000, while higher-income families saw increases between
7% and 16%."


Overall, Canada has done a reasonably good job of preventing inequality from rising (which it has been doing in almost all developed countries in the last 15 years) but there are signs that the efforts to fight the deficit (and the cutting of welfare programs in many provinces, including Ontario) which started around the mid-nineties have had a measurable impact of increased inequality.

Anyway, this post is getting long enough, but the study is definitely worth reading. One final thing I'll mention is the troubling gap which has opened up between low income rates for those born in Canada and immigrants.

In 1980 immigrants who had been in the country 6-10 years had almost the exact same likelihood of being low income as non-immigrants. Those who had only been here 0-5 years were 50% more likely to be low income.

In 2000, immigrants who had been in the country 6-10 years had *double* the likelihood of being low income as non-immigrants. Those had been here 0-5 years were 2 1/2 times as likely to be low income as non-immigrants (the chart I took this from is on page 20 in the study). As the study notes, this has a particular impact on places like Toronto and Vancouver where most immigrants settle. Figuring out why this is happening and how to turn it around should be a high priority for the federal government.

7 Comments:

  • Declan - I'm not sure what the statistics were supposed to illustrate (although I have not read the report you cited). We have slightly lower income inequality than the US, and slightly higher than the UK, and both we and the UK have quite a bit higher income inequality than Sweden. So?

    Other than a desire to be "less like the US" or "more like Sweden" how does that translate into determining policy? What social outcomes flow from the current level of income inequality? How would the proposed policy change affect income inequality? If the particular policy was implemented, how would the change in income inequality change social outcomes? I think there are lots of arguments for increasing funding at least for education (I am not a big fan of direct spending on child care), but I don't see that these statistics speak to it.

    Cheers,

    Dean

    By Blogger deaner, at 1:59 PM  

  • Dean, take a closer look (maybe I should have made some charts).

    While Sweden has lower levels of inequality overall, The U.S., the U.K. and Sweden all have low income rates for seniors which fall somewhat below that of one-parent families but a fair bit higher than 2 parent families.

    In Canada, by stark contrast, the low income rate for seniors is lower even than that for two parent families.

    The point is that in the past 30 years we have brought low income rates for seniors down to being among the lowest in the world. Meanwhile, our low income rates for children have risen and remain among the highest in the (developed) world.

    Given this situation, it seems like trying to reduce low income rates for children would be a better policy goal than devoting more money to seniors who already have a very low low income rate.

    By Blogger Declan, at 2:37 PM  

  • I should add that you are right that the statistics don't speak diretly to education or child care. Only to the point that families with children are in more need of financial assistance than seniors.

    Child care and education were two government programs which came to mind which ease the burden for poor families, but of course it might be more logical to just transfer income directly or to some other program.

    The general point was that, regardless of where specifically it is directed, we should be aiming any marginal increases in resources towards children, not seniors.

    By Blogger Declan, at 2:48 PM  

  • "...it seems like trying to reduce low income rates for children would be a better policy goal than devoting more money to seniors who already have a very low low income rate."

    I agree with that assessment. One of my pet peeves is the transfer of wealth from younger citizens to older when, under most measures, older citizens are already wealthier than younger ones. I have seen this described (although I know I will not find the citation) as the first time in history that intergenerational wealth transfers were from youth to age.

    "Care of the elderly" has become a shibboleth, and I think this has been to the detriment of our society as a whole. This will remain a problem as politically-active and expressive boomers age, and continue to use their voting power to direct social resources to their own benefit.

    Dean

    By Blogger deaner, at 11:53 AM  

  • The boomers have affected every age grouping they have gone through.No big deal.The boomers got wealthy by working their butts off not by laying back and soaking up some guys sperm so you can have a kid and get on welfare.The boomers footed the bill for the youngsers healthcare and education and by their taxes are still footing that bill; My kids are raised and gone why the hell should I pay taxes now to care for and educate the present crop of youngsters . You are right there is an inequality thing.

    By Blogger Useful Idiots, at 12:20 PM  

  • Rightthistime - I'm not sure I understand you arguments:

    >"The boomers got wealthy by working their butts off not by laying back and soaking up some guys sperm so you can have a kid and get on welfare."
    Some boomers did indeed work their butts off; but I don't think you can generalize to say that all of them did. The assertion that they didn't 'have kids to get onto welfare' implies that there were no 'welfare moms' who themselves were born in the 1946-1968 period. I don't believe that to be the case; I remember discussions of the problem going back to the early- to mid-seventies, which (assuming age 20 for the first 'welfare birth') would imply a mother born in -say- 1953. Since the discussion of an issue inevitably lags the occurance, we are probably looking at the first batch of 'welfare moms' being among the early boomers.

    >"The boomers footed the bill for the youngsers healthcare and education and by their taxes are still footing that bill."
    The cost of educating the boomer generation was largely borne by their parents (although some of it was passed down to the boomers and their children by deficit spending) - there was an incredible investment in educational infrastructure all through the fifties, sixties and seventies as the boomers rolled through the system. Boomers are paying taxes now (although some of the first cohort have retired) and have done so over their working lives - I am not sure if over their full life cycle boomers have been net recipients from, or contributors to, government coffers; that would be an interesting piece of research.

    >"My kids are raised and gone why the hell should I pay taxes now to care for and educate the present crop of youngsters?"
    I am not sure if this was intended rhetorically... One answer would be 'for the same reason as your parents paid taxes both before and after you were in school.' The more pragmatic answer might be that as our dependency ratio decays in the next thrity or forty years the segment of the population in the labour force really will have to 'work smarter, not harder' - there won't be enough of them to support our retirees simply by working harder. Without high quality education now, that will not be possible down the road.

    Cheers,

    Dean

    By Blogger deaner, at 5:45 PM  

  • Well said, Dean. I think we're (pretty much) in agreement on this one.

    By Blogger Declan, at 8:45 AM  

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