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%

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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.