Rising Tide Lifts Big Boats, Submerges Small Ones

Some discouraging news from StatsCan yesterday. It appears that inequality continues to worsen in Canada.

If you were an average person in the top quintile with respect to wealth, your income would be up 19% from 1999 to 2005 and up 64% from 1984 to 2005.

Meanwhile if you were the average person in the bottom quintile, you started off with nothing in 1984 and you've been losing ground ever since. Even if you are the average person in the second from bottom quintile, you've seen your wealth drop from 14,400 in 1999 to 12,500 in 2005. Of course, talking wealth, part of that growing spread is the housing bubble which obviously doesn't bring many benefits to those who don't own houses (e.g. most of the bottom 40% of Canadians ordered by personal wealth.) And maybe it's just that (maybe some of) those at the bottom are spending too much and not saving, which is not something the government can control. It's hard to get a clear picture without corresponding income data. Still worrying numbers though.

Perhaps the most depressing part was the section on young (especially male) Canadians. Says StatsCan:

"While the median wealth of families and unattached individuals rose 26% between 1984 and 2005, it fell substantially among families in which the major income recipient was aged 25 to 34."

(expected government solution: more tax breaks for Seniors! - OK, that was cynical, the actual government solution is to let those poor young people borrow more money to pay already overinflated home prices - and of course lots of Conservatives would like to see a 'flat' tax, giving the lion's share of benefits to old rich folks, because their biggest concern with inequality is that we don't have enough yet)

Even worse, continuing from the above StatsCan quote:

"This decline [in the wealth of young households] was due mainly to the fact that cumulative earnings of young men (the sum of earnings they receive over several years) fell substantially between the 1970s and 1990s.

Between 1994 and 2004, these cumulative earnings averaged roughly $267,000, compared with $330,000 accumulated between 1973 and 1983.

In contrast, cumulative earnings of young women increased about $10,000 from $166,000 to $177,000 during these periods.

Three factors were behind the decline among young men. First, they now stay in school longer than their counterparts did during the mid-1970s. This reduces the number of years during which they receive significant wages. Second, once out of school, they are less likely to have a full-time, and therefore relatively well-paid, job than in the past.

Third, those who did work on a full-year, full-time basis earned less annually during much of the 1990s than their counterparts did previously."

Talk about a triple-whammy. Compared to 20 years ago, you have to go to school for longer, and at the end you have less chance of finding a full time job than the people with less education had in the past, and even if you do find a job, it will pay less than it would have in the past.

Let's hear it for progress!

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For some more reading on inequality (in the U.S.), I recommend this Paul Krugman article.

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Does inequality matter? Well, say you had a choice, you could be randomly moved to one of the 20 most equal countries in the world or to one of the 20 most unequal. Which would you choose?





20 most equal (measured by Gini Coefficient): Azerbaijan, Denmark, Japan, Sweden, Czech Republic, Norway, Slovakia, Bosnia and Herzegovina, Uzbekistan, Hungary, Finland, Ukraine, Albania, Germany, Slovenia, Rwanda, Croatia, Austria, Bulgaria, Belarus

Seems risky, but odds are you'll end up in Europe somewhere.

The bottom 20: Namibia, Lesotho, Botswana, Sierra Leone, Central African Republic, Swaziland, Bolivia, Haiti, Columbia, Brazil, South Africa, Paraguay, Chile, Panama, Guatemala, Peru, Honduras, Argentina, El Salvador, Dominican Republic.

Yeah, I think I'll go with the first list, although if you can postpone the decision for a while, and keep voting Republican, the U.S. might show up on that second list which could help a little.