Crawl Across the Ocean

Wednesday, December 13, 2006

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.

9 Comments:

  • A few random points...

    1. Why is economic equality (parity) king?

    2. Your twin lists are cute and all, but it's pretty meaningless to say "I'd rather live in a country with a lot of equality than almost none". In the grand scheme of things Canada is probably in the top half of the list, correct?

    3. I'd rather live in a country where, if I work my tail off and plan well I'll be rewarded than one where enforced parity (through punishing taxes, a brutal regime, etc.) reigns.

    By Blogger Andrew, at 7:12 AM  

  • It's a fair question, I really should elaborate on the benefits of a reasonably equal income distribution vs. a highly unequal one. But I was being lazy for the moment.

    By Blogger Declan, at 8:04 AM  

  • I think that needs to be qualified a bit more, Declan. I think what we're you and I are more interested in is a country with high income equality AND a high standard of living.

    In other words, we'd choose the Scandinavian countries - one of which has a higher GDP per capita than the US - and not the ones where the standard of living sucks and you're living under a brutal dictator.

    By Anonymous Deanna, at 11:35 AM  

  • [skull thump]
    must...learn...to...proofread!

    By Anonymous Deanna, at 11:36 AM  

  • I guess I take the high standard of living part as a given, but maybe it needs to be clearer.

    By Blogger Declan, at 11:55 AM  

  • >Let's hear it for progress!

    Amen. I can buy a much better desktop computer now than I could in 1986. My car gets better mileage, which is less expensive for me and better for the environment. Everything I can acquire with my labour has dramatically outstripped the growth in value of my labour by several orders of magnitude. What was your point again?

    By Blogger AwaWiYe, at 4:29 PM  

  • "Everything I can acquire with my labour has dramatically outstripped the growth in value of my labour by several orders of magnitude."

    Sure, except for housing, education, health care, gas, etc.

    Still, what is *your* point, that it's no big deal that people have to go to school longer for less certain chance of a job which pays less, because a subset of the products they buy have had quality increases that ran ahead of inflation over that period?

    If I recall correctly, the recession of the 90's which led to so much moaning about Bob Rae and so on, involved a drop in GDP (income) nationwide of less than 2%. Maybe in Ontario which was hit harder there was a drop of 3 or 4%. But we're talking about a drop of 20% for this particular demographic, over 20 years.

    So if the whole country had had the same experience (e.g. we were currently in the 22nd year of what would be classed as a severe depression) you'd just say, hey no problem, look at the quality improvements in the products we can buy?

    Personally, I aim a little higher. If there is general growth in incomes but a large block of society has been seeing their income shrink for a long time, that seems like something worth investigating and remedying or mitigating if possible. It doesn't seem like progress.

    By Blogger Declan, at 5:15 PM  

  • >Sure, except for housing, education, health care, gas, etc.

    I'm not sure how housing stacks up - how many years' salary it took to buy a house at job X in 1970 or 1980 versus now, but fuel is definitely not at an all time high and education costs are skewed by whatever governments decide to subsidize. (It's interesting that in the US, which has something closer to a private market, education costs have been found to be rising because so much public money has been thrown in that the institutions have been boosting prices to match.) Health care is another example of an area of technology that improves by such leaps and bounds that it's almost senseless to try to compare across decades.

    I've been aware for a while that one must go to school longer; in all technical trades and professions there's more that is expected than 20 or 30 or 40 years ago.

    A market basket measure would be one actual metric one could look at.

    Historically, StatsCan's benchmarks for low income calculations have been mostly moving downward (ie. necessities of life have gotten relatively more affordable) since the measures began in the 1960s. If there's been a noticeable deflection, it must be a very recent one.

    By Blogger AwaWiYe, at 10:06 PM  

  • To be sure, I don't argue that from one year to the next, your (inflation-adjusted) dollar goes further due to quality improvements and so on, I just don't think it is an orders of magnitude change or enough for us to accept that declining incomes for a big bunch of the population is not an issue.

    By Blogger Declan, at 10:44 PM  

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