Incomes are becoming increasingly unequal in Canada. While the rich (and especially, the super-rich) are getting richer, the rest of Canada is falling behind. Families that could get by with one income 30 years ago are now struggling with two. New graduates who can find jobs have to accept mediocre salaries and wonder how to repay their loans. Meanwhile, the richest Canadians have seen their incomes increase significantly, particularly in the past decade.
What is disturbing is not that the rich are doing so well; it is that the rest of us are not doing well along with them. Rising inequality is not only a problem because it is unfair but also because of the serious negative effects it has on society as a whole. In their book, The Spirit Level, British social epidemiologists Kate Pickett and Richard Wilkinson argue that more equal societies have better health and social outcomes, as well as lower crime rates. An unequal Canada is worse for all Canadians, not just those who find themselves at the bottom of the economic ladder.
The Occupy movement, which began in New York City, and has since spread across the developed world, including to Toronto, has raised these concerns about inequality. While the movement includes people with disparate goals, they are united by a desire to take action on inequality. This seems to have resonated with some Canadian leaders, most notably Mark Carney, current Governor of the Bank of Canada. In an interview given last week, Carney agreed with many of the concerns raised by the Occupy protesters. He argued that the government should take action to stop the rise of inequality.
There are a number of measures the federal and provincial governments of Canada could take to stem inequality. For instance, they could introduce salary proportionality legislation. The law would require that no employer pay any employee significantly more than they pay their lowest-paid employee. For instance, if the lowest-paid worker is paid $30,000 per year and the law would require that the highest-paid not receive more than 50 times more than the lowest-paid, then the highest-paid could not receive a salary of more than $1.5 million. This would obligate an employer wanting to pay his or her executives highly to increase the salaries of the lowest-paid employees.
Another option would be to introduce public salary disclosure for the all workers. This is done in Norway and serves as a disincentive for employers to adopt extremely unequal pay. This is already done in Ontario for public sector salaries in excess of $100,000 and could quite easily be expanded. The provincial governments could raise the minimum wage to what would be an actual living wage and index it to inflation in order to make it harder for the poorest Canadians to fall behind.
The federal and provincial governments should also take steps to make the tax system fairer. They should ensure that the rich do not pay a lower percentage of their income in taxes than the rest of Canadians. They can do this by treating all income equally for Canadians earning more than $500,000 a year. Currently, income in the form of capital gains and dividends is taxed at a lower rate. This is meant to encourage investment but has done little to do so. Instead, it merely provides the rich with an opportunity to reduce the taxes that they pay. Reducing inequality is not about punishing the rich to benefit the poor. Instead, it is about making Canada a fairer and ultimately more successful country. The longer that Canadian governments choose to ignore inequality, the greater a problem it will become. In the meantime, most Canadians are being left behind as the wealthiest among us enjoy bigger and bigger paydays. The only solution is to take serious steps to ensure that all Canadians benefit from Canada’s prosperity, not just those at the top. If we cannot do that, it will mean that the social contract at the core of Canadian society has been irreparably broken.
