Denying income inequality won’t make it go away

The Vancouver Sun ran an opinion piece by yours truly that revisits the recent Statistics Canada release of income and earnings numbers for 2006

Denying income inequality won’t make it go away

Iglika Ivanova, Special to the Sun

Published: Tuesday, June 24, 2008

The May release of the 2006 Census data on earnings and incomes sparked a heated debate about inequality in Canada. Media commentators argued whether it was more informative to consider individual or family incomes, while others tried to convince us that market earnings are irrelevant since the taxes we pay and the government services and income supports we access reduce earnings inequality to some extent.

Yes, after-tax family income is more equally distributed than individual earnings, but this doesn’t mean that all is well.

On the contrary, the core finding from the latest Census is stark: Income inequality is growing during the best of economic times in Canada. This is a serious reason for concern.

It has been claimed that a rising tide lifts all boats, but Canada’s working poor are sinking. Census numbers reveal that the median earnings of the poorest fifth of individuals who worked full-year, full-time dropped by 20.6 per cent between 1980 and 2005 to $15,375 per year. Without government transfers, they’d be in real trouble.

This is not just a story about the bottom falling behind, but also about the middle class not being able to move forward. Everyone is working about as hard as they can. They’re becoming better educated. Yet only the richest among us are getting ahead.

Young Canadians and new immigrants — our future workforce — are struggling the most.

The situation is even worse in British Columbia, which saw the sharpest decline of median earnings of full-time workers in the last quarter century — 11.3 per cent — with a 3.4-per-cent drop between 2000 and 2005 alone.

Technological change, the industrial restructuring of the economy in response to international trade and the decline in unionization are among the most frequently cited explanations for the nationwide trends of stagnant real wages and rising inequality since the 1980s. These are often regarded as impersonal forces that governments have no control over, and thus bear no responsibility for. This is simply not correct. Public policy plays a crucial role in how we adapt to structural change: Well-designed policies successfully lessen the negative effects of changes, while misguided policies compound the problems.

The forestry industry’s collapse and the subsequent loss of stable and relatively well-paid jobs explain much of the dramatic decline in B.C. real wages between 1980 and 1990. Median earnings recovered slightly over the next decade, but then took another hit between 2000 and 2005, a time of stable economic growth and low unemployment. This makes B.C. the only province to experience a substantial drop in median earnings during times of economic prosperity.

The decline in median earnings since 2000 was likely the direct result of government policy. In the name of economic competitiveness and labour market flexibility, the current Liberal government introduced a host of policies that weakened labour protections soon after it was elected in 2001.

The labour market in its current incarnation in B.C. doesn’t seem to benefit most workers. If we are serious about reducing inequality, we should demand that our government take action.

The province needs to proactively enforce labour standards and implement a broad agenda of education and advocacy on workplace rights. Minimum wages should be raised to a level that ensures that no full-time worker lives in poverty. It is important to see wages not only as providing a certain level of income but also as indicators of affordability for basics like housing, child care and education to make sure we’re all set on the right path in life.

We also need to take a tougher look at the use of temporary foreign workers as a substitute for paying adequate wages to Canadians. In a tight labour market, the shortage of workers willing to take jobs at the prevailing wages should push wages up, but this cannot happen if we continue to allow employers to import and exploit cheap labour under the temporary foreign workers program. At a minimum, these temporary workers should enjoy the same labour rights as all Canadian workers.

Denying inequality won’t make this very real and pressing problem disappear. What we need instead is to take a serious look at the causes of rising inequality in B.C. and at the national level, and commit to addressing the problem with effective public policy.

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