New CCPA Study Finds Growing Inequality and Declining Family Incomes in BC

Yesterday the CCPA released a new study on family income inequality in BC by yours truly, which reveals some disturbing statistics about family incomes over the past 30 years. The figure below summarizes our main findings.

after-tax-incomes-figure

Among our other key findings:

  • The gap between the wealthiest and the majority of BC families has grown dramatically over the past 30 years. The share of income going to the richest 10 per cent of families has grown fast, while the share going to the bottom half of families has declined substantially. This is true for both earnings and after-tax incomes.
  • Not only has inequality grown, but most BC families with children have also fallen behind in absolute terms. The bottom 70 per cent of families have lower real (inflation-adjusted) earnings than their counterparts in the late 1970s, and the bottom 60 per cent saw a decline in their after-tax incomes as well.
  • Middle-class families in BC have been squeezed to an extent not seen in other provinces.

These findings are startling on their own, but with the recession that’s upon us now the problem is only going to get worse.

Yet it doesn’t have to be that way. It is clear that economic growth alone does not automatically translate into higher incomes for most people, especially for those at the lower end of the scale. The BC government can and should take action to reduce income inequality while also protecting poor and middle class British Columbians from the impact of the recession. There is a range of policy options available, including making the tax and transfer system fairer, expanding public services and social programs for all citizens, reducing poverty and improving earnings and working-conditions conditions for low-wage workers.

In the end, it is up to us to decide what type of society we want to live in: a society that is growing more unequal by the year or a more inclusive one, where the benefits of increased prosperity are broadly shared.

We got great media coverage in Vancouver, so you may have heard the study mentioned on the radio or on the evening CBC news. The Vancouver Sun ran an article about the study in today’s edition.

2 comments

  • I notice that the bottom 60% of *families* have gotten worse off. Yet at the same time I have the impression that many more families have two (or more) people holding down jobs than was true 30 years ago. If that’s true, then what are we to say of how bad the situation is for *individuals*? Even worse, I should think.

  • You raise a good point re: families now having more than one earner. Our dataset includes data on average weeks of work by family decile for the whole 30-year period and we did look at how time in the labour force has changed over time. We do find an increase in prevalence of two full-year earners – families in the top 50% of the earnings distribution worked 92+ weeks a year on average in the mid 2000s, while only the top 30% of families worked that much in the late 1970s (see Table 2 on p. 29 in the report). While it is true that families in higher earnings deciles work on average more weeks per year than those in the lower decile, the problem is that families in the middle (deciles 4 to 7) have increased their weeks of work and yet seen a decrease in earnings over the 30-year period.

    Unfortunately, data on hours of work (which is arguably a much better metric of work effort than weeks of work) is only available since 1996. We don’t present this in the report, but we did look at the hours of work and we find a similar pattern to what is happening to weeks of work – hours are increasing in the middle of the distribution, but earnings are falling.

    That said, when the income distribution of individuals is compared to that of families, studies have found that the distribution is more unequal for families. This is because there is greater variance in the amount of work families can put in the labour force than individuals (while an individual can work between 0 and 52 weeks per year, a family can work between 0 and 104+ if there are two or more earners). In addition, individuals of similar earnings potential seem to form families and when the low-wage high school dropout marries a low-wage high school dropout, their family income is much lower than that of two high-power lawyers.

    In my view, comparing inequality among families with inequality among individuals is not really very productive (it doesn’t really tell us much). There is evidence that both are rising and this is what we should be concerned about.

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