Growth Doesn't Pay Off for Most Canadians

Despite long stretch of healthy economic times, only the rich are gaining ground

by Norma Greenaway; Friday, May 02, 2008 - The Ottawa Citizen
http://www.canada.com/ottawacitizen/news/story.html?id=246c2...

Feel like you're just treading water economically? Well, join the club. Most working Canadians are in the same boat, according to the latest Statistics Canada analysis of the 2006 census.

The agency reported yesterday that despite a stretch of healthy economic times, there has been almost no growth in the after-inflation earnings of Canadian workers over the last quarter century. It also said the gap between the rich and the poor widened dramatically during that period and that the gap was only partially offset by the tax system.

"This report really does show the rich man's 'double, double'," said Armine Yalnizyan, senior economist with the Canadian Centre for Policy Alternatives, who specializes in income issues.

"The most affluent got most of the benefits from economic growth and the most affluent, we know, are also getting most of the benefits from the tax regime that we've enjoyed.

"It's telling us Canadians have been pedalling as fast as they can and they are not getting much further than they were when there were fewer of them working and they were working fewer hours and they were less educated."

The report said the median earnings of Canadians who work full time, year round edged up a mere 0.1 per cent to $41,401 in 2005 from $41,348 in 1980, despite a 2.4-per-cent gain since 2000. All figures are in inflation-adjusted 2005 dollars.

By contrast, those in the top 20 per cent of earners saw their incomes rise 16.4 per cent over the quarter century, including a 6.2-per-cent gain since 2000. Moreover, the proportion of Canadians earning $100,000 or more almost doubled to 6.5 per cent in 2005 from 3.4 per cent in 1980.

Those in the bottom 20 per cent saw their incomes shrink 20.6 per cent since 1980, including a drop of 3.1 per cent since 2000.

The report also said that 11.4 per cent of the population, or 3.5 million people -- including almost 900,000 under the age of 18, qualified as low-income in 2005, based on their after-tax income. This means they are estimated to devote at least one-fifth more of their income than the average family to the necessities of food, shelter and clothing, the report said.

Michael McCracken, president of Informetrica Ltd., an Ottawa-based research firm, said the findings are not good news, considering the economy grew 2.4 per cent between 2000 and 2005.

"You would expect an economy that has been performing better to be helping to raise the bottom end as part of the old saw that 'a rising tide lifts all ships.' Of course, the cynics say, 'it just lifts all yachts,' and we're seeing that," Mr. McCracken said.

The Statistics Canada report, which for the first time documents after-tax incomes, credited the tax system and such government transfers as child benefits and Old Age Security with helping to reduce income inequalities.

"After-tax income more accurately depicts what families have available to spend," the report said.

Using after-tax income as a measure also means the income gap between different types of families is smaller because the after-tax income reflects the fact that people with higher incomes generally pay taxes at a higher rate.

For example, on an after-tax income basis, lone-parent families headed by women had a median after-tax income that was 49.1 per cent of that received by couples with children in 2005, compared with 44.3 per cent based on before-tax income.

The report said the median after-tax income for all economic families -- those made up of two or more related individuals -- was $57,178 in 2005, compared with the median before-tax income of $66,343.

New Democrat Tony Martin, the party's poverty critic, said the report shows the tax system alone cannot address income inequities.

Mr. Martin said the federal government also needs to implement national strategies to meet such needs as housing and child care. He also said a major overhaul of the federal employment insurance plan is needed to catch people who deserve to qualify for the benefits but who now are falling through the cracks.

"There are a lot of people just treading water, and a lot of people are under water," he said in an interview.

Ms. Yalnizyan said the picture painted by the census doesn't bode well for the future.

"This is the story when we were doing extremely well," she said. "So, what's going to happen in this economic downturn, if not an economic recession?"

Among the report's other findings:

- The median income for lone-parent mothers in 2005 was $36,765, still the lowest of all the major economic family types. But this was 26.4 per cent higher than it was in 1980. In contrast, the median income for lone-parent fathers dropped four per cent during the 25-year period.

- The median family income was highest in 2005 in Calgary at $70,016, followed by Oshawa, Ont., at $69,389, and Ottawa-Gatineau at $68,803.

- Median earnings of full-time, full-year workers evolved differently across the country between 2000 and 2005. In British Columbia, they plunged 11.3 per cent over that period, whereas they grew 8.1 per cent in Ontario, 5.4 per cent in Prince Edward Island and 19.4 per cent in Northwest Territories.

- - -

Online: global video reports, more news and analysis, at ottawacitizen.com

- - -

What Canadians Make -- And How They Live

Earnings and Income:

Earnings refer to wages or salaries.

Income is a broader category that includes earnings as well as government transfers, investment income, and retirement income. The median is the middle number, meaning half the population earned less, half earned more than this figure.

More than half a million Canadians earned more than $100,000 in 2006.

Of those, just over one-third earned more than $150,000.

Where the big money is and who earns it ...

- Alberta, the Northwest Territories and Nunavut saw the greatest increase in people earning $100,000 or more.

- 57 per cent of people who earned more than $100,000 have a university degree. That figure increases to 65.3 per cent for those who earned more than $150,000.

- More than one million Canadians had total income of more than $100,000. 119,150 of those had income of more than $250,000.

How families are faring ...

$63,715: The median earnings for families, a slight increase of 0.6 per cent since 2000.

$75,997: The median earnings for families with children, an increase of just over four per cent since 2000.

Earnings of the poorest down 3.1%...

Median earnings for the poorest families declined sharply between 2000 and 2005. The bottom 20 per cent of families have median earnings of only $14,176.

... while the richest gained 5.1%

The 20 per cent of families in the top earnings group had median earnings of $140,905 in 2005, up 5.1 per cent from 2000.

Median incomes of single-parent households ...

- Headed by women: $36,765. This type of family receives 6.6 per cent of total income from child benefit allowances.

- Headed by men: $51,974. The child benefit allowance accounts for 3.3 per cent of income for this type of family.

Singles and seniors ...

$24,808: Median income for people living on their own

$19,923: Senior women living on their own, an increase of 46 per cent since 1980

$23,886: Senior men living on their own, an increase of 63.6 per cent since 1980

Why you should stay in school ...

$60,003: Median earnings for people with a university degree.

$37,403: for people with a high school diploma.

$32,029: For people with less than a high school education.

Calgary, Oshawa and Ottawa-Gatineau census metropolitan areas had the highest median after-tax income.

Recent immigrants faring worse

... especially if they're educated

- Earnings for recent immigrants is only 63 cents for every dollar earned by a Canadian-born worker, down from 67 cents in 2000. Job losses in the information technology and computer sector since 2000 account for some of the decrease.

- The earnings gap for recent immigrant men is even wider if they have a university degree. They only earn 48 cents for every dollar earned by a Canadian-born male university graduate. This reflects the number of recent immigrants in low-skilled, low-paying jobs.

Who makes what ...

$23,522: Average employment income of a child-care worker in Canada

$52,141: Average income of a plumber, pipefitter or gas fitter in Canada

$99,500: Average income of a pharmacist, dietician or nutritionist

... and where the big gains, losses are + 14.9 per cent: Increase of median earnings of a full-time worker in Nunavut between 2000 and 2005 + 7.8 per cent: in Alberta -3.4 per cent: Decrease in median earnings of a full-time worker in British Columbia -0.3 per cent: in Quebec

Housing and shelter:

About 75 per cent of Canadians own their home. The number drops to 46 per cent for the population that identifies as aboriginal.

- 25 per cent of Canadians rent their homes. That number increases to 37 per cent for aboriginal-identified Canadians.

- 16 per cent of aboriginal-identified Canadians live in band housing.

The property ladder ...

$263,369: The average value of a single detached home in Canada

$245,169: For a row house

65,315: Number of single detached homes in Toronto worth more than $750,000.

62,200: Number in Vancouver

15,000: Number in Calgary .

Most expensive -- and cheapest -- shelter costs in Canada ...

- For a home owner, the average monthly cost in Canada is $998 for mortgage, taxes, municipal services and utilities.

- The least expensive shelter costs were in Newfoundland and Labrador ($647).

- The highest were the Northwest Territories ($1,254) and Nunavut ($1,208), followed by Ontario ($1,167) and Alberta ($1,063).

-- Compiled by Kristen Smith

© The Ottawa Citizen 2008