Introduction
This is a review of the article published by the University of Toronto about the income inequality existing in Canada. It researches the patterns of Canadian income inequality and the difference in wages due to gender. It investigates the top one percent of earners. The known causes of the inequality in incomes are summarized and the policy options for controlling the growth of this income inequality are outlined. The article was written by the professors Nicole Fortin, David A. Green, Thomas Lemieux, and Kevin Milligan who were all Professors at Vancouver School of Economics (The University of British Columbia).
Analysis
Data used
In this report, the following measures are used by the authors for studying and arriving at the conclusions. Before explaining about the sources of data, firstly they define Market income as the sum of earnings from net employment (includes self-employment), net investment income, and private retirement income and the Disposable income as the income arrived at by adding government transfers to the market income and subtracting taxes.
Results and discussion
The other factor that they were interested in was whether the top one percent (or the richest) people’s share of the income has resulted in income inequality and the results proved that this has been the case since the last three decades. They found that Canada’s eight percent of income in the 1970s was concentrated in the top one percent of the population. It has now become 14% in the recent years, which are at socially unacceptable levels. The average income of this group is 450,000 CAD while the average income for the entire Canadian population is 36,000 CAD. They also found that 58% of this group have bachelor’s degree, 52 percent work for more than 50 hours per week, and a 70% of them earn their income from work. They are financial professionals (10%), CEOs and senior management (14%), and Physicians (10%). A staggering 83% of the top one percent earners are men.
Reasons for inequality
Policy options for addressing inequality
Conclusion
The study is based on different measures and one of the measures, Gini Coefficient that is used for income inequality, which places an inordinate amount of weight on changes in inequality of incomes at the middle and less towards the extremes. The advantage is that the data is comparable between different countries. The other disadvantage of using cross-sectional data is that there are always people who are earning less because they are young. There is no way to distinguish between those who are earning less due to other factors and those who are earning less due to age factors. To ensure that this bias is taken care of, the authors support using consumption data rather than income data.
References
Nicole Fortin, D. A. (2012, June). Canadian inequality: recent developments and Policy options. Canadian Public Policy / Analyse de Politiques, 38(2), 121-145.
