INCOME: AFFORDABILITY PROVES EVER ELUSIVE
Wealth gap exposes fresh labour challenge
Immigrants, native-born youngest male adults will be identified as prime victims of 25-year trend in widening income inequality
MICHAEL VALPY
THE GLOBE and MAIL
April 26, 2008
The final 2006 census data to be made public next week will portray the richest 5 per cent as dramatically accumulating more wealth, the incomes of most Canadians showing perhaps the greatest stagnancy in the developed world and the nation's poorest falling further and further behind.
Immigrants and Canada's native-born youngest male adults will be identified as the prime victims of a 25-year trend in widening income inequality – an inequality some economists believe reflects systemic long-term changes to the labour market rather than transitional bumps in demographics and swings in the business cycle.
The information to be released Thursday by Statistics Canada will show the median incomes falling for immigrants and native-born 18-to-34-year-old males who compete directly for the same entry level jobs that are increasingly characterized as low-pay, unstable and short term.
“The balance of power between worker and employer has shifted dramatically in this last 25 years, and that has something to do with what workers can command,” said Toronto labour market economist Armine Yalnizyan, a close watcher of the census data and parallel StatsCan surveys.
It is a power imbalance that university graduates like Colin Finkle of Ottawa and Terence Campbell of Halifax, both in their 20s, have discovered in their search for security and a career in the workplace. And an imbalance that Tania Stephan, an immigrant from Dubai living in Mississauga, encounters every day as prospective Canadian employers stubbornly devalue her foreign workplace experience and university education.
The census numbers are expected to show that the rich are driving up shelter prices beyond reach of increasing numbers of people whose earnings are inert, a situation impacting heavily on immigrants arriving in major cities where the housing markets are already stressed.
“I don't know what the census findings will say about trends in shelter costs over the long term,” Ms. Yalnizyan said, “but we know from other studies that housing affordability is at its worst level since 1990. How much people's incomes are getting eaten up by shelter costs, I imagine it's accelerating quite dramatically.”
The census analysis is also expected to show that the traditional premium paid by employers to well-educated workers is declining, largely because there are so many of them – bad news for both the highly educated immigrants Canada vacuums up from the developing world and its own well-educated native-born.
And while the history of Canada has rested on immigration's contribution to the economic and cultural strength of the country, the census data raise disturbing and moral questions about the impact of admitting more than 200,000 immigrants a year who are struggling – with steadily declining success – to find jobs commensurate with their knowledge and experience, good incomes and decent, affordable housing.
There has been no leak of this last chunk of 2006 census information. However, social scientists who work with census data and periodic Statistics Canada surveys are comfortable about predicting where the graph lines have gone since the release of 2001 census results.
“It's kind of hype from StatsCan to make this [the May 1 release] a big news item,” Dalhousie University economist Lars Osberg said. “The only reason you actually do a census any more is to have a sampling frame for the surveys. It's not going to tell you anything that's not already out there in the surveys.”
Said Ms. Yalnizyan: “Economists have been buried by reports from Statistics Canada and other institutions showing income inequality to be on the rise. So that isn't a surprise. But what the Statistics Canada analysis will do on May 1 is connect the dots between incomes and shelter costs. And that takes it beyond a moral imperative to act and says this situation may not be sustainable.
“Accommodation is the biggest bite out of the basket, and it goes straight to the heart of how income inequality is not about poverty , it's about affordability.
“And affordability is key. You know our macro-economic policy . . . the portion of the population that consumes the most is lower income people who don't save, they spend. Anyone in the bottom half is spending more of their income than they're saving. You want to keep them spending. So don't keep chewing up their disposable income with housing costs, which is what growing inequality does. It just grinds down the wheels of commerce.”
There is no consensus among economists on whether income inequality represents systemic change in Canadian society or is merely heartburn at an overheated point in the business cycle that will correct itself as the economy cools and baby boomers begin to retire.
A report last month from the Organization for Economic Co-operation and Development showing Canada to be one of a minority of OECD countries where tax cuts and other fiscal policies have primarily favoured upper income groups doesn't shore up the notion that inequality is a passing happenstance.
Moreover, the fact that inequality and poverty have grown during booming economic growth when a rising tide was thought to lift all boats raises the question of what will happen when or if the economy slips into recession. Finally, first-time job-seekers are now facing what shows signs of being a categorically different labour market than existed in Canada 15 or 20 years ago.
“Here we are in a country built on the expectation of economic growth,” Prof. Osberg said. “With the Canadian labour force way more educated than it was 25 years ago. With the baby boomers moving into their most productive years. With a whole series of policy initiatives, from the free-trade agreement to de-regulation, that were all aimed at improving productivity and the efficiency of market force. Lots of things going on that one would have expected would produce increases in real wages.
“Yet if you look at what I call the middle 90 per cent [of Canadians on the income scale], there's not a whole lot of change. And if you want to talk about the bottom 5 per cent it's clear that it's a nastier Canada now than it used to be.”
