Gap between Canada's rich, poor growing: Conference Board

Income inequality rose during, after recession
By John McCrank
||Last Updated: 07/21/2011

(Reuters) — The gap between Canada's rich and poor widened over the past generation, with the incomes of the wealthiest outpacing gains made by lower- and middle-income earners, according to a study by the Conference Board of Canada.

The average Canadian was better off in 2009 than he or she was in 1976, but most of the gains were made by richest members of society, found the report.

Inequality "can diminish economic growth if it means that the country is not fully using the skills and capabilities of all its citizens or if it undermines social cohesion, leading to increased social tensions," said Anne Golden, chief executive of the Conference Board. "Second, high inequality raises a moral question about fairness and social justice."

The report said income inequality in Canada fell in the 1980s, rose in the 1990s, and was relatively stable in the 2000s, though it increased between 2007 and 2009, during and after the recent recession.

The average Canadian income, after adjusting for inflation, rose 17 per cent between 1976 and 2009, to $59,700 from $51,100.

But average income can mask inequality, the report said. For example, it said that if Bill Gates walked into a bar and his annual income was $1 billion, the average income of the people in the bar would soar, but the people who were there before Gates came would be no better off.

The median income, which divides income into two equal groups, rose 5.5 per cent between 1976 and 2009, to $48,300 from $45,800, the study said, adding that the gap between average and median income has been growing.

"While the poor are minimally better off in an absolute sense, they are significantly worse off in a relative sense," Golden said.

The average income of the poorest group of people in Canada, after taxes, transfers and adjusting for inflation, rose to $14,500 in 2009 from $12,400 in 1976.

Over the same period, the gap between the real average income of the richest group of Canadians and the poorest group grew to $117,500 in 2009 from $92,300 in 1976.

The study divided incomes into five groups, from the top 20 per cent to the bottom 20 per cent.

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