Growing income gap a warning to leaders
OECD report shows rift in Canada increasing at quick rate
Armine Yalnizyan, senior economist with the Canadian Centre for Policy Alternatives
October 22, 2008

The internationally respected Organization of Economic Cooperation and Development threw out a warning flag to Canada on Tuesday.

It says the income gap between Canada's rich and poor is growing faster than in most other 30 developed nations in the world, and that our governments need to stop that trend.

The news is about as sober a warning as it gets. Canada is falling behind internationally. We used to be above the average when it came to income equality. Now we're below average. And there's really no good excuse for it.

As a nation, we are richer than most. Ours is the ninth-largest economy on the planet. The last decade has been one of the strongest, most sustained periods of economic expansion in our history.

But most of the gains of economic growth have gone to the richest 10 per cent. Earnings for those in the middle have been stagnant for 30 long years, and workers at the bottom have lost ground compared to a generation ago.

That's why income inequality is getting worse.

Now, with the global economy veering off the rails, we need to ask ourselves: How much worse can it get? And what can we do about it? The OECD report is clear: Our governments have a strong role to play.

Canadian government interventions traditionally offset these trends, particularly in bad times. But in the past 10 to 15 years governments backed away from investing in public benefits that help the majority of Canadians and replaced them with tax cuts that most benefit the richest 10 per cent -- exacerbating income inequality in the country.

Help for those at the bottom, like unemployment insurance and social assistance, has been stripped back as Canadians have been told to fend for themselves.

That's just dumb economics, and a recipe for greater instability and slower economic growth…..

In the meantime, the rich got richer and drove up housing prices and the cost of living soared for the rest of us. Our paycheques didn't keep up.

What can governments do?

Governments are being asked to bail out banks and investors. They can also be asked to keep purchasing power among the jobless, speed up investments in badly needed infrastructure projects and engage in counter-cyclical investments like housing to maintain jobs in the middle of the income spectrum.

Now would also be an opportune time for the federal government to partner with provincial governments on a clear poverty reduction strategy with targets and timelines -- because in a shaky economy, we need all hands on deck.

Anything less means Canada will continue down the troubling path of continuously growing income inequality, instability and economic weakness. It's time to heed the warnings and change our course of action.