Inequality — the good news and the bad news.

It seems we are no longer in denial about growing inequality in Canada, and about its potential consequences. In mid-November, a lot of attention was paid to new Statistics Canada data which show that inequality as measured by the income share of the top 1% of income earners stopped growing in Canada after the Great Recession, whereas it continued to grow in the United States. And while there was a fair bit of self-congratulation about that fact, it was also pointed out that inequality in Canada is still very close to the highest on record.

http://www.statcan.gc.ca/daily-quotidien/141118/dq141118b-eng.htm

However, the state of debate on the issue in Canada continues to be one of good news / bad news.

The next week, the Broadbent Institute Gala featured former US Secretary of Labour and current inequality crusader  Robert Reich as its guest speaker. The good news was that Reich is a very compelling and entertaining speaker, and he has put a lot of effort into popularizing the issue of inequality in America. Check out the trailer.

The bad news is that, despite the compelling information and analysis, the prescriptions leave us hanging. Some are simply beside the point. Sure, investment in education and increasing productivity may enable higher living standards, but as Reich’s own data show, the problem in the past 35 years or so has not been a lack of productivity improvement, it has been the distribution of the benefits from productivity improvement. Others point in the right direction — the need to renew a progressive tax system and strengthen the trade union movement, for example — but fall short of even a hint as to how those things might materialize in the current environment. And perhaps most important, Reich’s prescriptions ignore the way that different levels of public service — collective consumption, if you will — play into differences in income and wealth inequality among nations.

And near the end of November, a report from the TD Bank, no less, warned of the social, political and economic consequences of allowing inequality to continue to grow unchecked.

You can find the report here:

http://www.td.com/document/PDF/economics/special/income_inequality.pdf

Like Reich’s presentation, the TD report is full of compelling statistical analysis of the problem of growing inequality, and its potential consequences. And despite the case it makes, the TD report falls even further short of a credible and compelling response. Not surprisingly, the bank is cool to the idea of increasing income taxes on those with high incomes. And it fails even to mention an important part of Reich’s message — the link between growing inequality and the weakening of workers’ bargaining power as union representation in the private sector continues its absolute and relative decline.

But, astonishingly, the TD report advocates as a solution to inequality one of the key factors behind the growing gap in living standards between the middle and the top of Canadian income earners.  Rather than point to the importance of strong public services as contributors to reducing inequality — just look at a list of countries in reverse order of inequality compared with a list of countries by public services as a share of GDP to see the point — the TD report actually recommends more of the very income targeting of public services that has been a key driver of growing inequality in Canada in the past 25 years.

So the good news is, we’ve moved from denial, to dismissal to acknowledgement of the social, economic and political impact of inequality. The bad news is, we’re not much closer to a response that stands a chance of reversing the trend.

About hugh@HMA

Freelance consulting progressive economist.
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