OTTAWA—Canada’s biggest income earners lost ground to the other 99 per cent in the post-recession world, as new data suggests a narrowing of the gap experts could not immediately explain.
The highest-earning Canadians—the so-called top one per cent—saw their share of the country’s overall income tumble to 10.3 per cent in 2012, a drop from a peak of 12.1 per cent six years earlier, Statistics Canada said in a report.
The agency found the six-year period was also the first “prolonged” stretch in 30 years that saw the income shares of earners in the lower levels—the bottom 90, 95 and 99 per cent—stabilize or climb.
To qualify for the exclusive club, the report said an individual had to earn a minimum of $215,700 in 2012, a feat achieved by 261,365 people who filed taxes that year.
The debate over income inequality and the fate of the middle class has become a hot political topic in Ottawa, where Canada’s political class is already jockeying for working-class votes ahead of next year’s election.
One expert who has conducted extensive research on income distribution said the gains at the lower and middle sections of the income spectrum made the data release “modest good news.”
“In fact, the only group that has not improved is the group at the very top,” said Michael Veall, an economics professor at McMaster University in Hamilton, Ont.
“Proportionally, those at the top end of the income distribution have lost more income since the great recession (of 2008-09) than any other part of the income distribution. However, it’s obvious that they were in a better position to afford that.”
However, the data offers few clues about the underlying reasons for the changes, Veall said.
He said it could be linked to capital income and very low interest rates.
Perhaps, Veall added, bondholders earned smaller returns or maybe people who made important gains on the stock market had yet to sell.
Veall believes Canada stands out when compared to the United States and many countries in Europe, where he said data suggests the chasms between the rich and the poor have grown since the recession.
“The Canadian numbers are a bit of an outlier and it is, I think, somewhat unexpected,” he said.
The Statistics Canada data noted the big difference between Canada and its neighbour to the south.
While the top so-called “one percenters” in Canada earned a smaller slice of the overall income pie, the report said their counterparts in the U.S. raked in a bigger chunk of their own nation’s wealth.
The top-earning Americans, the agency said, saw their income share rise over the same six-year period, from 18 to 19.3 per cent.
Economist Armine Yalnizyan of the left-leaning Canadian Centre for Policy Alternatives said it’s unclear why the highest-earning Canadians lost more income share than Americans.
Yalnizyan said perhaps it was due to the fact Canada has lost many companies since the recession or maybe people are opting for fewer payouts via stock options.
“Those are still things that we’re digging into,” Yalnizyan said.
She warned that even though the divide closed a little bit, a stubborn lack of mobility in and out of the top one per cent has remained in place for decades.
Yalnizyan expects an era of low wages to continue, which would offer fewer chances for people to climb into the upper income echelon.
“Whereas it is tipping down right now, and has been for the last six years for unknown reasons, we’re nowhere near declaring victory that income inequality is a concern from the past,” she said.
The Statistics Canada data also found women represented 21.3 per cent of the ranks of Canada’s one percenters in 2012—nearly double their proportion of 11.4 per cent in 1982.
“Although Canadian men represent the vast majority of the top income groups, the number and share of women in (the) top one per cent reached a 31-year high in 2012,” said the report.
The data also provided a provincial breakdown.
The numbers show Ontario still had the highest proportion of top-earning Canadians in 2012 at 41.5 per cent, but the share plunged from its peak of 51.7 per cent in 2000.
Here’s a rundown of the provinces ranked by their share of Canada’s top earners in 2012 compared to their rankings from 2000, according to Statistics Canada:
- Ontario: 41.5 per cent (down from 51.7 per cent)
- Alberta: 22.8 per cent (up from 12.7 per cent)
- Quebec: 16.6 per cent (down from 17.2 per cent)
- British Columbia: 11.1 per cent (up from 10.7 per cent)
- Saskatchewan: 2.1 per cent (up from 1.5 per cent)
- Manitoba: 2.1 per cent (same as 2000)
- Nova Scotia: 1.3 per cent (down from 1.9 per cent)
- Newfoundland and Labrador: 1 per cent (up from 0.7 per cent)
- New Brunswick: 0.9 per cent (down from 1.1 per cent)
- Prince Edward Island: not available