The Rich Get Richer
Jul 06, 2007
A recent study by the Canadian Centre for Policy Alternatives (CCPA) shows that the fruits of a thriving Canadian economy are not benefitting Canadian workers. In Rising Profit Shares, Falling Wage Shares, Ellen Russell and Mathieu Dufour find that in spite of this, and even with worker productivity increasing by 51% over the past three decades, real wages have been stagnant over this period. Workers are getting a smaller piece of a larger economic pie, and corporate profits continue to skyrocket. Hopefully this study will help illustrate this inequality.
An earlier study by Armine Yalnizyan (The Rich and the Rest of Us) showed how the income gap is widening in Canada. And a 2006 Environics Research poll indicated that some 65 % of Canadians feel that they are not benefiting from the country’s economic growth. Now this study shows that the benefits of this growth have not been reflected in Canadians’ paycheques over the course of a generation.
Not only have the real wages of average Canadians not increased in over 30 years, but they have actually decreased for the lowest paid workers – those making the minimum wage. These stagnant wage increases have meant that a decreased share of the gross domestic product (GDP) has gone to workers, while a corresponding increased share has been going to corporate profits.
In real dollars, the Canadian economy grew by 72% between 1975 and 2005. Over that same period, labour productivity increased by 51%. One would logically think that a growing economy with increasing labour productivity would naturally translate into rising wages. And even though most economic models would also predict this, that has not been the case at all. Steady increases in Canadian workers’ wages between the early 1960s and the late 1970s have been followed by 30 years of stagnation. Real wages have improved in some sectors (finance, insurance) and decreased in others (transportation).
The promise that a growing economy and increased worker productivity would produce benefits that would be widely shared by the majority of Canadian workers has not happened. After adjusting for inflation, the average minimum wage in Canada has decreased from $9.14 in 1976 to $7.32 in 2006 (in 2006 dollars). Those workers earning minimum wage are indeed experiencing real wage decline.
Workers’ share of increasing profits shrank as Canada’s economy grew. This important change in income distribution trends has been a key factor in the intensification of the income gap in Canada. The promised benefits of economic growth are not reflected in the paycheques of most Canadians, despite the fact that they have helped increase this country’s productivity dramatically. Instead, these benefits are increasingly going directly to corporate profits.
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The Canadian Centre for Policy Alternatives says the incomes of the top 10 per cent of families have jumped disproportionately over the past 30 years, and in 2004, the wealthiest 10 per cent of families earned 82 times as much as the poorest 10 per cent. In 1976 they earned 31 times more. The study's author, Armine Yalnizyan, said poorer Canadians are not benefiting from Canada's economic growth due to declining bargaining power. Contract work, part-time work, fewer unionized jobs and more low-paid service-sector jobs are resulting in lower average wages, she said. "We have a two-tier labour force," Yalnizyan said. "That's what you're getting in the labour market." The study, titled "The Rich and the Rest of Us: The Changing Face of Canada's Growing Gap," says that in the late 1970s the bottom half of households earned 27 per cent of total earnings. Between 2001 and 2004, that dropped to 20.5 per cent, though they worked more. Up to 80 per cent of families lost ground or stayed put in after-inflation income terms, the study added. "Canada's gap is growing at a time when Canadian families are playing by all the rules - working harder, contributing to a growing economy - but most aren't getting payback," said Yalnizyan. Finn Poschmann, director of research at the C. D. Howe Institute, suggested that lower-income families could be helped by lower tax rates. "There's lots to gripe about," Poschmann said.
Deb N. - 2007-07-08 23:14