Canada's Income Stagnation
May 06, 2008
The data from the 2006 Canada census were released recently and they paint a dismal picture with regard to the stagnating incomes of Canadians over the last quarter century.
Although earnings for the richest 20 percent of Canadian workers rose by more than 16 percent between 1980 and 2005, those of the poorest plummeted more than 20 percent over the same period. Immigrant incomes declined significantly as well. And young people entering the labour market today are earning less than their parents did a generation ago.
But perhaps most disturbingly, median earned incomes – those of the majority of Canadians – have barely increased in 25 years (after adjusting for inflation). This number increased from $41,348 in 1980 to $41,401 in 2005 – an increase of $53.
What makes these numbers so perplexing is that 2005 saw the Canadian economy at the tail end of significant economic growth, certainly the strongest seen in the previous 40 years. This was a time of low inflation, low interest rates, and low unemployment. Yet the majority of people are at best no better off than they were in the 1980s and 1990s, which were periods of recession.
Although government transfers help reduce the inequalities somewhat for the poor, they can do nothing to eliminate the gap between expectations of new workers getting into the workforce in a thriving economy and the reality that has resulted. While some have coped in this increasingly globalized world, others, as the data show, are barely keeping their heads above water in an economy that seems to place a lower value on their contribution.
Why this is all happening is the subject of vigorous debate. Some point the increasing immigrant population - one that tends to be more educated than the average Canadian worker - as providing increasing competition to Canadian-born workers.
But other forces may be at work as well. The number of private-sector unionized workers has dropped significantly since 1980, which could reduce the bargaining power of middle-income earners. Continuing technical change is leaving behind those with fewer skills. Employers themselves may not be investing enough money into advanced production methods. And it’s also possible that aging baby boomers are conservatively clutching onto their jobs and not retiring at the rates expected.
The only clear lesson from these numbers is that there is a definite link between higher education and better earnings, except for immigrants. Why the latter are not able to take advantage of their greater levels of education remains somewhat of a mystery.
Regardless of the reasons for these negative and somewhat unsettling trends, governments are now faced with questions and challenges that they cannot ignore.
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I'll be the first to admit that I really don't know much about economics, but can someone explain why its a bad thing that the median income, after adjusting for inflation, stayed the same? It seems to me that for a person, doing a middle-of-the-road job, to have the same purchasing power now as they did 25 years ago would be a good thing. Sure, maybe it's not a great thing, but at least we haven't lost ground. Anyway, I must be missing something because everyone keeps talking about how "bad" this is and I just don't get it...
Dave - 2008-05-06 15:27