Inequality is felt universally, and it can be complex to understand. But, there is data that paints a vivid picture of the impact inequality has on the well-being of communities and continents alike. In this blog, I explore the concept of inequality, specifically focusing on income inequality, and why this is something you should care about too.

To start off, let’s discuss income inequality. Income inequality refers to the extent that income is distributed unequally among members of a population and although inequality has no influence over the rate of poverty, the two concepts are intricately linked. Soaring income inequality was a prevailing belief after the first wave of the pandemic, but not everyone agrees as some indicators show the income inequality gap is narrowing.  

Exploring income inequality

In the last five years, the rate of growth for top earners and bottom earners show inequality has stabilized. In fact, low-income earners are growing their incomes at a higher rate when compared to high income earners. The Gini Coefficient, defined by the Organisation for Economic Co-operation and Development (OECD)  as a tool that “measures the extent to which the distribution of income within an economy deviates from a perfectly equal distribution,” shows that inequality has declined over the last half-decade or so. However, the Gini and the rate of growth do not track the share of wealth going to those in the top one percent, which has steadily increased over time according to Statistics Canada.

The trend of growing concentration of income at the top can be attributed to changes to our tax system over time, that have disproportionately benefited high income earners. Examples of this are lower tax rates for dividends and capital gains. In the book Share the Wealth, authors Nathan Gauvin and Angella MacEwan point out that in 2016, the Parliamentary Budget Office estimated that “Canada’s top one percent [holds] one quarter of all the wealth in Canada,” a trend that has worsened since COVID, with Canada’s 100 highest paid CEOs now making 191 times more than the average worker in Canada.

The OECD better life index reports that Canada ranks above many countries in most measures of well-being. However, there remains a considerable gap between the rich and the poor, with the top 20% earning six times that of the bottom 20%, and the 2018 world inequality report identifies two Canadian business people - Galen Weston, CEO of Loblaws and David Thompson, controlling shareholder of Thompson Reuters – as having the same amount of wealth as the poorest 30% of the country.

During the pandemic, an example of this inequality was in wages for grocery store workers. Think about how corporations saw record profits and frontline grocery store workers only saw a brief and temporary increase to their hourly rate of pay, despite the hazards of working during a health crisis.

While not all the data for 2020 is in, we know some aspects of inequality are better than what we saw in the 1990s.  Weekly income estimates from Statistics Canada demonstrate that Canada’s tax and transfer system including the rapid delivery of the Canadian Emergency Response Benefit (CERB) may have offset rising levels of inequality and poverty during the pandemic. However, there is still an alarming trend of wealth being concentrated to those at the top of income scales and we have reached a tipping point.  

Too much inequality is harmful, and not just from a democratic and fairness perspective, it can also impact a host of other well-being indicators such as our health, educational performance, and crime rates. In fact, we are already feeling those effects from the rise of Canada's gig economy. More and more people are employed in low paying, precarious, temporary, and contractual work than ever before. Our social safety net has not kept up, so temporary benefits such as the CERB had to be rapidly dispersed when many low-income contract workers were unable to work during the first wave of COVID.

2020 and 2021 also brought other aspects of inequality to the surface. I’ve been considering how inequality negatively impacts democracy and the fairness of society and the layers of inequality that ripple out from hundreds of years of systemic racism. According to a study from the Canadian Centre for Policy Alternatives, racialized and Indigenous workers were more likely to become unemployed and be in jobs that increased their risk of COVID-19 infection. Racialized and Indigenous workers were also more likely to live with economic insecurity compared to white workers.

Tipping Point of inequality

Since the summer of 2020 and the tragic death of George Floyd at the hands of a Minneapolis Police Officer, an unprecedented number of protests against systemic racism have been seen around the globe. While this act of violence was far from an isolated event, it’s another tipping point of inequality that compelled millions to speak out, and demand changes to our justice system.

Public displays of growing distrust towards government are becoming all too common, and Alberta is fast becoming one of the most polarized regions in Canada. In fact, Income Inequality and Global Political Polarization: The Economic Origin of Political Polarization in the World explains the causal relationship. Everything from feeling deprived or unfavourable perceptions of those in poverty play a role in polarization.

Reversing the trend

Several actions can reverse this trend, like distributing economic growth more fairly through social procurement and implementing living wage policies, basic income, and closing tax loopholes. We must also demonstrate meaningful commitments towards anti-racism, closely monitor all aspects of inequality, and start measuring what matters through community performance metrics and well-being measures.

While some people may ignore information that contradicts their beliefs, understanding inequality has never been more vital. It’s particularly important as we attempt to make sense of the impacts of the pandemic and take action for a just recovery.