Income Inequality in Canada: A Pre-Election Primer

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By: Hugh Ragan and Jack Pankratz

With the inequities exposed by the pandemic fresh in people’s memory, and an election looming for September 20, Canadians will be looking for their political leaders to promise progress on economic inequality in the month ahead. 

Although the troubling patterns of American inequality may have spurred a worldwide reckoning on the issue, the Canadian inequality story is distinct and merits its own analysis. This pre-election primer will help separate fact from rhetoric, giving voters a clearer understanding of the Canadian inequality landscape and each party’s policy proposals to address the issue.

The Canadian Inequality Landscape

Since 1980, family take-home incomes have grown more unequal in Canada. Income divergence is subtle in most years, but it is more pronounced in recessions – and pandemics, as the lowest earners tend to experience worse setbacks.  

There are two sides to this increasing inequality. 

First, wages have grown more unequal, reflecting that technological change has favoured Canadians who are highly skilled and educated while displacing low-skilled workers whose jobs can be automated or sourced more cheaply overseas. While our governments have significantly increased post-secondary education rates to cultivate a skilled labour force, over that same period minimum wages have been eroded by living costs and union bargaining power has become far less impactful.

Secondly, Canada’s social welfare programs have collectively become less generous and are no longer ‘doing their job’ of neutralizing the labour market inequality. The current Trudeau government is a notable exception, having significantly expanded social entitlements programs like the monthly Canada Child Benefit cheques, introduced a temporary livable income through the Canada Emergency Response Benefit program, and made the tax system more progressive, meaning the changes disproportionately benefit low earners.   

While there will never be a consensus about the level of inequality that is acceptable in Canada, it may be easier to agree about the consequences of a society growing less equal. Severe inequality can dampen economic growth, concentrating money in the savings accounts of top earners, leaving less for low earners likely to spend the money on goods and services that keep the wheels of the economy turning. But there are important social consequences, too. As incomes become more polarized in Canada, so too do the lifestyles, values, and political preferences of its people, which can insidiously erode a sense of common experience and solidarity within the country. If Canada is to avoid what Michael Sandel calls a ‘politics of resentment,’ in which the least fortunate are humiliated by being told to feel responsible for their position in society, then smoothing of income is important in preventing such a chasm from arising. However, the redistribution of income cannot be the only tool – Sandel points out that the least fortunate have been denied not only a share in the economic gains over the last generation but also the dignity that comes from earning a decent living. We can expect Canada’s political parties to be attuned to these dynamics and offer not just improvements to our social programs and tax progressivity but the promise of good jobs and wages. 

Our Parties and Where they Stand

The Conservative Party’s Canadian recovery plan centers around a job-stimulating Apprenticeship Tax Credit for employers, a temporary 50 percent employer wage subsidy for new hires, and a $250M fund to help employers offset the costs of worker retraining. Erin O’Toole’s plan includes doubling Canada’s Workers Benefit – an income supplement equal to a $1 per hour raise for many Canadians below the poverty line. The platform also promises to redesign Employment Insurance (EI) to increase protections for workers during recessions and to extend eligibility criteria to include temporary staff and independent contractors.

The Liberal Party also provides key redistribution tools and programs within their 2021 platform, such as tax reforms and wage subsidies. Justin Trudeau has pledged that individuals will pay no tax on their first $15,000, saving nearly a million from paying federal income tax. The Liberal Party’s plan also proposes increases to student grants and delays on student loan payments. Finally, the Liberals have highlighted retraining and education, including the Canada Training Benefit (to fund job-protecting skill development) and the introduction of CanCode, a federal plan to introduce coding and software development training to nearly 3 million Canadians.

The New Democratic Party (NDP) platform emphasizes affordable education for all ages. This includes long-term proposals, like integrating universities into our free, public education system, as well as promises to immediately expand Employment Insurance eligibility for those voluntarily leaving paid employment for additional schooling or training. The NDP is also offering to gradually introduce a guaranteed livable income for all Canadians, although they have not indicated whether these supports would be universal- or income-based. Finally, the NDP’s plan calls for a minimum wage starting at $15 per hour and eventually increasing to $20 per hour, indexed to the cost of living.

While the Green Party platform will not be fully revealed before election day, previous party platforms show a tendency towards redistribution and wage policies to address inequality. In 2019, the Greens matched the NDP and Liberal pledges of a $15 per hour federal minimum wage floor while also proposing complete forgiveness of student loans, abolishment of university tuition, and a guaranteed livable income depending on the region of Canada. 

With the upcoming federal election, there comes a chance for Canadians to face the economic disparities that have been growing for generations and play a defining role in the economic and social policies of our future.

Jack Pankratz is a second-year undergraduate at the University of Toronto’s Munk School’s Trudeau Centre for Peace, Conflict & Justice. Jack is a Bachelor of Arts (Honours) candidate in Peace, Conflict & Justice Studies and Political Science. Jack is geopolitics and diplomacy focused, with interests in international relations, foreign policy, and environmentalism.

Hugh Ragan is a Master of Public Policy candidate at the University of Toronto’s Munk School of Global Affairs and Public Policy. He currently serves as a member of the Peterson Leadership Speaker Series Committee and Munk, and also participates as a mentor with the Global Ideas institute where he helps a group of high school students propose innovative solutions to global policy challenges. His motivation for joining Munk is to better understand the role of government, and specifically to understand how public policy is both a consequence and a driver of social change. 

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