The Fraser Institute

The Fraser Institute

July 30, 2015 05:30 ET

Fraser Institute News Release: No Income Inequality Crisis in Canada When It's Properly Measured

TORONTO, ONTARIO--(Marketwired - July 30, 2015) - Canada has only seen modest increases in income inequality among families, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

Among Canadians families, the study finds that between 1982 and 2010, the latest year of comparable data, the share of income received by the top 10 per cent of families increased by 12.9 per cent-a far more modest increase in inequality than other studies show.

"The nearly 13 per cent increase in income inequality since 1982 is much smaller than the often-quoted increases found in other studies, which ignore taxes and government transfers, and contradicts the popular narrative about an inequality crisis in Canada," said Christopher Sarlo, study co-author and economics professor at Nipissing University.

The study, Income Inequality Measurement Sensitivities, part of a series of studies examining different aspects of inequality, measures income inequality in Canada since 1982 and reveals how different definitions of income and households influence results.

"Income inequality in Canada is often treated simplistically, is poorly defined, and presented without proper context, which can paint a flawed picture," said Jason Clemens, study co-author and Fraser Institute vice-president.

For example, earnings (wages, salaries) represent a narrow definition of income, yet many researchers use earnings to measure income inequality. Consequently, the results can be misleading because this measure of income ignores a number of critical factors including government transfers (welfare, Old Age Security, etc.) to low-income families.

Additionally, researchers who use earnings to measure income inequality ignore the effects of progressive taxation, which takes a larger percentage of income from high-income earners than it does from low-income earners.

"Ironically, some researchers use earnings as their sole measure of inequality, ignoring what government is already doing to close the inequality gap, then call on government to take action," said Sarlo.

Finally, the study identifies who should be measured-individuals or families.

If you measure inequality using only the incomes of individual Canadians, you will find a higher (and potentially misleading) level of inequality than if you use family incomes.

"If measured in isolation, the income of some stay-at-home parents may appear relatively low, but when the incomes of the entire household are factored into the equation, that same parent likely moves up the income range," Clemens said.

Therefore, the most accurate measurement for income inequality is after-tax income (which includes government transfers) adjusted for family size.

A short video about income inequality in Canada is also available at the Fraser Institute's YouTube channel.

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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of think-tanks in 87 countries. Its mission is to improve the quality of life for Canadians, their families and future generations by studying, measuring and broadly communicating the effects of government policies, entrepreneurship and choice on their well-being. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org

Contact Information

  • The Fraser Institute - Media Contact
    Christopher Sarlo
    Senior fellow, Fraser Institute
    Economics professor, Nipissing University

    The Fraser Institute - Media Contact
    Jason Clemens
    Executive vice-president, Fraser Institute

    The Fraser Institute - Media Contact
    For interview requests, please contact:
    Aanand Radia, Media Relations Specialist, Fraser Institute
    (416) 363-6575 ext. 238
    aanand.radia@fraserinstitute.org
    @FraserInstitute

    For more information:
    Aanand Radia
    Media Relations Specialist, Fraser Institute
    (416) 363-6575 ext. 238
    aanand.radia@fraserinstitute.org
    @FraserInstitute