Falling inequality in Canada? Maybe

Amid all the justified handwringing about rising economic inequality around the world, Statistics Canada came out today with an unexpected finding.  Apparently the share of national income going to the top one percent of the population fell to a six-year low in 2012. The richest slice of Canadian society (about 260,000 taxpayers) now corrals 10.3% of national income, down from a peak of 12% in 2006.  The share of income going to the top 5 percent and top 10 percent also fell.

The earnings of Canada's top one percent certainly pale against the comparable number for the US, which is north of 18% and is continuing to rise.  But hold the (Niagara) champagne, because these data don't tell the full story, and Canada is not quite an egalitarian utopia. Recall that the key focus of much of the literature on inequality, including Thomas Piketty's doorstopper, Capital in the 21st century, is on inequality of wealth distribution rather than annual income.

No doubt the prolonged declines in equity prices in the wake of the financial crisis hit the wealthiest hardest, but stock prices have bounced back sharply in the last year or two. That not only means that wealth inequality is on the rise again in Canada: it also means that income inequality may have ticked up again in the two years since StatsCan compiled its data, as dividends, which are self-evidently a larger component of incomes at the top end than at the bottom, have continued to grow.

And then there's housing costs, which the OECD and others have pointed to as a significant contributor to inequality in Canada. House prices in Toronto, Vancouver and Calgary, the three most economically dynamic cities in Canada, continue to rise sharply, while less fortunate areas fall further behind. This too suggests that if one were to look at wealth rather than income, one would see a much different picture from the one StatsCan is painting.

Oddly enough, it's unlikely that any political party will have much to say about today's data.  The Tories are quite comfortable with the rich getting richer anyway, while the Liberals and NDP, both of whom have expressed concern over rising inequality, may actually be a little aggrieved at StatsCan for undermining some of their arguments!