Inequality at the top of everyone’s agenda

Not two years ago, income inequality was a pretty obscure topic. Not so today.
Earlier this year the World Economic Forum identified income inequality as a top global risk and in late 2011 President Obama called growing inequality “the defining issue of our time”.
In March, polling by Ekos found that 57% of Canadians felt that they would be worse off in 25 years’ time than they are today. In April, a Broadbent Institute poll found that three quarters of Canadians felt that the growing income gap in our country was a significant problem, a finding that was confirmed by a Forum poll for the National Post in May. Perhaps it should not have come as a surprise, then, that at the end of April, Liberal Finance critic, Scott Brison succeeded in securing cross-party support in the Canadian Parliament for his motion to form a committee to review income inequality in Canada.
Fast forward to June and the theme continues…..with the economists in the vanguard. The Presidential address at the annual Canadian Economics Association Conference was about trends in top income shares (and why these might matter) and just last week Nobel Prize winning economist, Joe Stiglitz published his latest book, The Price of Inequality: How Today’s Divided Society Endangers our Future.
The debate is over, we all fall in with the President: this is a serious issue that policy-makers ignore at their own peril.
The difficulty lies in knowing what to do about the problem. Addressing inequality is not the same as addressing poverty, something that we have done with varying success for many decades now. It is likely to take action at all levels of the income spectrum (dampening growth at the top, shoring up the middle and actively transferring at the bottom). It also requires a whole new dimension of thought when designing health policy, education and training policy, labour policy, youth policy and policy on corporate governance.
It is action in these areas that will help create a world in which equality of opportunity becomes more meaningful and growth becomes more inclusive. Without such changes, the already substantial degree of public alienation from the institutions of state is only likely to grow, possibly with highly disruptive consequences.
Let us hope, then, that when our Parliament’s Standing Committee on Finance reports in one year from now, it has some firm and inspiring recommendations on how best to improve the equality of opportunity and prosperity for all Canadians. In the meantime, we at Canada 2020 will also be working away on the topic. So, if you have any views, please do share them with us. Left unattended, this is a problem that will certainly not go away.

Is the U.S. still a ‘Land of Opportunity’?

Canada is still more economically mobile than the US: if you are rich and want to stay rich, it is better to be born in the US. If you are poor and want to move up, Canada is a better bet.
The New York Times posed this question to a group of experts, Richard Florida, Isabel Sawhill, Timothy Smeeding, and five others, including me.
More specifically, they asked:
There is a growing consensus that it is harder to move up the economic ladder in the United States than in many other places, like Canada. Should more Americans consider leaving the U.S. to get ahead? Or can the U.S. make changes to be more of a “land of opportunity”?
You can review all the contributions, and the resulting commentary from readers on the Room for Debate section of the Times website.
My response was based in part on a paper I co-wrote with Shelley Phipps and Lori Curtis, “Economic mobility, family background, and the well-being of children in the United States and Canada”, that was recently published by the Russell Sage Foundation.
I’d be interested in your comments, particularly from Americans in Canada and from Canadians in America, on my take:
Most American and Canadian children of middle class parents don’t have their life chances noticeably determined by their family background.
But averages conceal as much as they reveal.
If I were a young American born to top earning parents I would want them to stay put: these high-achievers are not only rich but also well-connected and informed. They can give me the education, health care, housing, and other investments that would set me on a path to attend some of best colleges in the world. I would enter a labour market that rewards my education to a much greater degree than in Canada, and a tax system that lets me keep more of my earnings.
My odds of staying in the top 10% as an adult if I were a child born in the top 10% are better than 1 in 4. I’d have a better than 50% chance of staying in the top third. In Canada only 1 in 7 kids born to top earning parents become top earning adults, and almost 10% fall to the very bottom, something that happens to only 3% of rich American children.
A rich kid does well in the US; but not a poor kid.
If I were born to parents in the bottom 10% I would rather they were raising me in Canada. Being in the bottom 10% would mean less hardship: my family income would be greater; I would be more likely to be living with both of my biological parents; I would be visiting a doctor regularly; and I would spend more time with my parents, particularly my mother during my infancy as she would have almost one year of paid parental leave.
My physical and mental well-being, general happiness, and cognitive development would be noticeably superior even at a very young age.
My early education would be of higher quality because it is funded through progressive income taxes, not local property taxes. I would have access to a good quality college or technical training at relatively affordable tuition fees of $5,000 to $10,000 a year.
In short, the Canadian playing field is more level than the American, and my chances of moving into the middle class would be higher. If my parents lived in the US I would have more than a 1 in 5 chance of being stuck in the bottom 10% of the earnings distribution and a 50% of staying in the bottom third. In Canada I’d be less likely to remain in the bottom, and would have a 50% chance of reaching the top half.
Miles Corak is a professor at the University of Ottawa trained in labour economics, and working on child rights, poverty, immigration, social and economic mobility, unemployment, and social policy. For more on this topic see his blog