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Forum on Income Inequality

Posted on November 16, 2013

Income Inequality Forum - Ted Speaking - ReducedOver a hundred concerned residents gathered in Kingston’s historic Memorial Hall on Wednesday November 20th, 2013 to learn more and share their concerns about rising inequality in Canada.  MP Ted Hsu welcomed participants with the sad news that one of our keynote speakers, MP Scott Brison, had to cancel due to the death of his mother the previous day in Nova Scotia.   Ted spoke briefly to the importance of the issue to both current and future generations, then passed the microphone to William McCarten moderator for the panel discussion portion of the meeting.

The Speakers
The opening speaker, Dr. Charles Beach, provided an overview of the economic forces behind the widening income and wealth inequality being experienced in Canada and other countries.  He explored the “great divergence” in the relative shares of the economic pie in the form of a widening gap between top income recipients and the rest of our society combined with a “new normal” of slower overall economic growth.  Driven primarily by what is happening to earnings in the labour market, since the late 1970s the share of the top 20% of families has risen from 38% of all family incomes to over 43%.  In that same period, the median income of the top 1% rose from seven times that of the lower 99% to 10 times that of their less fortunate fellow citizens.  This divergence, which was even more pronounced in US and UK, reflects a widening gap between low- and high-skilled workers.  Today’s youth  in particular are losing out, earned 15% less income than their similarly-educated parents enjoyed at the same age.

Income Inequality Forum - Panellists - ReducedDr. Beach pointed to a hollowing out of the middle class, especially male workers, and significantly reduced intergenerational income mobility, albeit less so in Canada than in the US.  He pointed out that, while globalization is typically blamed for eroding the demand for skilled labour, technology-enabled flattening of organizations is in fact a more important factor behind that hollowing out.

The next speaker, Kathleen Lahey, provided a perspective on the role of government policies in exacerbating the impact of those economic forces on income equity.  She pointed out that since 1970s, Canada has been buffeted by a succession of recessions and policy changes, including the erosion of the federal government’s regulatory role; and had come out one come out of each one as a less equal society.  The share of nation income accruing to the richest 0.1% declined significantly after the Great Depression and only started rising again after WWII, but really took off starting in the 1970s in parallel with reductions in the top marginal tax rates.  Those are now down to lowest ever, enabling the income share of the top earners to skyrocket.

According to Prof. Lahey, Canada had long maintained a tax system which promoted a fairer income distribution.  Subsequent tax reductions include visible cuts to rates which have cumulative taken $40 billion annually out of the tax system.  Even more significant, however are the tax benefits, credits and loopholes which overwhelmingly benefit the high earners and have taken an estimated $172 billion out of the tax system.  These changes have also disproportionately benefitted male taxpayers, exacerbating the gender wealth gap.

Michael Harris as final speaker provided the local perspective on the consequences of these larger trends and forces on the many individuals and families in our community who are struggling and being left behind.  He spoke especially of the impact of unemployment on those lives, including the children growing up in families in which parents’ employability is not a given.  Unemployed youth can find themselves isolated and at an inherent disadvantage as job searching becomes ever more technology-based.  This leaves an important role for community groups, especially those which involve local employers and social agencies, which can help individuals to gain an initial foothold into the labour market and begin the process of gaining marketable skills.  He also spoke to the need to identify and adopt smart programs and policies which have proven to be effective in other communities.

Audience Discussion
Income Inequality Forum - Audience - ReducedThe second half of the meeting was devoted to an open question-and-answer discussion moderated by Kingston and the Islands Member of Parliament Ted Hsu, during which the panellist responded to questions, concerns and ideas proposed by members of the audience.  These included:

  • Q. The role of free trade/globalization in increasing inequality.  A. One panellist suggested that, on the one hand, free trade have played a large role in the loss of manufacturing jobs which has increased inequality, that Canada should leave the resulting “race to the bottom” on labour costs, and that there are other solutions but they all require either funding through increased taxation or changes.  Another pointed out that there’s nothing like reducing unemployment rates through micro- and macro-economic policies to get the economy moving.
  • Q. Wealth accumulated through the lifetimes of the wealthy is now again being taxed in the US but not in Canada, permitting the tax-free transfer of capital to next generation.  A. One panellist spoke a huge change in nature of wealth and where it comes from (in the past, the largest fortunes were primarily inherited whereas now they come from innovation; suggesting caution in reducing incentives through overly high taxes but that a wealth tax would help.  Another pointed to tax free saving accounts which enable the wealthy to pass on a lifetime $1 million to each child entirely tax free.
  • Q: Canada was stated to be doing a very poor job on apprenticeship compared to advanced countries like Germany.  A. Panellists agreed that parents are a big problem in not supporting their children going into well-paid trades; that rules and quotas for apprenticeship programs require rationalization; and that programs needed to bring women and aboriginals into the trades;
  • Q: Strong evidence was cited that income inequality has pernicious effect on health and longevity, with the most marginalized suffering the worst.  A. Panellists agree that the stresses and tensions associated with unemployment, precarious employment and poverty are extremely costly to individuals, families and society.
  • Q. The political convictions required to change the personal and corporate tax structures.  A. Panelists spoke to the importance of ensuring that changes to the tax system ameliorate rather than exacerbate income inequality.  More specifically, evidence was shown that proposed measures to enable income splitting by couples constitute a tax benefit which would overwhelmingly favour high-income families with little or no benefit accruing to the middle- and low-income counterparts.

Next Steps
There was a clear consensus on the part of participants that widening income inequality is a major issue for the future of Canadian society, one for which governments have a clear responsibility to ameliorate rather than exacerbate.  The problem was seen as being highly complex involving many different facets.  As a next step, interested participants were invited to collectively develop a Petition to Parliament which will be presented to the House of Commons sometime in February by our Member of Parliament, Ted Hsu.

For more information, background reading, videos of the presentations and the opportunity to sign the petition, please click here to go to our full page on the income inequality issue and what we as concerned citizens can and should do about it.  If you would prefer to go right to the petition, please click here.

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