BRIEFING NOTE Income Inequality in Canada. Issue: The purpose of this briefing note is to present an analysis of alternatives and a recommendation regarding the rising economic, social implication of Income inequality in Canada. Background: In recent times, income inequality has been a major issue in Canada that has affected other sectors of the economy. Recent research has shown that Canada’s income equality has risen over the past 30 years with no significant improvement over time. Also, evidence that has shown that 20% of the families in the top income scale has 70% of the wealth of Canada since 1998. Although the mid class income earners has been quite slow in the performance even if they recorded a gain of about 14%, the average …show more content…
annual growth rate has been 1.5% for the low income earners and 1.1% for the mid- class income earners. One major cause of income inequality is capitalism. Capitalism is a system of government whereby resources are owned and controlled by private individuals with minimal government invention. Under the capitalist system an average worker is paid a small fraction of the total profit made by the company which is barely enough for them to survive while the largest fraction goes to the employer, thus income is not evenly distributed in the economy; unfortunately, Canada also adopts the capitalist system of government. Recent observation has shown that it is nearly impossible for an employee under the capitalist system to get rich. This is because as an employee you are only paid a little fraction of the total profit made by the company and since the lager fraction goes to the employer, the employer reinvests it as capital which eventually yields more profit thus, making the employer richer and the wealth of the employer is been passed to the family which goes from generation to generation. Income inequality can be further demonstrated using the Gini Coefficient. Gini coefficient has been used as the economic yardstick to measure the level of income inequality in Canada and other parts of the word. Gini coefficient measures the level of equality in the distribution of income among various households within an economy. The Gini coefficient scale measures from 0 to 1 and the closer it is to 1 the more the inequality. Canada has a Gini coefficient of 0.33, this implies that Canada is much better than that of the United States which happens to be approximately 0.4. Furthermore the Lorenz curve is a curve that is plotted by using the cumulative percentage of income received by beneficiaries against the cumulative number of beneficiaries.
It begins with begins the poorest household, which is also a standard for measuring income inequality. Usually, perfect income equality is represented with a straight diagonal line which is drawn from the left to right. The Lorenz curve comprises of a vertical axis that illustrates the percentage of total income received, while the horizontal axis consists of the percentage of beneficiaries which represents 20% of the poorest population and both axis sums up to a 100 %. After the plotting the graph, it was observed that the bottom 10% of the poorest population only receives 1.8% of the country’s wealth; 20% of the population receives 5% of the country’s wealth ;while in the middle of the diagonal line which represents the half of the population receives approximately 20% of the counties wealth. In other words, the farther the Lorenz curve is away from the diagonal line which represents perfect equality, the higher the level of inequality. However, the relationship between the Lorenz curve and the diagonal line is obtained by calculating the ratio of the area between the diagonal line and the Lorenz curve divided by the total area of the half squared in which the square lies. That area is known as the Gini …show more content…
coefficient. The economic and social implication of the rising income inequality has the following potential issues to be encountered.
Widening income inequality in Canada has a huge implication on growth and stability. This is because it causes concentration of power and economic resources in the hands of fewer individuals in the society, leading to mismanagement and exploitation of the majority which then results into economic instability as well as crisis in Canada. High level of income inequality causes a social cost to the society. This is because it undermines a person’s educational and career choices and as such their efforts are deviated into certain social vices like corruption, nepotism etc Growing body of evidence suggest that the Gross Domestic Product will be widely affected as the level of output produced within Canada thus causing a dampening effect on investments since individual has deviated their skills from production and investing into other things that wouldn’t be beneficial to the society. High inequality growth also affects the standard of living of the lower- income earners as they can barely afford their basic necessities such as food, clothing, and shelter as well as health care. Analysis Confronting the implications of Income Inequality in Canada has a multiple
approach. Options Advantages Disadvantages Government should adopt the use of progressive tax system where high income earners pay more tax than the lower income earner, and the tax being received from the high income earners is redistributed to the lower income earner in the form of bursary, allocations, etc., which in turn reduces the gap between the rich and the poor. It reduces the rate of crimes as well as improves the level of income equality in the society. Also, it generates more revenue for the government as high amount of tax is being collected from the high-income earners instead of collecting a certain percentage from everybody. It causes discrimination in the society since everybody is not treated equally in terms of the taxes that are been paid. Government should implement equality wage rate, because it encourages equal pay to people in the same field as individuals in the same field will be paid the same amount thus reducing the income inequality gap in the society It reduces the gap between male and female as everyone is treated fairly in terms of the wage rate In the homes where the females are breadwinners, it causes a lot of disrespect to their male counterpart as they begin to feel superior to the men. Recommendation: It is recommended that the government should adopt the progressive tax system, as it is the most preferred approach to tackle the problem of income inequality in Canada
In Canada there is no official, government mandated poverty line. It is generally agreed that poverty refers to the intersection of low-income and other dimensions of ‘social exclusion’, including things such as access to adequate housing, essential goods and services, health and well-being and community participation. In Canada, the gap between the rich and poor is on the rise, with four million people struggling to find decent affordable housing, (CHRA) and almost 21% of children in BC are living in poverty it is crucial to address poverty (Stats Can). In class we have considered a number of sociological lens to examine poverty. Structural-functionalists maintain that stratification and inequality are inevitable and
Policy statement: Women should receive equal pay for work of equal value. It is recommended that the Canadian government should design and pass a compulsory and proactive pay equity law, which would ensure that all Canadians receive equal pay for equal work.
...nguage, and religion all make up Canada’s human face, but also front how the cultural accommodation will continue with the risk of losing Canada’s main traditions. Faultlines again come into perspective within demographic issues, especially with newcomers/old-timers, aboriginal population expansions, and French/English language. The core/periphery model is also represented. The end of the chapter places a focus on Canada’s economic face as well, dealing with stresses inside the global economy as well as its strong dependency on the U.S markets (Bone, 169) especially with the stimulating global recession. Canada’s economic structure leans on the relative share of activity in the primary (natural resource extraction), secondary (raw material assembly), tertiary (sale/exchange of goods and services), and quaternary (decision-making) sectors of the economy (Bone, 166).
Poverty is a serious issue in Canada needs to be addressed promptly. Poverty is not simply about the lack of money an individual has; it is much more than that. The World Bank Organization defines poverty by stating that, “Poverty is hunger. Poverty is lack of shelter. Poverty is being sick and not being able to see a doctor. Poverty is not having access to school and not knowing how to read. Poverty is not having a job, is fear for the future, living one day at a time”. In Canada, 14.9 percent of Canada’s population has low income as Statistics Canada reports, which is roughly about two million of Canadians in poverty or on the verge of poverty. In addition, according to an UNICEF survey, 13.3 percent of Canadian children live in poverty. If the government had started to provide efficient support to help decrease the rates of poverty, this would not have been such a significant issue in Canada. Even though the issue of poverty has always been affecting countries regardless of the efforts being made to fight against it, the government of Canada still needs to take charge and try to bring the percentage of poverty down to ensure that Canada is a suitable place to live. Therefore, due to the lack of support and social assistance from the government, poverty has drastically increased in Canada.
People outside of Canada are baffled at how Canada ended up in such a state of affairs. Canada as a country has a lot going for it. A high GNP, and high per capita income in international terms. It is ranked at the top of the...
Raphael, D. D. (2002). Poverty, Income Inequality and Health in Canada. CSJ Foundation for Research and Education, 1-32.
The highest earning fifth of U.S. families earned 59.1% of all income, while the richest earned 88.9% of all wealth. A big gap between the rich and poor is often associated with low social mobility, which contradicts the American ideal of equal opportunity. Levels of income inequality are higher than they have been in almost a century, the top one percent has a share of the national income of over 20 percent (Wilhelm). There are a variety of factors that influence income inequality, a few of which will be discussed in this paper. Rising income inequality is caused by differences in life expectancy, rapidly increases in the incomes of the top 5 percent, social trends, and shifts in the global economy.
Income inequality in the United States has increased and decreased throughout history, but in the recent years, the widening gap has become a serious issue. Income inequality is usually measured by Gini coefficient. According to this method coefficient varies between 0 and 100; while 0 represents complete equality (income is distributed equally among all the population of the country), 100 represents complete inequality (only one person receives all the country’s income, while the rest of the population receives nothing). According to the Census of Bureau, the official Gini coefficient in the U.S. was 46.9 in 2010. This is way higher than the all-time low coefficient of 38.6 set in 1968 (qtd. in Babones).
3. What are the effects of this wealth inequality in the US and what causes it, as well as some possible solutions and their ramifications, will all be discussed and answered below. There has always been a wealth gap between the richest and poorest in society. However, in the past decade, the wealth gap between the richest and poorest citizens in the US has been growing rapidly. In the 70s and 80s, the wealth and income growth rate for both poor and rich people were similar, however, between the years 2009 and 2012 the top 1% income increased 31% while for the bottom 20%, their income actually dropped and for the vast majority of Americans, the average yearly income only increased by 0.4% [4].
Income inequality is not necessarily harmful to our society because if the rich is getting richer they are able to invest more of their money to create business which will lead to more employment of people in the lower and middle class. A topic we also discussed in class was about the income mobility. The idea behind income mobility is that the poor does not always remain poor. People who were poor in the past are usually not poor later on in the future because the size of the economic pie increase too. People may think that the rise of income inequality is bad, but I do not really think it is as bad as many make it out to be. A solution should be put in place for a better distribution of the wealth, but I do not believe it should really be a concern because it seems to be something that will always exist. Even though income inequality exist or even if it is rising, people are better off today than they were before. The middle and poor class as discussed in class are getting a smaller peace of the pie, but it is larger that before, and with income mobility, the poor keep pushing forward regardless of the rich getting richer. Income inequality is a debated subjected, and I believe it will always be a debated subject. However in this class, so far, I have leaned that income inequality is not such as a bad thing as people make it sound. Income inequality has two side
Although Saez’s provides legitimate causes of income inequality, I highly disagree with the thought of making changes to end income inequality. In any diverse economic environment, income inequality will exist due to the rise of some economically successful people and the further development of factors that push people into poverty. I believe income inequality exists due to people not taking advantage of equal economic opportunities, the diversity of people qualified for certain occupations, and the ideas centered around capitalism.... ... middle of paper ...
If income inequality continues to grow, the economy will break down. For example, if the housing price continues to rise because of the rich people, poor people will not have a place to live since they cannot afford to buy these expensive houses. When this happens, it will create another housing bubble because the houses are not worth buying, which means the market value of the house exceeds the house’s value; therefore, nobody will buy the house including the riches since they already have houses to live. Moreover, poor people do not believe they can get access to wealth because they cannot afford anything, and they cannot afford the tuition fees for a good education, which is the traditional route to success.
A human beings sex is their biological difference; either male or female, while gender is a learned behavioral and natural development with a person’s personality. In this world, and in Canada, gender inequality is an issue that continues to plague our homes, schools, workplaces, and our society in general. Gender equality is detrimental for our society to function in an inclusive, safe, and just way. While Canada strives to make multiculturalism and a generalized diversity another key asset to all whom reside in this country, gender inequality is an issue that affects many aspects of women’s lives. From inequality in pay equity, reproductive rights, domestic and sexual violence, sexism and sex-role stereotyping, to women's representation in
When talking about inequality of income distributions within the society, it is inevitable to talk about how it relates to the process of economic development. About more than half a century ago, Simon Kuznets made his hypothesis on the relationship of the two and it was presented as an inverted U-shape curve—the Kuznets Curve. The pattern of the inverted U-shape intuitively indicates the timing characteristic that the inequality increases in the initial stages of development then decreases at the higher level of development. Later on the stylised fact has been formalised by numerous of studies that proving its validity and implicating in modern societies. Certainly there would be some skeptical opinions as the conjecture was based on scanty data, but the reasoning model Kuznuts built is considering an empirical regularity.
In some countries, women are paid lower wages than men who are performing the same line of work. Also in some developing countries, women are expected to take on child rising and are constrained from seeking employment. This inequality creates a drawback for women where it hinders opportunity for more income for the household. Also inequality between the rich and the poor will affect social cohesion and lead to problems such as increasing war and violence which will strain the economy, create safety issues and also face food shortages in some countries. These can occur unexpectedly and can cause everlasting effects on the economy therefore these issues are more difficult to overcome.