Bridging the Income Gap

Taking on inequality

Via The Nation, a column by editor Katrina Vanden Heuvel: Taking On Inequality. Excerpt:

The good news is that Democratic presidential nominee, Senator Barack Obama, quickly spoke out against the decision by Democrats not to take on the loophole after more than twenty lobbying firms worked to preserve it.

At the time the campaign issued a statement saying, "If there was ever a doubt that Washington lobbyists don't actually represent real Americans, it's the fact that they stopped leaders of both parties from requiring elite investment firms to pay their fair share of taxes, even as middle-class families struggle to pay theirs. When I'm President, the American people won't have to spend record amounts on lobbying to get their voice heard in Washington. I will close tax loopholes for big corporations...."

But it will take a lot more than closing an obscene tax loophole to reverse thirty years of tax cuts for the rich, union-busting, and deregulation that promoted corporate interests at the expense of consumers--all of this bankrolled by conservatives and corporations to instill blind faith in the market as a magic elixir that can solve any problem.

The result is that we now live in a Second Gilded Age. (And The Nation will hold a name Name Our Epoch! contest starting next week. The winner will be selected by our all-star progressive panel of judges--historian Howard Zinn, journalist Barbara Ehrenreich and novelist Walter Mosley.)

The richest 1 percent of Americans currently hold wealth worth nearly $16.8 trillion, $2 trillion more than the bottom 90 percent. According to the Center for American Progress, since 1979 the average income for the bottom half of American households has grown by 6 percent. In contrast, the top 1 percent of earners have seen their incomes rise by 229 percent during that same period.

With less money available, Americans are forced to make tough choices on how to spend diminishing disposable incomes. The largest increases in consumer spending between 2006 and 2007 was on necessities: fuel, food staples, and medical bills. Medical bills now account for almost one-fifth of average family income. The divide is so huge, the Wall Street Journal now dedicates a full-time reporter to cover what the reporter calls "Richistan."

In January 2007, Congressman Barney Frank said dealing with income inequality was his top priority as chairman of the House Financial Services Committee. He summarized the impact of conservative, free-market ideology run amuck this way:

"The rising tide lifts all boats has always been a problem. If you think about that analogy, the rising tide is a very good idea if you have a boat. But if you are too poor to afford a boat and you are standing tiptoe in the water, the rising tide goes up to your nose."

Next week, The Nation will publish a special issue on income inequality, exploring how rising extreme inequality is undermining our common good. It will include a 12-step blueprint for action for citizens and smart elected officials who care about reducing concentrations of wealth, reducing poverty and rebuilding our infrastructure.

I'll post on this blueprint as soon as it's published.

Inequality and health in Europe

Via The New England Journal of Medicine: Socioeconomic Inequalities in Health in 22 European Countries. The abstract, re-paragraphed:

Background Comparisons among countries can help to identify opportunities for the reduction of inequalities in health. We compared the magnitude of inequalities in mortality and self-assessed health among 22 countries in all parts of Europe.

Methods We obtained data on mortality according to education level and occupational class from census-based mortality studies. Deaths were classified according to cause, including common causes, such as cardiovascular disease and cancer; causes related to smoking; causes related to alcohol use; and causes amenable to medical intervention, such as tuberculosis and hypertension.

Data on self-assessed health, smoking, and obesity according to education and income were obtained from health or multipurpose surveys. For each country, the association between socioeconomic status and health outcomes was measured with the use of regression-based inequality indexes.

Results In almost all countries, the rates of death and poorer self-assessments of health were substantially higher in groups of lower socioeconomic status, but the magnitude of the inequalities between groups of higher and lower socioeconomic status was much larger in some countries than in others.

Inequalities in mortality were small in some southern European countries and very large in most countries in the eastern and Baltic regions. These variations among countries appeared to be attributable in part to causes of death related to smoking or alcohol use or amenable to medical intervention. The magnitude of inequalities in self-assessed health also varied substantially among countries, but in a different pattern.

Conclusions We observed variation across Europe in the magnitude of inequalities in health associated with socioeconomic status. These inequalities might be reduced by improving educational opportunities, income distribution, health-related behavior, or access to health care.

Canada: We're more egalitarian than we thought

Via The Globe and Mail: Tiny pay gap reflects egalitarian attitude.

The gap between the pay of managers and workers in Canada is the second smallest in the world, an annual global survey by Hay Group has found.

The average Canadian manager garners 2.6 times the salary of the average worker, the survey noted - the smallest gap after Norway. In the United States that gap is 3.7 times, while it's 10 times or more in emerging markets such as Thailand.

"The Canadian gap is a reflection of a more egalitarian philosophy than most countries," Karl Aboud, Hay Group's director of reward consulting in Canada, said in a report released yesterday.

The result reflects less extremes at both ends of the wage scale, added David Sissons, vice-president of the consulting firm.

"In Canada, we tend to have a well-paid lower floor and not as high of a ceiling," he said in an interview.

Other reasons for Canada's low pay gap include the higher preponderance of public service jobs, as well as a relatively small number of highly-competitive global multinationals, he said.

Hay Group's report analyzes data on over 12 million employees to measure the gap in 61 countries. To calculate its rankings, Hay used the market-median base salary for a clerical level worker and for a standard middle-management job.

Canada's pay gap didn't budge between 2006 and 2007, though its ranking moved to second spot from third, and Mr. Sissons doesn't foresee a big shift in the coming year.

The much-ballyhooed U.S. pay gap, meantime, has soared. The disparity between the salaries of managers and clerical workers jumped nearly 20 per cent, making it the third-fastest growing pay gap in the world.

Trying to bring down a government over the income gap

It won't succeed, but at least Canada's New Democrats have tried. Via The Star: NDP to move today to topple Tories. Excerpt:

Federal New Democrats will make a last-gasp bid today to topple the minority Conservatives, citing the country's growing "prosperity gap" as the reason Canadians should go to the polls.

But the political move is destined to fail, all but eliminating the chance of an election in the coming weeks and opening the door to a summer of campaigning by all political leaders in preparation for a possible federal campaign this fall.

"This could be certainly one of our last opportunities, if not our last opportunity, to say we think that the Harper government is wrong," NDP Leader Jack Layton said.

The New Democrats' motion calls on the Commons to acknowledge that the growing income gap is having a harmful effect on working and middle-income families.

And it says those woes have been "fostered by this government's unbalanced economic agenda, including its failure to reform employment insurance to ensure that people who lose their jobs during economic downturns are protected and trained."

"We think that it's important to show that ultimately you can't have confidence in a government that can't manage the economy for the average middle-class family and working-class individuals," Layton said last week.

But Layton's push for an election will have to wait because like the other confidence votes this parliamentary session, the Liberals aren't ready to bring down the government. That means they won't support the NDP's election manoeuvring.

"We'll not trigger an election through an NDP motion," Liberal Leader Stéphane Dion said last week.

Not that Dion's reluctance to go to the polls is a great disappointment to Layton. After all, the NDP's confidence motion is aimed at the Liberals too, a bid to once more embarrass Dion and highlight the refusal of Liberal MPs to defeat a Tory government they regularly condemn.

Dying for the Rich

The Tyee has published my article Dying for the Rich.

Professor Dennis Raphael sends along some links to related material:

Poverty and Policy in Canada: Implications for Health and Quality of Life, by Dennis Raphael.

Staying Alive: Critical Perspectives on Health, Illness, and Health Care ed. Dennis Raphael, Toba Bryant, and Marcia Rioux.

Social Determinants of Health, ed. Dennis Raphael.

And two videos:
The Politics of Population Health, about 45 minutes long, and a 50-minute presentation on Politics and Health at the Center for Health Disparities in Cleveland, Ohio.

David Olive on the census: A country divided

Via The Star, David Olive weighs in on the new StatsCan report on Canada's income gap: A country divided. Excerpt:

"An imbalance between rich and poor is the oldest and most fatal ailment of all republics."– Plutarch, Greek historian

We have a compassion gap in Canada, a land that by tradition celebrates mutual health and happiness and not the accumulation of wealth. Yet governments, particularly Ottawa, vacated the field of compassion decades ago rather than building on social-equity innovations of past generations.

Statscan's report yesterday on income trends between 1980 and 2005 reveals a Canada that would be unrecognizable to social-justice pioneers Tommy Douglas, Lester Pearson and Pierre Trudeau.

Most shameful is that 3.5 million Canadians, or 11.4 per cent of the population, live in poverty, almost 900,000 of them children. That's not much better than the 12.3 per cent of Americans in poverty.

Despite more than a decade of robust economic growth, the earnings of middle-income Canadians have stagnated since 1980.

By any definition that's a crisis. A large and growing middle class of increasing affluence is the bedrock of a nation's social stability, its industrial and cultural prowess, and its prospects of raising future generations able to take a nation to a higher level of success.

It is encouraging that the one-fifth most affluent among us have seen a 16.4 per cent rise in inflation-adjusted earnings – a sign of Canada's ability to reward high achievers and stem a brain drain. But it is morally indefensible that the poorest one-fifth have seen incomes drop 20.6 per cent.

It is whispered that America, with 36.5 million poor and hundreds of billionaires, is becoming the world's richest Third World nation.

It could happen to us.

"Compassion" has nothing to do with it. Sheer self-interest should encourage us to narrow the income gap—thereby increasing social stability, reducing individual and group stress, and improving health and longevity.

The rich, the poor, and the chasm between

Via The Globe and Mail, discouraging but unsurprising news from the 2006 Canadian census: The rich, the poor, and the chasm between. Excerpt:

The earnings gap between the rich and the poor is widening in Canada, with incomes among recent immigrants showing especially dramatic declines in recent years, according to sweeping new census data.

Earnings among the richest fifth of Canadians grew 16.4 per cent between 1980 and 2005 while the poorest fifth of the population saw earnings tumble 20.6 per cent over the 25-year time period, Statistics Canada said in its 2006 census release on income and earnings. Earnings among people in the middle stagnated.

That earnings didn't budge for middle income earners was particularly surprising, given that the economy has generally expanded over the past quarter century, said one business professor.

“It's not just that there's inequality growing. We knew that. But that the middle income earner is flat-lining over a long period of time – that's stunning to me,” said Tony Frost, professor at the Richard Ivey School of Business at the University of Western Ontario, who'd previously figured the middle class was moving up.

The Statscan news release is here, with links to tables, analysis, and geography.

A Quarter Century of Economic Inequality in Canada

The Canadian Centre for Policy Alternatives has just released A Quarter Century of Economic Inequality in Canada. Excerpt:

Canada’s inequality in wealth and income is growing, and at a more rapid pace than before, says a new study released by the Canadian Centre for Policy Alternatives (CCPA).

The study, by economist Lars Osberg, looks at 25 years of income and wealth inequality in Canada and finds disturbing new trends.

The whole report is available for downloading as a PDF.

The CCPA has also published Why Inequality Matters in 1,000 Words or Less, also available as a PDF.

At some point we're going to have to grapple with inequality as both a social problem and a health problem. The sooner the better for all of us.

Life Expectancy Drops for Some U.S. Women

Via The Washington Post: Life Expectancy Drops for Some U.S. Women. Excerpt:

For the first time since the Spanish influenza of 1918, life expectancy is falling for a significant number of American women.

In nearly 1,000 counties that together are home to about 12 percent of the nation's women, life expectancy is now shorter than it was in the early 1980s, according to a study published today.

The downward trend is evident in places in the Deep South, Appalachia, the lower Midwest and in one county in Maine. It is not limited to one race or ethnicity but it is more common in rural and low-income areas. The most dramatic change occurred in two areas in southwestern Virginia (Radford City and Pulaski County), where women's life expectancy has decreased by more than five years since 1983.

The full story provides a link to the PLoS report it's based on.

Korea's Income Gap is Widening

Via the Korea Herald: Country's income disparity worsens. Excerpt:

Economic polarization between the country's top and bottom income groups increased last year, a government report showed yesterday.

According to the 2007 household accounts report compiled by the National Statistical Office, the country's Gini coefficient rose from 0.351 in 2006 to 0.352.

The Gini coefficient is a measure of income distribution in a society, with values between zero and one, indicating the maximum level of disparity. Last year's Gini coefficient of 0.352 is the highest value recorded since 2003.

Last year, the Gini coefficient for urban households rose more rapidly than the national average and reached 0.313, the largest value since the 0.312 recorded in 2002.

Over the same period, the country's income distribution ratio also increased from 7.62 in 2006 to 7.66 in 2007. The income distribution ratio is the income ratio between households in the top 20 percent and households in the bottom 20 percent. Higher values represent a wider income gap between the two groups.

For urban dwellers, the income distribution ratio increased by a larger margin, 0.06 points, from 5.38 recorded in 2006 to 5.44 last year.

The Ministry of Finance and Economy attributed the change partly to the aging population and the reduction in average income in older households.

Pathways Magazine

Thanks to Stephen Bezruchka for mentioning Pathways, a new magazine published by the Stanford Center for the Study of Poverty and Inequality. It looks like a useful new resource.

Gulf in rich-poor life expectancy

Via BBC News Online: Gulf in rich-poor life expectancy. Excerpt:

The wide gap in life expectancies between rich and poor persists, with professionals enjoying far longer lives than their low-skilled contemporaries.

A male lawyer can expect to live over seven years longer than the man who empties his wastepaper bin, Office for National Statistics figures suggest.

The government has made the reduction of life expectancy inequalities one of its key health targets for 2010.

But the England and Wales data suggests overcoming differences may be tough.

Male and female non-manual workers - which include professionals as well as clerks - saw the greatest increase in life expectancy in the 33 years covered by the study, stretching from 1972 to 2005.

Men in non-manual jobs could expect to live to 79.2 by 2005, compared to 71.2 in the mid-1970s - a difference of eight years.

By contrast, male manual worker life expectancy increased by 6.8 years over the same period, despite starting from a lower base.

Women non-manual worker life expectancy went up 5.2 years to 82.9, compared to an increase of 4.8 years for manual counterparts, who could expect to live to 80 by 2005.

The Curious Absence of Class Struggle

Via the Globe and Mail: The curious absence of class struggle. Excerpt:

Statistics Canada reported recently that the earned income of the "average" Canadian — the so-called median income — was the same in 2004 as in 1982.

After we subtract inflation to keep the purchasing power of a dollar roughly constant, it turns out that median income, before taxes, did not rise at all over those 22 years. Yet during that same time the Canadian economy grew, in real per capita terms, by more than half.

But only the very well-paid — those above the 90th percentile of the income distribution — saw any significant increase in earned income; and the higher up the earnings ladder, the greater the growth. What has been going on?

Canada's experience is certainly not unique. We are following the same pattern as the United States — as usual, a bit more mutedly and a few steps behind. In the 30 years after the Second World War, the U.S. income distribution did not vary much, as the average American worker's earnings grew in tandem with a robustly expanding economy.

Things changed abruptly starting about 1973; productivity growth collapsed, and the economy lapsed into a long inflationary stagnation. Eventually, North America recovered, but the fruits of growth no longer flowed in the same proportion into the average worker's pocket.

Between 1975 and 2005, median family income in the U.S. increased by only 28% (with most of that coming in 1993-2000) while the economy overall grew by 86% in per capita terms. Between 2000 and 2005, median U.S. family income actually declined slightly.

Meanwhile, those at the top of the heap have been doing better than ever. The average earnings of the highest 1 per cent of the U.S. income pyramid rose a very healthy 160% between 1975 and 2005, while the income of the rarefied top 10th of 1 per cent soared 350%, in real terms, from $800,000 (U.S.) in 1975 to some $3.6-million by 2005.

Three Cities Within Toronto

Go to the website of the Centre for Urban and Community Studies, and you can download a new report, The Three Cities Within Toronto: Income Polarization, 1970-2000.

Welcome to a New Blog

I've just discovered Lane Kenworthy's new blog, Consider the Evidence. Here's a sample from his latest post: Households Running Out of Wiggle Room.

The share of American households delinquent or in default on their mortgage payments has been increasing for several months. The Wall St. Journal reported yesterday that the same is true for auto loans. The New York Times reported last Friday that food bank use is on the rise.

The proximate cause of these developments is the housing crisis. But there is a longer-term element. We may be embarking on a period in which sour economic turns — an increase in unemployment, a rise in interest rates, a significant jump in gas or food prices — create substantial financial difficulty for a larger share of households than has previously been the case. Why? Because more households have little financial “wiggle room.”

Read the whole post. I'm creating a link to the blog under Gap-Related Websites.

Child wellbeing and income inequality in rich societies

Via the British Medical Journal: Child wellbeing and income inequality in rich societies: ecological cross sectional study. The authors are Kate E. Pickett and Richard G. Wilkinson. Abstract:

Objectives To examine associations between child wellbeing and material living standards (average income), the scale of differentiation in social status (income inequality), and social exclusion (children in relative poverty) in rich developed societies.

Design Ecological, cross sectional studies.

Setting Cross national comparisons of 23 rich countries; cross state comparisons within the United States.

Population Children and young people.

Main outcome measures The Unicef index of child wellbeing and its components for rich countries; eight comparable measures for the US states and District of Columbia (teenage births, juvenile homicides, infant mortality, low birth weight, educational performance, dropping out of high school, overweight, mental health problems).

Results The overall index of child wellbeing was negatively correlated with income inequality (r=–0.64, P=0.001) and percentage of children in relative poverty (r=–0.67, P=0.001) but not with average income (r=0.15, P=0.50). Many more indicators of child wellbeing were associated with income inequality or children in relative poverty, or both, than with average incomes. Among the US states and District of Columbia all indicators were significantly worse in more unequal states. Only teenage birth rates and the proportion of children dropping out of high school were lower in richer states.

Conclusions Improvements in child wellbeing in rich societies may depend more on reductions in inequality than on further economic growth.

Rich taxed less, study finds

Via The Star in Toronto: Rich taxed less, study finds. Excerpt:

The era of tax cuts ushered in by federal and provincial governments in recent years have made Canada's tax system so regressive that the country's richest now pay the lowest rates of all income groups, says a report to be released Thursday.

The report by the Canadian Centre for Policy Alternatives, an advocacy research group that has pressed in the past for more social spending and bigger taxes on corporations and higher-income Canadians, looked at what percentage of income Canadians pay in taxes to all levels of government.

The study shows that Canada's progressive tax system has become less so between 1990 and 2005, and for the richest Canadian families – those with annual earnings of $266,000 a year and more – the era of tax cuts since the turn of the century has been like manna from government.

Those very rich Canadians paid 30.5 per cent of their income in federal, provincial and municipal taxes in 2005, as opposed to the 30.7 per cent for those with incomes under $13,523, the lowest 10 per cent of family earnings.

That's a big difference from 1990, when the top one per cent of earners paid 34.2 per cent of their incomes in taxes, as opposed to 25.5 per cent for families in the bottom 10 per cent.

Measuring Historical Inequality

Via Zubin Jelveh's Odd Numbers blog: A New Way to Measure Inequality. Excerpt:

The Gini coefficient measures how unequally (or equally) wealth is distributed in a society. The latest data show that Denmark is the most egalitarian country in the world while income inequality is highest in the south African nation of Namibia where 56% of the population lives on less than $2 per day.

But how do these nations stack up against historical societies? Has inequality improved over time? Branko Milanovic of the World Bank, Peter H. Lindert of UC Davis, and Jeffrey G. Williamson of Harvard decided to find out and in the process devised an innovative way of measuring inequality. (Here is a link to their NBER paper, if you know where to get a free version please leave a link in the comments. and thanks to Egalitarian for the link non-gated version.)

Reliable income data wasn't around before the late 1800's, so the researchers turned to what are called social tables where different social classes are ranked from the richest to the poorest. (These were also called political arithmetick, which happens to be name of a neat blog.)

Here is a graphic showing the Ginis for four modern nations and 12 pre-industrial nations. A value close to 100 means more inequality while closer to zero means more equality.

Click through to see the table.

Canada: Income gap now "on par with that of Indonesia"

David Olive in The Star explains Why poverty threatens us all. Excerpt:

According to the latest statistics from the World Bank, the widening gap between rich and poor in Canada is now roughly on par with that of Indonesia. Indeed, in the matter of income equality, Canada trails not only the Scandinavian countries, but Egypt and Pakistan, as well.

You might think that fact alone would place poverty high on the national agenda. But in this week's throne speech, Prime Minister Stephen Harper devoted no more than 98 of 4,000 words – less than 3 per cent – to the subject.

More than a decade of tax cuts at the federal level and in certain provinces has not put a dent in the rising number of people in poverty, despite being among the advertised benefits of tax reduction.

With an estimated 1 million children living in poverty, we risk raising a new generation of Canadians unable to contribute to our economic progress. And the continued decay of impoverished urban and rural communities threatens their demise, as gangs, drug-dealing and prostitution take over once livable neighbourhoods.

So vague and relatively fleeting was the throne speech's attention to poverty that the Harper government's commitment to addressing the crisis is open to contrary interpretations.

For instance, Liberal leader Stéphane Dion denounced it as a "complete and shocking indifference about poverty in this country."

By all means read the whole article.

Canadians living beyond their means

The Certified General Accountants has published a new report: Where does the money go: The increasing reliance on household debt in Canada. Excerpt from the backgrounder:

•Household debt is at an all-time high, reaching $1 trillion in 2006.

•Canadians’ personal saving rate has been declining since the early 1980s dropping from its highest level of 20.2 per cent in 1982 to its lowest of 1.2 per cent in 2005.

•Home equity per owner was 5 per cent lower in 2005 than in 1997.

•Household debt has been increasing annually by 4.7 per cent for the past 30 years outpacing gains in personal disposable income, assets and the GDP.

•Consumption rather than asset accumulation is the primary cause of rising debt.

•The least wealthy 20 per cent of households experienced the second fastest rate of debt growth between 1999 and 2005 when compared to all other wealth groups.

•A greater number of people – 20 per cent- are tapping into their RRSP savings prior to retirement; using funds primarily for day-to-day living purposes.

You can download the whole report from the link.