Incomes in Canada – Booming and Busted

Today’s release of the annual Income in Canada report is Statistics Canada’s first word on the impact of the Great Recession on Canadians’ incomes.

The report in The Daily was presented as a non-event, but the data reveal important stories about the winners and losers since the recession.

What comes through loud and clear is the fractured nature of the Canadian economy in the wake of the global recession: one part booming, the other part is busted.

It’s often portrayed as an east-meets-west friction, but the story is a little more checkered than that.

Three provinces have been growing right through the recession, one like gangbusters – Newfoundland and Labrador, Saskatchewan and Quebec. In these provinces, average and median after-tax incomes rose right through the recession.

Three provinces were hit hard by the global economic crisis in 2008 and 2009 – Ontario, Alberta and B.C. In these bust provinces, both average and median incomes dropped since the recession hit.

Result: not much change at the national level, which gives the impression there is nothing to talk about, even while a dramatic story unfolds that should have all of us worried about what lies ahead for Canada as a whole.

For instance, how growth/recession affects the distribution of incomes.

First, recession. The three bust provinces – Ontario, Alberta and B.C. –  were all hard hit by the global economic crisis.  In each jurisdiction, the shares of the richest quintile are at or near peak highs.

In Ontario, the distribution of shares of income has barely budged since 1998, despite rapid growth in the number of jobs.  The richest 20% of Ontarians enjoy 44.3% of total after-tax incomes, the poorest 20% take home just 4.7% of the pie.

In Alberta, there has been a steady redistribution of income to the richest income quintile since 1998, primarily at the expense of the upper middle class and middle income quintile.  The poorest income quintile saw the largest drop in their share of incomes of any jurisdiction since the recession hit in 2008. By 2009, the poorest 20% had 4.3% of total after-tax income, compared to 44.3% for the richest 20%.

In B.C. the share of the richest quintile just keeps on increasing, experiencing only two set-backs since 1976, one in 1981 and one in 2001.  The big losers in this redistribution have been the lower middle class and middle quintile.  The richest 20% held the biggest share of total after-tax income of any jurisdiction in 2009, at 44.8%. The poorest 20% had, correspondingly, the smallest share, at 4.5%.

The opposite occurred in the boom provinces.

All three boom jurisdictions saw the richest 20% enjoying a larger piece of the action since the mid-1990s, with more of the income gains from economic growth accruing to those at the top.  But in these three provinces, the share of after-tax income going to the richest stopped rising in the past five years, as the gains from growth started to become more widespread.

Quebec has one of the most evenly distributed incomes in the country, for reasons of both a diversified industrial base of its economy as well as a cultural predisposition for highly redistributive programs. In Quebec, shares by income quintile have held mostly steady since 2006.  Between 2008 and 2009 the share of the middle quintile grew marginally, and that of the richest quintile shrank marginally.  The richest 20% had 42.9% of all after-tax income in Quebec in 2009; the poorest 20% had 5.3% of all after-tax income.

In Saskatchewan, shares by income quintile have similarly remained steady since 2006, with a slightly more pronounced reduction in the share of the richest quintile, and more growth in the bottom quintile, a clear sign of jobs boom in that jurisdiction over the past few years.  In 2009, the richest 20% held 43.1% of total after-tax income, and the poorest 20% held 5%.  (This survey source does not include aboriginal populations living on reserve, a large proportion of the population of Saskatchewan, meaning the income inequality and poverty measures are likely understated for this province.)

While average and median incomes continued to grow in 2008, shares of incomes Newfoundland and Labrador showed the impact of more unemployed in the province, many of them returning from the oil patch. That year, the richest quintile saw a marginal gain in their share of total after-tax incomes in that province; but by 2009 the bottom three quintiles showed some growth in their shares, based on growth in the number of jobs as well as earnings.   In Newfoundland and Labrador, the richest 20% had 42.2% of all after-tax income, and the poorest 20% had 5.6%.  Despite the fact that the rapid growth of its economy in the past few years has transformed it from have-not to have status in the federation, Newfoundland and Labrador remains the province with the most even distribution of after-tax income.

Overall we are told that the average Canadian had $31,500 to play with after-tax in 2009, same as in 2008.  Median after-tax income less was $25,400 in 2009, $200 higher than the previous year.  It’s worth pausing on that fact alone:  half of Canadians were living on less than $25,400 in 2009.

The Income in Canada data tables offer some fascinating insights on poverty trends and offer up a brand new set of data about income mobility.  I’ll post on these topics in the coming days.