- Canada earns a “B” and ranks 7th out of 17 peer countries in the Society report card. Canada’s middle-of-the-pack ranking means it is not living up to its reputation or its potential.
- Canada’s social performance has remained a “B” over the last two decades.
- Canada’s “D” grade on the poverty rate for working-age people, and its “C” grades on child poverty, income inequality, and gender equity are troubling for a wealthy country.
Putting Society in context
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Achieving the goal that the Conference Board sets out for Canada—that of providing a high and sustainable quality of life for all Canadians—requires much more than economic success. By “high quality of life,” we mean communities that:
- ensure the active participation of individuals within society, including its most vulnerable citizens (such as youth and people with disabilities)
- minimize the extremes of inequality between its poorest and richest citizens
- are free from fear of social unrest and violence
Outstanding economic performance does not guarantee outstanding social outcomes—the U.S. performs well in the Economy report card yet receives a “D” in the Society report card.
Nor are outstanding economic performance and outstanding social outcomes mutually exclusive. Two countries—Norway and the Netherlands—earn “A”s in both report cards.
How is social performance measured?
Social performance is measured using 17 indicators across three dimensions:
- Social cohesion
- Self-sufficiency is assessed by two indicators that measure the financial autonomy of individuals within the economy and society. For most people, employment participation is probably the most important means of achieving self-sufficiency. Canada’s relatively low unemployment rate implies that the country's economy is doing a good job at ensuring that people who want to work are able to do so. But the situations of two vulnerable sub-populations—youth and people with disabilities—are often masked by the overall numbers.
- Equity has two broad dimensions: equality of opportunity and equality of outcome. Opinions on what is a “fair” or “just” distribution of resources vary widely, and it is difficult to obtain measurable and comparable information on equality of opportunity.
An indicator that can be seen as a measure of equality of opportunity is intergenerational income mobility. It assesses the likelihood that individuals can break out of the income class into which they are born.
The remaining five equity indicators focus on equity of outcomes: elderly poverty, child poverty, working-age poverty, income inequality, and the gender income gap.
- Social cohesion is assessed through indicators that:
Indicators in other performance categories also reflect levels of social cohesion, such as the unemployment rate in the Economy report card and the proportion of youth not completing high school in the Education and Skills report card.
What is Canada’s grade on social performance?
To enlarge this report card in a new window, click anywhere on the report card.
Overall, Canada earns a “B” and ranks 7th out of 17 countries on this report card. Its position below the Nordic countries is not surprising; the Nordic countries have long outperformed Canada. But our country now also ranks below the Netherlands and Austria. Our middle-of-the-pack ranking means we are not living up to our reputation or potential.
What is the main social challenge that Canada must address?
The financial crisis has put rising income inequality in the media and political spotlight. According to a recent article on inequality in The Economist magazine, the lack of attention paid to the issue in the years before the financial crisis was because “asset bubbles and cheap credit eased life for everyone. Financiers were growing fabulously wealthy in the early 2000s, but others could also borrow ever more against the value of their home. That changed after the crash. The bank rescues shone a spotlight on the unfairness of a system in which affluent bankers were bailed out whereas ordinary folk lost their houses and jobs.”1
The World Economic Forum’s Global Risks 2012 report surveyed 469 experts from industry, government, academia, and civil society on what global risk was perceived to be most likely to occur over the next 10 years. “Severe income inequality” topped the list, tied with “chronic fiscal imbalances.”2
But Canada does well on the equality of opportunity indicator, so does rising inequality matter?
Canada’s record on intergenerational income mobility (which can be considered a measure of equality of opportunity) is good. Compared with most of its peers, there is a weaker relationship between a family’s background in Canada and the adult incomes of that family’s children. Intergenerational income mobility measures how well children fare as adults in relation to their parents’ financial status. For example, if children born to poor parents tend to become poor adults themselves, economic mobility is said to be low.
In Canada, only 19 per cent of a family’s disadvantage is passed on to their children. This means, for example, that if a family earns $10,000 less income than the average, the children will earn $1,900 less than the average. For a family in the U.S., the children would earn $4,700 less; in the U.K., the children would earn $5,000 less.
But there is less mobility at the very top of the income brackets, according to a recent report by Statistics Canada. The report concludes that the top 1 per cent of tax filers have become more likely to remain in the group. Among those who were in the top 1 per cent in 1983, two-thirds (67 per cent) had also been in the top 1 per cent the year before, in 1982. “By 2010, this one-year measure of high income persistence had risen to 72 per cent.”3 In other words, 72 per cent of those in the top 1 per cent in 2010 had also been there the year before, in 2009.
The report also notes that the five-year persistence increased as well. In 1987, nearly 44 per cent of the top 1 per cent had been in that group five years before. That share jumped to 48 per cent in the early 1990s and 52.7 per cent in 2010.4
The rising inequality since the 1980s in Canada and its peer countries, however, is cause for some concern. The Economist article notes there is evidence that growing levels of income inequality can “translate into growing inequality of opportunity for the next generation and hence declining social mobility. . . . Bigger gaps in opportunity, in turn, mean fewer people with skills and hence slower growth in the future.”5 Of particular concern is equality of opportunity in education.
Some countries are more concerned about ensuring equality of outcome—in other words, ensuring that there are no large income gaps. The Scandinavian countries, for example, would fall into this group.
Other countries are more interested in ensuring that there is equality of opportunity. The reasoning is that as long as everyone has the same opportunity to move up the income ladder, gaps in income are not unfair; they reveal differences in such things as education and employment choices. The U.S. would fall into this group.
But despite the fact that the U.S. likes to think of itself as a country where everyone has a relatively equal chance of success, the fact is that the U.S. has less equality of opportunity than most of its peers. Miles Corak explains:
There is a disconnect between the way Americans see themselves and the way the economy and society actually function. Many Americans may hold the belief that hard work is what it takes to get ahead, but in actual fact the playing field is a good deal stickier than it appears. Family background, not just individual effort and hard work, is importantly related to one’s position in the economic and social hierarchy. This disconnect is brought into particular relief by placing the United States in an international context. In fact, children are much more likely as adults to end up in the same place on the income and status ladder as their parents in the United States than in most other countries.6
Is poverty also an issue in Canada?
Many Canadians seem to regard poverty as something that is an issue “over there” rather than in their own country. In the most recent World Values Survey, 58 per cent of Canadian respondents stated that “people living in poverty and need” was the most serious problem facing the world, while only 23 per cent said that poverty was the most serious problem facing Canada.7 Yet the gap between rich and poor in Canada has widened over the past 15 years, and all age groups have felt the change. Between the mid-1990s and the late 2000s:
- The child poverty rate increased from 12.8 per cent to 15.1 per cent.
- The working-age poverty rate rose from 9.4 per cent to 11.1 per cent.
- The elderly poverty rate increased from 2.9 per cent to 6.7 per cent.
The rise in child poverty is particularly disheartening. As noted by the OECD, “Failure to tackle the poverty and exclusion facing millions of families and their children is not only socially reprehensible, but it will also weigh heavily on countries’ capacity to sustain economic growth in years to come.”8
Poverty has increased in most OECD countries over the past decade, despite the fact that incomes at all levels have risen over the past two decades. Oxford Professor Anthony Atkinson notes that the poverty statistics released by the OECD in Growing Unequal: Income Distribution and Poverty in OECD Countries show that “a rising tide does not necessarily raise all boats.”9 And, according to the OECD, in Canada, Finland, Germany, Italy, and the U.S., the gap also widened between the rich and the middle class.10
How did the recession affect low income rates in Canada?
The global financial crisis that hit in 2008 increased the overall share of people in low income. Statistics Canada data on after-tax low-income rates reveal that the overall low income rate increased from 12.4 per cent in 2007 to 13 per cent in 2010.11 This means that 13 per cent of Canadians had an income below half of the median national income.
But not all age groups were affected in the same way. The elderly experienced the largest jump in the low income rate—almost two percentage points in the three years. Elderly women were particularly hard hit. Working-age people also had a higher low income rate, while the share of children in low income declined.
What can be done to reduce income inequality and poverty?
Governments, through the tax and transfer systems, play a large role in reducing inequality and poverty. Canada’s tax and transfer system reduces the country’s Gini coefficient from 0.441 to 0.324—a drop of 27 per cent. The OECD estimates that the overall poverty rate in Canada in the mid-2000s would have been 11 percentage points higher—23 per cent rather than 12 per cent—without government tax benefits and cash transfers to low-income people.12
While developing countries still need to address growing inequality and poverty through the tax and benefit system, Angel Gurria, the Secretary-General of the OECD, notes that, “for most OECD countries, this approach alone is no longer going to work . . . Trying to patch the gaps in income distribution solely through more social spending is like treating the symptoms instead of the disease.”13
The analysis in Growing Unequal? Income Distribution and Poverty in OECD Countries reveals that the largest part of the increase in poverty comes from changes in labour markets—not everyone has been able to take advantage of the opportunities of a high-tech globalized economy. According to Gurria, “This is where governments must act. Increasing employment is the best way of reducing poverty. . . . Thus, a key element in tackling poverty and inequality lies in creating more and better jobs.”14 The OECD notes that “work is even more important as a way of avoiding poverty in Canada than it is in other countries.”15
The OECD lays out three policy areas in which governments can act:
- Education. Better education is a powerful way to achieve growth that benefits all, not just the elites. And it is the key to upward social mobility. If access to early childhood education or to tertiary education depends on the depth of parents’ pockets, it is very hard for the child of poor parents to do well. If quality education depends on the neighbourhood where you live, this will also affect your capacity to improve your life.
- Make work pay. However necessary, reforms in education take a long time before their full impact is felt. In the immediate future, Canada needs policies that address directly the increasing earnings inequality. There are a number of good examples. In-work benefits—such as the Earned Income Tax Credit in the United States, the Revenu de Solidarité Active in France and the Working Tax Credit in the United Kingdom—help reduce poverty by encouraging more people to work while, at the same time, giving working families a boost in their income.
- Tackle child poverty. Growing Unequal? shows that children have gained less from economic growth than other groups. Poor children do not eat well, do not learn well and have low chances of escaping poverty when they grow up. This is unacceptable. The countries that do best in keeping child poverty low are those which help mothers work. Yet many families are struggling to reconcile family and work responsibilities. Services intended for children and their parents often do not reach those most in need. The OECD published a report called Babies and Bosses, which shows how sensible investments in child care, in parenting support, and in promoting flexible employment can help solve this problem. These investments promise high returns and low risks, a combination that no doubt appeals to governments.16
How does Canada’s social performance compare to the 17-country average?
The radar diagram below is a snapshot of Canada’s social performance (and the 17-country average performance) relative to that of the best-performing peer country—the outer ring—for each of the 17 social indicators.
The chart has 16 axes—one for each indicator—that radiate out from the centre. A score closer to the centre represents worse performance, while a score closer to the outer circle represents better performance.
Canada is a top-performing country on the acceptance of diversity indicator and comes close on the indicator measuring life satisfaction.
Compared to the 17-country average, Canada’s performance is also significantly above average17 on indicators measuring acceptance of diversity, life satisfaction, income mobility, elderly poverty, disabled income, and suicides. It is significantly below average18 on child poverty, working-age poverty, income inequality, the gender income gap, and voter turnout.
The U.S. accounts for six of the worst performances (out of 17 indicators): child and working-age poverty, income inequality, trust in parliament, homicides, and voter turnout. Denmark, the country ranked first overall in the Society category, accounts for five of the best performances: child poverty, working-age poverty, income inequality, income mobility, and life satisfaction.
Use the pull-down menu to compare Canada’s social performance with that of any of its peers.
Is Canada really a “kinder, gentler nation”?
Society is a category the Conference Board likes to call a “myth buster.” The self-image of Canada as kinder and gentler is based largely on a narrow Canada–U.S. comparison. Yes, Canada’s social safety net results in lower rates of child and elderly poverty and income inequality, along with higher rates of self-sufficiency of vulnerable populations than in the United States. But many Canadians would be surprised to learn that the U.S. burglary rate and suicide rate are not much higher than those in Canada, and that the gender income gap is the same in the two countries.
Self-satisfaction is also not justified when Canada’s social performance is compared with its peer countries. Six countries rank above Canada overall, and Canada’s “D” grade on working-age poverty and “C” grades on child poverty and income inequality, are troubling for a wealthy country.
Has Canada’s social performance improved?
Canada has been an “A” performer in the 1990s and 2000s on four indicators: elderly poverty, homicides, life satisfaction, and the acceptance of diversity. The homicide “A”s come with a caveat: if the U.S. were removed from the analysis, Canada would lose its “A” grades.
Canada has been unable to improve its relative performance on several of the indicators: the consistent “C”s on child poverty and the drop to a "D" on working-age poverty are the most disheartening.
The difference in relative performance in the 1990s and 2000s can be seen in the radar diagram below.
Canada’s performance improved significantly on the income of people with disabilities—shown by the movement toward the outer ring, which represents the best-performing country on each indicator. The confidence in parliament indicator also moved outward, as did the burglaries indicator.
The working-age poverty, child poverty, and income inequality indicators all moved closer to the middle, meaning that Canada’s performance deteriorated relative to its peer countries.
Is Canada keeping up with the rest of the class?
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Canada has been a steady “B” performer overall in the Society report card, ranking in the middle of the pack in the 1990s and 2000s.
Canada has not been able to close the gap with the top performers. Four countries have earned “A”s over the two decades: Denmark, the Netherlands, Norway, and Sweden.
The U.S. and Japan have been the worst performers in this category. Japan received “D” grades for its overall social performance despite the fact that it had very low crime rates. The U.S. has not been a top performer on any indicator, and has been below average on the majority of the indicators.
Why are social outcomes important for Canada’s future?
Canadians should care about social outcomes. A strong social fabric promotes social justice and, ultimately, contributes to sustainable economic prosperity.
1 “For Richer, For Poorer,” The Economist, October 13, 2012, 4.
2 World Economic Forum, Global Risks 2012, 2012, 11.
3 Statistics Canada, “High-Income Trends Among Canadian Taxfilers, 1982 to 2010.” The Daily (Ottawa: Statistics Canada, 2013).
4 Statistics Canada, “High-Income Trends Among Canadian Taxfilers, 1982 to 2010.” The Daily (Ottawa: Statistics Canada, 2013).
5 “For Richer, For Poorer,” The Economist, October 13, 2012, 22.
6 Miles Corak, Inequality From Generation to Generation: The United States in Comparison, 1 (accessed November 6, 2012).
7 World Values Survey, Online Data Analysis (accessed September 5, 2009).
8 OECD, Combating Poverty and Social Exclusion Through Work, Policy Brief (Paris: OECD, 2005).
9 Anthony Atkinson, “Unequal Growth, Unequal Recession?” OECD Economic Observer, No 270/271 December 2008–January 2009 (accessed September 6, 2009).
10 Michael Forster, “Growing Unequal: Poverty and Incomes Over 20 Years,” DELSA Newsletter Issue 7 (Paris: OECD, 2009), (accessed September 5, 2009).
11 Using Statistics Canada’s low income measures (LIMs), which are relative measures of low income, set at 50 per cent of adjusted median household income. These measures are categorized according to the number of persons present in the household, which reflect the economies of scale inherent in household size.
12 OECD, Growing Unequal? Income Distribution and Poverty in OECD Countries (Paris: OECD, 2008), (accessed September 4, 2009), 141.
13 Angel Gurria, “Launch of Growing Unequal? Remarks by Angel Gurria, OECD Secretary-General,” October 21, 2008
(accessed September 11, 2009).
14 Angel Gurria, “Launch of Growing Unequal? Remarks by Angel Gurria, OECD Secretary-General,” October 21, 2008 (accessed September 11, 2009).
15 OECD, Growing Unequal? Income Distribution and Poverty in OECD Countries—Country Note: Canada (Paris: OECD, 2008), (accessed September 4, 2009), 292.
16 Angel Gurria, “Launch of Growing Unequal? Remarks by Angel Gurria, OECD Secretary-General,” October 21, 2008 (accessed September 11, 2009).
17 More than 10 percentage points above the 17-country average on the normalized values for each indicator. For more information on the normalization methodology, see the Methodology section on this website.
18 More than 10 percentage points below the 17-country average on the normalized values for each indicator. For more information on the normalization methodology, see the Methodology section on this website.