Ottawa, September 13, 2011—Since the mid-1990s, income inequality has been rising more rapidly in Canada than in the United States, according to The Conference Board of Canada’s How Canada Performs analysis of world income inequality.
“Canada had the fourth largest increase in income inequality among its peers,” said Anne Golden, President and CEO of the Conference Board. “Even though the U.S. currently has the largest rich-poor income gap among these countries, the gap in Canada has been rising at a faster rate.”
“As we highlighted in our analysis of Canadian income inequality in July, high inequality both raises a moral question about fairness and can contribute to social tensions. In Canada, the gap between the rich and poor has widened over two decades, especially compared to our peer countries.”
Between the mid-1990s and the late 2000s, income inequality rose in 10 of 17 peer countries—including Canada—while it remained unchanged in Japan and Norway, and declined in five countries. Sweden, Finland, and Denmark had the three largest increases in income inequality during the 1990s and 2000s, but all three are still considered low-inequality countries.
The most commonly used measure of income inequality is the Gini index, which calculates how the distribution of income deviates from a perfectly equal distribution (a Gini index of 0 means that every person in the society has the same amount of income; whereas, 1 would indicate that one person has all the income). A country with low income inequality has a Gini index of 0.3 or less; the index ranges between 0.3 and 0.4 in a country with medium inequality and above 0.4 in a country with high income inequality.
Canada’s Gini index rose from 0.293 in the mid-1990s to 0.320 in the late 2000s. During the same period, the United States’ Gini index increased from 0.361 to 0.378.
The Conference Board study assessed whether world income inequality has increased using three methods:
- Income gap between rich and poor countries—Income inequality grew in the 1980s, 1990s and most of the 2000s before declining between 2007 and 2010.
- Overall world income inequality using the Gini index measure (with and without adjusting for country population size)—When country population size is not taken into account, income inequality rose between 1982 and 2000 before levelling off in the past decade. When country population size is accounted for, income inequality declined from 1962 onward, mainly due to economic growth in China and India.
- Income inequality within each country—Seventy-one per cent of the world’s people live in country where income inequality has been increasing; 22 per cent live in countries where inequality is declining, and 7 per cent live in countries where inequality is stable. In general, countries with high inequality are clustered in South America and southern Africa.
World Income Inequality is the final of 10 Hot Topics published in 2011. The How Canada Performs: A Report Card on Canada—Executive Summary 2011 summarizes all 10 Hot Topics.
How Canada Performs is a multi-year research program at The Conference Board of Canada designed to help leaders identify relative strengths and weaknesses in Canada’s socio-economic performance. The How Canada Performs website presents data and analysis on Canada’s performance compared to 16 peer countries in six performance categories: Economy, Innovation, Environment, Education and Skills, Health, and Society.
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