Inequality Persists in Canada, But Improved During the Pandemic

Ottawa, November 7, 2022 –The Conference Board of Canada released analysis highlighting that despite a common belief that inequality is rising, income inequality in Canada has improved and fell sharply during the pandemic, while wealth inequality has declined dramatically over the past two decades. The analysis used the Gini coefficient and distribution of wealth data to assess income disparity among households.

“Although it is certainly positive news to see inequality decline nationally, Canada’s performance remains middle of the pack when comparing it to other developed nations, and we’re well behind Nordic countries,” said Pedro Antunes, Chief Economist, The Conference Board of Canada. “Inequality is still problematic in Canada, with women, racialized groups, new Canadians, and Indigenous people facing tougher economic circumstances.”

The Conference Board of Canada’s research found that a variety of factors have contributed to the decline of inequality in Canada. The Canada Child Benefit (CCB) introduced in 2016 played a significant role in reducing child poverty. Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) have helped pull down poverty rates among seniors. Additionally, wealth inequality has declined, in part due to monetary policy, as low interest rates helped bolster home ownership while at the same time lifting home prices. This increase in home values has pushed up the wealth of lower-income households by more than that for high-income households.

Income inequality dropped sharply in 2020, when pandemic-related income supports were created but looking ahead, The Conference Board of Canada’s research notes there are a multitude of factors that can negatively impact our recent progress on inequality. The pandemic supports were temporary while runaway inflation and higher interest rates are eroding household finances. Technological change and the green transition are also important factors that can shake up the economy and lead to rising inequality.

Despite our progress, in comparison to many countries, there is still significant room for Canada to improve on inequality. The wage gap between men and women in Canada has narrowed over time but remains concerningly wide. There is also a significant gap between top earners in Canada and most Canadians.

Our tax system contributes to lowering inequality in Canada. While wages and salaries, capital gains, and investment income are clearly not evenly distributed, progressive income taxes, coupled with a multitude of support and transfer programs implemented by federal, provincial/territorial, and municipal governments has helped level the playing field. As a country, we could build on the success of already established programs such as the CCB or the OAS. Like those programs, a targeted, means-tested minimum income could help reduce the gap for more Canadians.  

Providing accessible public healthcare and education also goes a long way toward reducing inequality and intergenerational mobility. Access to affordable daycare, which the federal government and provincial/territorial governments have committed to, can also help close the gap between incomes earned by men and women. Accessible daycare has been shown to enable women to increase their participation in the workforce and have a meaningful impact on reducing income inequality.

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The Conference Board of Canada is the country’s leading independent research organization. Our mission is to empower and inspire leaders to build a stronger future for all Canadians through our trusted research and unparalleled connections. Follow The Conference Board of Canada on Twitter @ConfBoardofCda.

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