May 23, 2008

Pedaling Faster to Stay in the Same Place

"People Are Pedaling Faster to Stay in the Same Place"

Interview with economist Armine Yalnizyan

HALIFAX, Canada, May 20 (IPS) - In early May, Statistics Canada, the government's official number crunchers, released what was billed as a landmark report titled "Income Inequality and Redistribution in Canada: 1976 to 2004". The report was based on census data from the 1980s to 2005 and it analysed take-home pay and standards of living for families and individuals.
Upon the report's release, the fiscally conservative Globe and Mail newspaper began a feature article by noting "the incomes of most residents" show "perhaps the greatest stagnancy in the developed world" with "the nation's poorest falling further and further behind."

Armine Yalnizyan, a well-known economist, says the data shouldn't come as a major surprise. She authored a groundbreaking report in 1998 on income inequality in Canada, entitled "The Growing Gap". In 2002, Yalnizyan became first recipient of the Atkinson Foundation Award for Economic Justice and received the Morley Gunderson Prize in 2003.

IPS correspondent Chris Arsenault sat down with Armine Yalnizyan over coffee, before she delivered a lecture alongside politicians in Halifax, to discuss the problem of growing inequality.

AY: Income inequality has widened throughout the labour market. People who were already doing well 25 years ago have a seen a significant increase. People in the middle are pedaling faster and not getting further ahead and people at the bottom are actually losing ground.

We know that in 2005, more people are working than ever before. This is coming at the tail end of a decade of explosive economic growth in Canada, unlike almost every other advanced industrialised country. This rate of growth actually looks more like the 1960s than anything we have seen in the intervening period. This should have been a good news story; it should have been the closing of the gap.

IPS: At what points in Canada's history has inequality been worse?

AY: Not using census data, but using tax data, academics from McMaster University in Canada and Yale in the U.S. are showing that inequality in Canada and the U.S. hasn't been this strong since the 1920s. It's like going back to the future. And honestly, the economy wasn't growing this fast in the 1920s. If we can't do it now, really, when can we do it? If this is as good as it gets, it's not good enough.

IPS: Which groups in Canadian society are most affected by these changes?

AY: The most troubling part of the census Canada result is that people under the age of 30, both male and female, and recent immigrants, are doing much worse than their predecessors in the 1980s and 90s, and those were recession-plagued decades.

In 2005, we've had the lowest unemployment rates in about 35 years. We have seen explosive job creation, so there is lots of work being done. Both people under [age] 30 and recent immigrants have really good levels of education compared to their predecessors and the rest of Canadians.

If this was a typical labour market, given the tightness of the labour market and the small number of new market entrants and the demand for them, wages should be up for that group, compared to 1980s, not down. The labour market is getting more divided between permanent and non-permanent jobs, casual, contract, temporary, seasonal work. The people who are filling in those jobs, who tend to be younger people and recent immigrants, don't have the bargaining power to say 'I want more money.'

IPS: Aristotle once remarked that "the worst form of inequality is to try to make unequal things equal." Isn't inequality a necessary step towards economic development, as the people who build up drastically more wealth are the ones who will have capital to invest in broader operations for economic development that eventually help everyone?

AY: Part of the answer is investing to make sure we all have, not equality of outcome, but equality of opportunity.

The jury is out on whether it [inequality] is a necessary evil. You've got arguments saying economic inequality actually breeds the investment that leads to jobs. But we are seeing that if you don't invest in the fundamentals like good education, affordable housing, child-care for people who are working around the clock, then everyone suffers.

It's also true that creating more investment capacity often does little more than investing in the casino economy. There is more disposable income but you are gambling more of it rather than creating productive capacity. The argument works if that investment translates into real people doing real things. But we know, without doubt, that when you invest in your community you get a payoff down the road.

IPS: You've touched on how dynamics of age and national background are related to growing inequality in Canada. What about gender?

AY: When you start talking about policies that are responsive to gender issues and gender inequalities, then you are immediately talking about poverty reduction and inequality.

It is the same conversation we had in 1995 in Copenhagen on poverty reduction strategies and [that year in] Beijing on women's inequality. There has been massive progress since 1995 in global consciousness and bringing gender architecture, and the significance of that for human development and poverty reduction, into the core of U.N. and even WTO financing for development discussions.

In Canada, however, 1995 was the year we cut social spending massively. That same year Canada signed on the dotted line at Beijing and Copenhagen, we decided to strip out all the things that we know makes the difference. When Canada signed onto those things in 1995, we were the number one place in the world to live according to the U.N. Human Development Index and we had the top-ranking gender equality.

We have plummeted in both of those scales. So we know that social investment makes a difference. When your goal is to make life better for people and to reduce inequalities, whether it's gender-based or the next generation or immigrant or however you are doing it, you are actually making life better for everybody. You make it the best place to live for everybody.

IPS: What policies should governments be using to combat rising inequality, in Canada and beyond?

AY: I don't think it is a policy-driven conversation -- we know the policies. I think it's a political conversation. Our economy is, in real terms, twice as big as it was 25 years ago. And yet we are wondering which schools we should shut down, which pools we should close, and where can we avoid investing. It's a nuts period.

Inequality raises everybody's stress level, to be frank. When the basics like a safe place to live, a good school, a good public transit system and good health and mental health care system are out of our reach, that leads to a more unhealthy society. We can't buy those things with a little bit more money [in the pockets of individuals].

We've had 25 years or more of trickle down economics being the prevailing ethic; changing that will take a little while. I think there is a waking up moment, realising that tax cuts aren't the only things governments can do for people. Knowing that we are falling short, there is going to be increased political pressure on our elected leaders. There is going to be more demand to say 'how are you going to invest to see that my kids can do at least as well as I did?'


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