A recently released study by the OECD found that Canada ranks 18th among developed countries in terms of income inequality:
In the last 10 years, the rich have been getting richer leaving both middle and poorer income classes behind. The rich in Canada are particularly rich compared to their counterparts on other countries.. Canada spends less on cash benefits such as unemployment benefits and family benefits than most OECD countries. Partly as a result, taxes and transfers do not reduce inequality by as much as in many other countries. Furthermore, their effect on inequality has been declining over time. Over the past 10 years poverty (people who live on less than half median incomes) has increased for all groups… to an overall rate of 12%.
There are lots of reasons for this embarrassing result. What reasons can you think of?
One issue often debated is the extent to which there is a relationship between unionization rates and income inequality. Since unions tend to raise wages of workers, we might predict that strong unions equals less income inequality. For example, check out this study using Canadian, U.S., and UK date.
Take a look at the rough correlation between countries with high unionization rates and low income inequality. Using quick stats I took from this article by Blanchflower, the top ten countries on the list (countries with the lowest income inequality), include these (listing those I have stats for in the article):
1. Denmark (union density, 2003: 70%)
2. Sweden (2000, 80%)
3. Austria (2003, 38%)
7. Finland (2003, 74%)
8. Belgium (2002, 55%)
Canada, on the other hand, at 18 on the list, has a unionization rate around 28% (2003). Other notable bottom feeders:
We need to be cautious doing direct comparisons of unionization rates across countries, because the systems for measuring are not always the same. Still, this is an interesting question for policy, since most of our current conservative governments in Canada are adamantly opposed to collective bargaining. If collective bargaining decreases the gap between rich and poor, should our governments be doing more to increase the union density rate in Canada?
