Middle Class disappears; wage gap grows

Earnings evaporate for Canada's very poorest families while the very rich grew richer, study shows By April Lindgren

The federal government's pledge to improve incomes and reduce the gap between rich and poor

takes on new urgency following the release of a new study charting the decline of Canada's middle class.

"I'm as surprised as anybody about how bad the situation is," says Armine Yalnizyan, the author of a report on the growing inequality between Canada's haves and have_nots.

The study. titled The Growing Gap and issued by the Centre for Social Justice, paints a bleak picture of Canada's disappearing middle class: Between 1973 and 1996, the proportion of middle_range income families with children _ families earning between $24,000 and $65,000 _ fell to 44 per cent of the population from 60 per cent.

The report points to the evaporation of earnings among the country's poorest families.

And it highlights the erosion of government programs such as welfare and employment insurance that until a few years ago ensured income dis- parities did not become more pronounced.

The report attacks directly the notion that economic growth is the solution to such ills.

Canadians were promised that less government and greater reliance on market forces would un- leash unparalleled economic expansion where all would benefit -- a rising tide raises all boats.

"Some are riding high, but many more see at best only a gentle swell, at worst nothing but a stranded boat on a muddy beach."

Observing that governments today aren't inclined to give people money to compensate for the failures of the market, the report says that leaves only two alternatives.

"Either the state gets more involved in how the economy does its job (regulation), or we will have to watch the >logic' of unleashed market forces unravel more and more of our families and our society."

Ms. Yalnizyan, using both published research and her own analysis of Statistics Canada income figures, reports that as the middle class shrank, the ranks of the very poor and the very rich grew. She also compares the incomes of Canada's poorest lO per cent of families with the incomes of the richest lO per cent.

If you ignore taxes and government transfers to individuals and look only at income earned from work and investments, the poorest l0 per cent of famines took home only $435 on average in all of 1996, down from $5,204 in 1973. The richest 10 per cent earned $136,737 on average _ 314 times the earned income of Canada's poorest families. A generation ago, they only earned about 21 times as much.

Ms. Yalnizyan said the dramatic change occurred because jobs have become increasingly scarce for some segments of the population In 1973, almost two thirds of the lowest income families had some work. Today almost three quarters do not have any work.

When taxes and government transfers, including welfare and employment insurance payments. are added to the equation, the picture improves considerably, The research shows that under those circumstances. the richest l0 per cent of families earn -ed 7.2 times the income of the poorest families, up from 6.77 times in 1973.

The numbers point to the importance of government in equalizing income, the report says before going on to document how those same programs have been scaled back.

Information from Ont. Coalition for Social Justice.