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Stasis Amid Change Income Inequality In Canada 1965‐1983

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  • Michael Wolfson

Abstract

Income inequality in Canada has not changed significantly over the past two decades, though this apparent stability may be surprising in view of the major economic and social changes that occurred over this period. The share of income going to the bottom quintile remains at about four percent while the top quintile continues to receive about 40 percent of income. Social trends such as lower fertility rates have coincided with increased female labour force participation to increase family incomes in the middle and upper‐middle parts of the income spectrum. At the same time, the trend for baby boom children to establish their own separate households, and increased divorce and separation rates, have tended to create more small family units with low incomes. These social trends, in isolation of other factors, would have increased income inequality. However, economic factors have apparently offset these tendencies. Since employment income is concentrated in the middle and upper‐middle ranges, the relative fall in this source of income over the past two decades tended to be equalizing. Similarly, the fact that a large part of total investment income accrues to the elderly who have below average income implies that the trend towards high interest rates has been equalizing. Finally, the social “safety nets” put in place in the mid‐1960s and early 1970s have grown in relative importance, and this too has had an equalizing impact on the distribution of income. Given the overall stability in income inequality, the equalizing tendencies of economic factors such as high interest rates and relatively slow economic growth, with the large automatic responsiveness of governments' social safety net programs, appear to have just about exactly offset the disequalizing social factors of “baby boomers” leaving home, lower fertility, higher divorce and separation rates, and higher female labour force participation.

Suggested Citation

  • Michael Wolfson, 1986. "Stasis Amid Change Income Inequality In Canada 1965‐1983," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 32(4), pages 337-369, December.
  • Handle: RePEc:bla:revinw:v:32:y:1986:i:4:p:337-369
    DOI: 10.1111/j.1475-4991.1986.tb00545.x
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    Cited by:

    1. Sharpe, Andrew & Zyblock, Myles, 1997. "Macroeconomic performance and income distribution in Canada," The North American Journal of Economics and Finance, Elsevier, vol. 8(2), pages 167-199.
    2. Joon-Woo Nahm, 2008. "Shrinking Middle Class and Changing Income Distribution of Korea: 1995-2005," Korean Economic Review, Korean Economic Association, vol. 24, pages 345-365.
    3. Lars Osberg & Kuan Xu, 2000. "International Comparisons of Poverty Intensity: Index Decomposition and Bootstrap Inference," Journal of Human Resources, University of Wisconsin Press, vol. 35(1), pages 51-81.
    4. McKinley L. Blackburn & David E. Bloom, 1993. "The Distribution of Family Income: Measuring and Explaining Changes in the 1980s for Canada and the United States," NBER Chapters, in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 233-266, National Bureau of Economic Research, Inc.
    5. Louis Chauvel, 2016. "The Intensity and Shape of Inequality: The ABG Method of Distributional Analysis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(1), pages 52-68, March.
    6. James Foster & Michael Wolfson, 2010. "Polarization and the decline of the middle class: Canada and the U.S," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 8(2), pages 247-273, June.
    7. Andrea Brandolini & Timothy M. Smeeding, 2007. "Inequality Patterns in Western-Type Democracies: Cross-Country Differences and Time Changes," CHILD Working Papers wp08_07, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
    8. Louis Chauvel, 2014. "The Intensity and Shape of Inequality: The ABG Method of Distributional Analysis," LIS Working papers 609, LIS Cross-National Data Center in Luxembourg.
    9. Heisz, Andrew, 2007. "Income Inequality and Redistribution in Canada: 1976 to 2004," Analytical Studies Branch Research Paper Series 2007298e, Statistics Canada, Analytical Studies Branch.

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