Neighbourhood Inequality in Canadian Cities

In this paper, we use census tract data to analyse changes in neighbourhood income inequality and residential economic segregation in the eight largest Canadian cities during the 1980-95 period. Is the income gap between richer and poorer neighbourhoods rising? Are high and low-income families increasingly clustered in economically homogeneous neighbourhoods? The main results are an elaboration of the spatial implications of the well documented changes that have occurred in family income and earnings inequality since 1980. We find that between neighbourhood family income (post-transfer/pre-tax) inequality rose in all cities driven by a substantial rise in neighbourhood (employment) earnings inequality. Real average earnings fell, sometimes dramatically, in low-income neighbourhoods in virtually all cities while rising moderately in higher income neighbourhoods. Strikingly, social transfers, which were the main factor stabilizing national level income inequality in the face of rising earnings inequality, had only a modest impact on changes in neighbourhood inequality. Changes in the neighbourhood distribution of earnings signal significant change in the social and economic character of many neighbourhoods. Employment was increasingly concentrated in higher income communities and unemployment in lower income neighbourhoods. Finally, we ask whether neighbourhood inequality rose primarily as a result of rising family income inequality in the city as a whole or because families were increasingly sorting themselves into "like" neighbourhoods so that neighbourhoods were becoming more economically homogeneous (economic "segregation"). We find that economic spatial segregation increased in all cities and was the major factor behind rising neighbourhood inequality in four of the eight cities. A general rise in urban family income inequality was the main factor in the remaining four cities.