Eric Beauchesne,
Canwest News Service

Income inequality in Canada has increased, creating a widening gap between the rich and the rest and one that is only partially offset by the tax system.

But overall, there's been little growth in the after-inflation earnings of Canadians over the past quarter century, Statistics Canada said Thursday in its latest report on its findings from the 2006 census.

And that's despite a period that witnessed strong economic growth as well as substantial increases in both the educational attainment and experience of the workforce, it added.

What earnings growth there has been has gone mostly to those at the top of the income ladder, dramatically widening the gap between them and the rest, a trend that has continued this decade and accelerated for those at the top and those at the bottom, the findings suggest.

"Earnings of full-time full-year earners rose for those at the top of the earnings distribution, stagnated for those in the middle and declined for those at the bottom," Statistics Canada said in its report Thursday on changes since 1980 in median earnings of individuals, the level at which as many are earning more as less.

"As was the case during the 1980s and the 1990s, earnings grew faster between 2000 and 2005 among workers in the upper segments of the earnings distribution than among those at the bottom," it said.

Ted Wannell, a senior Statistics Canada analyst, said the available international data suggest increasing earning inequality is not exclusive to Canada. The evidence suggests it's happening in other countries and to an even greater extent in the United States.

There's no satisfactory explanation yet of why it's happening, Wannell said in an interview, but factors could include stronger job growth in occupations that have enjoyed strong wage growth, especially in the resources sector, and in high skill occupations, such as auditors.

The report shows that the median earnings of full-time workers edged up just 0.1% in 25 years to $41,401 in 2005 from $41,348 1980, and actually fell in several provinces, led by an 11.3% plunge in British Columbia. All figures are based on earnings in the year prior to the census and are in inflation-adjusted 2005 dollars.

The stagnation in earnings was despite modest growth of 2.4% between 2000 and 2005.

Those in the top 20% of earners saw their earnings rise 16.4% over the quarter century, including a 6.2% gain since 2000, while those in the bottom 20% saw theirs shrink 20.6% since 1980, including a 3.1% drop this decade. Those in the middle 20% saw only a marginal 0.1% rise since 1980 despite a 2.4% gain since 2000.

The gap between what immigrants and native-born Canadians earn also widened, both over the 25 years and over the most recent five years.

In 2005, men who were recent immigrants earned only 63 cents for each dollar earned by native-born men down from 85 cents in 1980, while the earnings of recent immigrant women fell to 56 cents of what Canadian born women earned from 85 cents .

Meanwhile, the gender gap in earnings among younger workers aged 25 to 29, after narrowing steadily over the past two decades, remained unchanged through the first half of this decade with women earning 85% of what men did, the same as in 2000.

The tax system, however, has helped to reduce the widening gap in incomes, according to the report from the census, which for the first time includes after-tax incomes as well.

The tax system hasn't completely offset what has been a substantial widening in employment earnings but has come close to doing so, Wannell said, noting that when total incomes and not just earnings are included, the gap has barely widened over the past quarter century.

"So the tax and transfer system does do a lot to equalize the distribution of well-being in the country," he said.

"After-tax income depicts in a better fashion what families have available to spend," the report said, noting that the median after-tax income of all families, made up of two or more related individuals, was $57,178 in 2005, compared with a pre-tax income of $66,343.

The after-tax income gap between higher and lower income earners is also smaller as people with higher incomes generally pay more in tax, it said, citing as an example the impact of taxes on the gap between what tend to be the highest and lowest income families.

"For example, on an after-tax basis, lone-parent families headed by women had a median after-tax income that was 49.1% of that received by couples with children, compared with 44.3% based on pre-tax income," it noted.

It also noted that the proportion of income paid in taxes ranged from a high of 24.2% for the one-fifth of families with the highest incomes to just 2.8% for the fifth with the lowest incomes.

The collection of after-tax information allowed for what some argue is also a better measure of the proportion of low-income Canadians, which Statistics Canada define as those living in families that spend 20 percentage points or more of their after-tax income than the average family on the basics of food, shelter, and clothing.

On an after-tax basis, the proportion of Canadians living on low incomes in 2005 was 11.4%, rising to a high of 14.5% for children five and under who lived in low-income families, it said. Comparisons with previous years was not possible because it was the first census in which information on after-tax income was collected.

On a pre-tax basis, the proportion of Canadians living on low incomes in 2005 was 15.3%, down from 17.3% in 1980, and the proportion of young children 19.3%, down marginally from 20% a quarter century ago.

Meanwhile, the more rapid growth in earnings among higher-income Canadians has boosted the proportion earning high incomes of $100,000 or more a year to 6.5%, or more than one-half million, from just 3.4% in 1980 and 5.5% in 2000. The proportion earning $150,000 or more has also increased to 2.2% in 2005 from 1.0% in 1980 and 1.8% in 2000.

The increase in the proportion of those earning $100,000 or more was greatest in the Northwest Territories, where there were also the greatest proportion at 12.1%, and in Nunavut and Alberta. Among the provinces the proportion of those high earners ranged from a high of 9.4% in Alberta to 7.8% in Ontario and to a low of just 2.4% in Prince Edward Island.

Most high earners were also highly educated, the report said, noting that while university-educated people accounted for only about one-quarter of full-time workers they made up 57% of those earning $100,000 or more and 65.3% of those earning at least $150,000.

The growth in high earnings was also concentrated in a relatively few occupations, many related to management, finance, oil extraction, and health and law.

The growth in earnings this decade also reflected the growth in the economy with substantial increases in earnings in occupations related to the resource boom in Western Canada, and slower growth in blue-collar earnings in manufacturing, which has been hard hit by the rising costs for energy and for raw materials, as well as the strong dollar.

Provincially, median incomes grew by a strong 7.8% in Alberta to $43,964 and 6.4% in Saskatchewan to $35,948 but fell by 3.4% in British Columbia $42,230, and 0.3% in Quebec to $37,722.

The level of incomes in 2005 ranged from a high of $60,000 in the Northwest Territories, $58,088 in Nunavut, $49,787 in Yukon, and $44,748 in Ontario to a low of $34,140 in Prince Edward Island, and less than $40,000 in Newfoundland and Labrador, Nova Scotia, New Brunswick, Quebec, Manitoba and Saskatchewan.

Among families, the census found that couples with children continued to have the highest median incomes of all family types at $82,943 up a hefty 21.6% from 1980 and 5.4% from 2000, the increase being due in large part to the increase in dual-earner families.

The report notes, however, that couples with children, once the dominant type of family, now account for only 46.2% down from 56.3% a quarter of a century ago, while the proportion of couples with no children at home has increased to 37% from 30.3%.

The median income for couples without children at home was $59,834, up 14.6% from 1980, and 4.8% from 2000.

While the lion's share, or $78 of every $100 of family incomes still comes from employment earnings, that proportion has dropped over the quarter century from $83 in 2008. In 2005, the proportion of income from job earnings ranged from $86.60 of every $100 for the 20% with the highest income to $37.60 for the 20% with the lowest income who got more than half their income from government transfers, such as public pensions, old age security, employment insurance and child benefits.

The share of income coming from government transfers, however, has declined this decade to 9.9% from 10.3% in 2000 although it rose by 3.8% to an average of $8,149 per family.

Provincially, the share of income coming from government transfers ranged from a high of 19.1% in Newfoundland to a low of 6.4% in Alberta and less than 10% in British Columbia at 9.6%, and Ontario at 8.8%.