As wealthiest speed past the rest of us, Manitoba needs to fight income inequality
Income gap between rich and poor can be narrowed with progressive public policy, says CCPA Manitoba director
A Ferrari cruises down Portage Avenue past people lining the streets on lawn chairs on a Sunday evening "cruise night" in Winnipeg. The $250,000 car purrs along the road, a symbol of incredible wealth.
Meanwhile, other Winnipeggers struggle to find bus fare to use our underfunded transit system.
The wealth of upper-income earners compared to the rest of is growing in Manitoba and Canada. When a segment of people drives way ahead, many others are left behind.
But this is not inevitable — there are public policy remedies.
The top 10 per cent of earners are wealthier than ever — 44 per cent wealthier in Manitoba in 2014 than they were in 1976, according to a new study based on Statistics Canada data.
Last month, the Canadian Centre for Policy Alternatives-Manitoba released Manitoba Inequality Update: Low-Income Families Left Behind, a report by Ian Hudson and Benita Cohen, which studies income for families with children and finds the majority of market gains in the past several decades have gone to the top earners.
While this might be good for the wealthy who like expensive cars, the data finds a growing gap between the rich and the rest of us.
The study looked at market income — income from employment earnings or investment income, but not from government — which economists use as a measure of inequality. The study finds lower-income people made more market income in the 1970s than in 2014.
That means the ability of low-income people to earn money has been reduced over the past 30 years.
In 2014, the bottom 10 per cent earned 11 per cent less than in 1976 and the next lowest 20 per cent were also worse off. Those in the middle saw moderate gains.
Inequality affects everyone
Returning to the cruise-night analogy, this means 30 per cent of Manitoban families are standing still by the side of the road — the working and middle-class are walking along the sidewalk and the wealthiest 10 per cent of families are speeding away at an accelerated rate.
Our economy and society are losing out as a result. Those at lower levels of income cannot realize their full potential.
Being from a lower-income household impacts social mobility: children from low-income families are less likely to graduate high school on time and go on to post-secondary education.
This, coupled with the rise in precarious, part-time work, results in stagnant wages for young people.
Recent policy changes in Manitoba will make it harder for low-income and working-class students to get ahead.
The Manitoba government recently allowed post-secondary institutions to increase tuition by five per cent annually, plus the rate of inflation.
Tuition could double in the next decade and along with this, the hope of social mobility for those with lower incomes is squashed.
But with more progressive public policy, this need not be the case.
We need truly progressive public policy … so that those who drive Ferraris pay a bit more in taxes and those of us along the side of the road can at least get on the electric bus.- Molly McCracken
A recent Canadian Centre for Policy Alternatives Manitoba study, Rising Tuition: Impacts for Access and Career Choice by Jesse Hajer and Zac Saltis, compared graduation rates from Organization for Economic Co-operation and Development (OECD) countries.
They found that increasing tuition brings down enrolment for low income students. Student loan programs do not increase enrolment from low-income students.
But countries with needs-based grant programs have increased post-secondary enrolment among low-income students.
At recent graduations across the province, families and friends witnessed the thrill of having a new degree in hand.
Imagine how different our province would be if everyone who wanted to go on to post-secondary education or training had the chance to do so without being burdened by student debt.
The human and economic potential if everyone had post-secondary education is significant: higher productivity, a stimulated economy and unleashed human talent.
Inequality is not inevitable
Government has an important role to play to mitigate the huge disparities created by market inequality. Hudson and Cohen found that once government taxes and transfers are considered, the average income of the bottom 10 per cent of Manitoban families with children increased from $4,500 to $23,000.
While this is an improvement, it is still below the poverty line of $28,000 for couple with children and $24,500 for single parents as measured by the low-income cut-off after tax measure, or LICO, which Statistics Canada defines as the "threshold below which a family will likely devote a larger share of its income to food, shelter and clothing than average."
This is hardly enough to survive day to day. It is virtually impossible to go back to school for better education and training.
Rising inequality is not inevitable. Those who were around between 1940-1980 will remember we didn't have this big a gap between the wealthy and lower-income people.
This was due to progressive income tax transfers and strong public services to the poor and middle class.
Government took action to increase incomes of working people by allowing for unionization. Other important measures that would help are a minimum wage set to a living wage of $15/ hour, improvements to employment insurance and livable basic needs benefits for those on assistance.
But recent changes in Manitoba will increase inequality, not alleviate it. The Labour Relations Amendments Act, passed in 2016, makes it more difficult for workers to unionize in Manitoba.
The carbon tax credit does little to help low-income people, returning only 20 per cent of the cost of this tax to those below the poverty line, according to new analysis by Harvey Stevens published by CCPA Manitoba.
But this need not be the case.
We need truly progressive public policy and redistribution of resources so that those who drive Ferraris pay a bit more in taxes and those of us along the side of the road can at least get on the electric bus.