Nfld. & Labrador

Mind the gap: St. John's wage inequality worst in Atlantic Canada

St. John's, Gander and Bay Roberts show big gaps between high incomes and low incomes.

Census shows top one percent taking home nearly nine times more than bottom 30 per cent in St. John's

Tony Fang, an economist at Memorial University, says increasing wage inequality in the province is a problem, and that it needs to be solved. (Sarah Smellie/CBC)

St. John's has the richest rich in Atlantic Canada, according to the latest census data.

And it's nothing to be proud of, says a Memorial University economist.

"We definitely should be concerned about it," said Tony Fang. "This situation is only going to get worse if we don't do anything to mitigate or reverse the trend."

The numbers show that the gap between the highest salaries and the lowest incomes in St. John's is the highest of the Atlantic Canadian census metropolitan areas, with the top one percent taking home nearly nine times more than the bottom 30 per cent, and nearly seven times more than the bottom 50 per cent.

The next largest gap is in Gander, then Halifax, followed by Bay Roberts.

Highest cost of living in N.L.

It makes sense when you consider the limited opportunities for employment in the province, said Fang, especially outside of the metro area.

"You have the high-flying oil industry, people working as engineers and so on," he said. "And then you have people working in the fishery and low-wage service industry."

MUN economist Tony Fang says the wage inequality in the province is the result of a lack of economic diversity. People have few options other than the high-paying oil industry and low-paying jobs in the fishery or service industry. (Statoil/Canadian Press)

According to the numbers, there isn't much change in the incomes of the bottom 30 per cent of people across the region: they're all bringing in $20,000 or less each year.

With the highest cost of living in the region — December's consumer price index for the province was comfortably above those in the Maritimes — that money needs to stretch further in Newfoundland and Labrador.

Not making enough can cost a lot

Though it might be tempting to think it's positive sign that at least some people in the province are doing well, Fang disagrees. 

The disparity between the income levels is the result of a system that rewards the rich but makes it difficult to get there, he said, and that's why many people have a little and just a few people have a lot. 

High-income earners can afford to take risks with high-return investments like stocks and property, and their salaries often come with programs like stock and investment options, he said.

Tony Fang is an economist at Memorial University. (Sarah Smellie/CBC)

Middle income earners, if they can invest at all, need to stick to low-risk investments, which net low returns, he said.

And people with low incomes can't afford to take any risks, let alone put money away.

"If they lost a few hundred dollars, they would be suffering from starvation."

Getting out of poverty is difficult, he said, especially since people who can't make minimum bill payments are penalized with more costs like credit card fees, late payment fees, and reconnection fees for phone and power.

In other words, he said, not making enough money can be very expensive.

Low-income earners more vulnerable

Al Antle, executive director of Credit Counselling Services of Newfoundland and Labrador, said the people who walk through his door are rarely high-earners who have spent wildly beyond their means.

They're people who just didn't have the income to weather a financial storm.

Al Antle says about 10 per cent of the people using the Credit Counselling Service of Newfoundland and Labrador say their financial problems are a result of gambling. (CBC)

"The biggest challenge that families have is changes of circumstance, changing circumstances and moving targets," he said.

Those changes include everything from unexpected layoffs or reductions in hours to what he calls "subtle inflation" — things like higher prices at the grocery store in the winter months.

Public policy has a role to play

Fang expects the income inequality in the province to keep growing, and that it will become "a significant social issue." 

"Widening income inequality will negatively affect the health status of lower income people, and could actually increase the crime rate," he said.

He believes government should be looking at ways to solve the problem, and that solutions are within its grasp.

Government could focus on trying to diversify the economy in the province, he said, and on keeping tuition costs low, as education has been shown to have a big impact on helping low-income people move into higher wages.

Companies and governments could also look at ways to give low-income earners more bargaining power, he said.

"They should also have access to … income-earning programs, profit sharing, and stock ownership programs," he said. "Just like a senior executive."