Income redistribution by our tax and welfare systems ignored in earnings report
With permission from Lorne Gunter, The Edmonton Journal, May 4, 2008 [picture from www.canada.com]
I cannot for the life of me understand why Statistics Canada publishes income numbers that do not include money received by individuals from government, unless the nation’s official number cruncher is deliberately attempting to fan the flames of class envy and reinforce the case for more and bigger social programs.
On Thursday, StatsCan set off a maelstrom of media coverage with its release of a report on Canadians’ earnings in the past 25 years. It said since 1980, median earnings among the top 20 per cent of Canadian earners increased by 16.4 per cent, while the median among those in the bottom 20 per cent decreased by 20.6 per cent.
Headlines abounded about how the rich are getting richer while the poor are getting poorer — a favourite canard of the liberal-left. Also immediately, the Globe and Mail declared on its website that in the past quarter century, “those at the top end got a lot richer, and those at the bottom got much poorer.” The following day, the front page of that paper’s print edition devoted nearly the entire space to a declaration that the Canadian dream was dead.
Admittedly, StatsCan is not responsible for how its reports are spun by the media. But surely it is intellectually dishonest for the agency to release earnings numbers entirely out of context, particularly when it knows how those statistics are going to be played out in the press.
StatsCan did the same thing last spring when it released a report on our incomes in the previous decade — 1996 to 2006. It led the public and reporters to believe that the gap between rich and poor had increased dramatically when in fact it had not moved a jot in 10 years.
The trouble (read fatal flaw) in both these StatsCan reports is that neither includes either taxes paid to governments nor benefits received. They paint only a picture of a pre-tax, pre-benefit world.
Who lives in that world — a world where there are no taxes paid by the rich nor any welfare, pensions, child tax credits, GST rebates and so on received by the “poor”?
These StatsCan earnings reports lead to days and days of sensational news coverage and impassioned calls for more social programs from opposition politicians, special interest groups and editorialists.
But they neglect to mention that Canadians in the bottom 20 per cent of the income table receive 52 per cent of their income from government or that Canadians in the top 20 per cent pay nearly two-thirds of all income taxes.
The income redistribution achieved by our tax and welfare systems is completely overlooked in painting a portrait of a society increasingly divided along income and class lines. What motive would StatsCan have for doing this other than to manipulate the political debate in favour of a bigger, more lavish safety net?
Thursday’s report insists that in the past 25 years the average Canadian has come ahead just $53 dollars in real income. Worse yet, the bottom one-fifth of Canadians have seen their earnings drop from $19,400 in 1980 to $15,400 today, after adjusting for inflation.
But without accounting for taxes and benefits, these numbers are meaningless. When transfers from government to individuals are included in the calculations, according to Statistics Canada’s own numbers the median income of the poorest 20 per cent rose over the period, from $21,100 25 years ago to nearly $25,000 today, even with the effects of inflation taken into account.
And when the effects of progressive taxation are also factored in, the assertion that the rich are getting richer at the expense of the poor disappears, entirely.
Yes, before taxes and benefits, the income of the top 20 per cent is now 13- times higher than the income of the bottom 20. But after taxes and benefits, the gap between rich and poor was 5.6-to-1 in 1996 and it was still 5.6-to-1 in 2006, the last year for which StatsCan has applicable numbers.
The fact that the wealthiest 20 per cent in Canada are roaring ahead in some idealized, unreal, statistical Neverland is only of significance to people who are eager to feed their own prejudices about the uncaring “rich” and the “invisible” poor.
Figures released by StatsCan in other reports paint a very different picture of “poverty” and “income inequity” in Canada.
In just the past year the agency has told us only 11.7 per cent of children under the age of 18 still live in poverty, “far below the 18.6 percent in 1996.” Seniors and single moms — two groups that suffer a disproportionate share of low income — have seen real income increases of 15 per cent and 39 per cent, respectively, since 1996. Now just 6.1 per cent of seniors are low-income and 29 per cent of single mothers (compared to 53 per cent a decade ago).
We should be pleased with the pro-gress we have made, rather than playing numbers games to spark a class war in Canada.