Poor get poorer, rich not so rich
New report shows all Canadian incomes declining
By Elaine Carey
Toronto Star Demographics Reporter
Most Canadian families are slipping down the income ladder,
and the odds of climbing up have all but disappeared, a new
report says.
``We are witnessing a slide to the bottom, with fewer
opportunities to get ahead,'' says the report's author,
economist
Armine Yalnizyan.
During the '90s, the proportion of families at the bottom
income
level surged dramatically, while the proportion in the
middle and
top income categories has dropped - along with average
after-tax incomes.
The ``grand social experiment'' of the '90s - to
emphasize market
solutions over government intervention in the economy - has
been a dismal failure, concludes the study released today by
the Canadian Centre for Social Justice, an economic think
tank.
``The promise of the last generation was, `If you work
harder
you'll get ahead,' '' Yalnizyan said in an interview.
``But over the
'90s, the restructuring of the workplace is such that
economic
growth does not translate into more prosperity for the vast
majority of Canadians.''
In 1989, 30 per cent of families had an income of less than
$35,038 after taxes. But in 1997, after adjusting for
inflation, a
full 37 per cent had less than that threshold.
The number of families at the very bottom of the economic
ladder grew even faster. The poorest families - those
earning
less than $11,567 after taxes and transfer payments -
swelled
from 10 per cent of all families to 14 per cent. The
earned income
in this group dropped from an average $3,731 to $1,255.
``By any definition of poverty, the poor are getting
poorer, and
there are more poor families among us,'' concludes the
study,
funded by the Atkinson Foundation.
The rich aren't getting richer, either. The top 10 per
cent of
families had an average income of $144,700 in 1989. In 1997,
they earned about $8,300 less. But rich families lose
proportionately less when bad times hit and are the first
group
to benefit from a recovery, the report says.
Tax cuts aren't the answer, because taxes aren't the
problem,
Yalnizyan said. Cuts don't help the growing number of poor
families who don't have enough income to tax, and reduced
government revenue means basics like health care and
education suffer.
The report is a follow-up to a study released 15 months
ago that
exposed a growing gap between the rich and the poor.
This study found two distinct phases in the decade.
During the
1989-1993 recession, the income gap between rich and poor
grew. But government actions closed the after-tax gap.
The opposite happened during the 1994-97 recovery period.
While average income went up, the after-tax gap between rich
and poor grew at the fastest rate since the '70s.
Ontario has the biggest gap between rich and poor, and that
disparity has widened faster than elsewhere.
Cuts in taxes and transfer payments since the mid-'90s have
benefited only the richest 10 per cent of families - the
one group
with a lower income-tax rate in 1997 than in 1994. The
poorest 10
per cent, meanwhile, paid more taxes and got fewer income
supports. That led to a net loss of 12 per cent in average
after-tax income - the biggest loss of any income group -
mainly
because employment insurance and welfare were reduced.
``Getting tough on the poor didn't seem to help anybody,''
Yalnizyan said. ``At the same time, we're stripping the
social
services that make life a lot more secure for everyone.''
Families are working harder and earning less in real
dollars,
which ``fuels a sense of desperation that, `The only way I'm
going to get ahead is by tax cuts,' '' she said. ``At
least, that's
how it's been spun.''
What's needed instead, the study concludes, is job growth,
better wages, family services and supports for the poorest
families.
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