Income Inequality – Where’s the Tipping Point?

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If you ask me if I support a living wage, I will say “yes,” but if you also tell me that the living wage (at least in urban centres like Edmonton) is about $14.00 per hour, I might be a tad skeptical. That’s just over $29,000 before taxes and other deductions and it’s based on 40 hours per week. As many of you realize, many low paying jobs are not secure jobs; it is quite probable that many will not hit 40 hours per week for 52 weeks.

Most people who figure out these things – perhaps all people – do not make a living wage; they make significantly more that $14.00. They have no personal experience living on that wage, but for some reason those who make more money determine how much or how little those making less money should be satisfied with.

I imagine a single person could get by on $14.00 per hour, especially if they stayed healthy, but if you are having a hard time making ends meet like the nearly 50% of Canadians who live pay cheque to paycheque, you can only imagine what it must be like for all those “living wage earners.”

Unfortunately for the majority of Canadians a living wage is not the same as a living family income. If you are a single mother with two kids, $14.00 per hour is hardly a living wage. In Edmonton it could take up to half her monthly income at that wage to pay her rent. Then’s there utilities, a phone, food, clothing, transportation costs and so on.

Across the world, those with wealth are growing their net worth exponentially at a rate far outpacing the majority of citizens. According to the Conference Board of Canada, “The richest 1 per cent of Canadians took almost a third of all income gains from 1997 to 2007—the decade with the fastest-growing incomes in this generation, according to a 2010 study by Armine Yalnizyan.”

Just to drive that home, that is one person in a 100, taking in 30% of the total increase of net worth and 99 splitting the 70% up among themselves. That’s an average of .070% for each of the 99. Yes, that’s right –  point zero seven percent.

One can argue that the wealthy earn their wealth and I won’t quibble with that, but my sense is that the other 99 people are probably are hard working, putting in lots of hours, and perhaps working two jobs. Wealth generation and hard work are not exclusive.

Many might argue that Income Inequality is a moral or social justice issue. I think it is at least an ethical question that we need to address. But even if you disagree, there are increasing voices speaking to the “inefficiencies” in the economy that are emerging because of this growing divide between the wealthy and everyone else.

Again from the Conference Board: “The standard response has historically been that high inequality raises a moral question about fairness and social justice. While that’s still true, noted economist Joseph Stiglitz now argues that it is no longer just a moral issue: income inequality is hurting the economy.”

Andrew G. Berg and Jonathan D. Ostry argue that “equality appears to be an important ingredient in promoting and sustaining growth.”

I am not an economist, but it seems to me that income inequality has substantive potential to negatively impact consumerism, home ownership, health care affordability, and so on. If most of the money resides in the very few, the rest will have proportionately fewer dollars to spend on necessities, much less on all those extras that fuel profits and, I imagine, the wealth of the one percent.

If there are still those around who believe in the latest version of trickle down economics please do some reading about the deleterious effects of Ronald Reagan’s “Reaganonmics.” Not much trickled down and cuts to social programs just made things even worse.

There is this odd notion that we are all connected and that if we don’t pay attention to that, everyone will — or most everyone — will suffer. There’s got to be a tipping point somewhere down the road. I am concerned it’s not all that far from here.

Aren’t you?

Conference Board of Canada
Equality and Efficiency (Berg and Ostry)


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