Keith Banting and John Myles | May 21st, 2015
In 1989, the Canadian Parliament passed a resolution to abolish child poverty by 2000. To no one’s surprise, that didn’t happen. Indeed, in recent years, the anti-poverty rhetoric that dominated Canadian policy debates over income distribution has almost disappeared.
In case you haven’t noticed, none of the parties in recent provincial elections have mentioned poverty or the poor very much. As they begin to release their party platforms for the 2015 federal election, all parties have shifted their rhetorical focus to helping “families,” usually vaguely defined as “middle class.” No federal political party is proclaiming a new “war on poverty.”
As two long-time observers of the politics of income distribution in Canada, we find this turnaround stunning. From the late 1960s to the early 2000s, combating poverty entirely dominated not only the rhetoric but also the practices of tax-transfer policy in Canada. Beginning with the Guaranteed Income Supplement for seniors in 1966 and up until 2006 with the Working Income Tax Benefit for low-wage workers, new mechanisms for targeting benefits on those at the bottom were the focus of government innovation.
The shift raises two questions: Why did it happen? And is the shift “good” or “bad” for Canadians? We turn first to the “why” question.
In 2011, the Occupy Movement changed the dial on Canadian debates on income distribution from the “poor” to the “rich” with its focus on the rising incomes of the top one per cent. “Inequality” replaced “poverty” as the hot topic for the pundits and for good reason. Canada is on the leading edge of the 99/1 phenomenon, with the OECD estimating that the top one per cent of Canada’s income earners have captured 37 per cent of total income growth over the past three decades.
While incomes at the top have been rising, conventional poverty measures have been either stable or declining somewhat. Why is that? The answer is simply the flip side of the rising incomes at the top. Statistics Canada’s traditional low-income measures are defined relative to what is happening in the “middle,” and incomes in both the bottom and the middle have been relatively stagnant, both moving in tandem. So poverty rates haven’t changed a lot. The rich have been getting richer, but the poor have not been getting poorer.
The most politically sensitive stresses generated by the growing inequality, however, are found in the middle of the distribution. Indeed, middle-income Canadians are increasingly anxious about their economic prospects, their debt levels, their retirement income and the prospects for their children. Our federal parties are not talking about inequality directly, but they are all advancing policies designed to tap into this growing unease in middle-income Canada.
Federal politics and national-level political parties focus mainly on traditional tax-transfer policies: higher taxes for some, higher benefits or lower taxes for others. That’s because the federal government controls tax and transfer policies. But these provide very limited range in a world where income distribution depends critically on areas like labour market and education policy that are largely under provincial jurisdiction.
Will the reframing of the debate on income distribution be good or bad for those at the bottom? It all depends on the answer Canadians give to the inequality question. Comparative analysts have long argued that “targeting” tax and transfer policies on the “poor” may be economically efficient but politically ineffective. The “poor” are a political minority (now about 13 per cent of the population); they don’t vote much; and have little political influence. Hence, they are the most likely to experience cuts under conditions of fiscal restraint. They are more likely to gain when tax-transfer and other policies include them as part of a much broader range of beneficiaries.
The counterpoint, of course, is the danger that in the new debate about inequality, we lose sight of those at the bottom. Not all policies advanced to help families reflect an egalitarian impulse. Some of them may actually assist upper-income earners more than others and exacerbate inequality.
The struggle to tap into the anxieties generated by growing inequality will be central to the electoral politics of 2015 and could set the direction of social policy in years to come. Much will depend on whether the “middle class” see their interests as aligned with those at the bottom or the top as they prepare to cast their vote.
Keith Banting and John Myles are contributing authors of the forthcoming book Income Inequality: The Canadian Story published by the Institute for Research on Public Policy (irpp.org).