OTTAWA: Data from the 2016 Census show that income inequality grew quite significantly over the decade from 2005 to 2015, and that the supposedly most progressive part of our overall tax system failed to make much of a difference. This underlines the need for progressive tax reform in the next federal budget.
One key way of thinking about income inequality is to look at the gap between the middle and the top of the income distribution. Here we look at the incomes of working-age persons ranked by deciles. Every person is assigned to one of 10 equal-sized income groups, ranked from the lowest 10 per cent to the top 10 per cent of all persons on the basis of after-tax income adjusted for family size. Data are available on income, sources of income and income tax paid for each decile over time, and also for the median, the midpoint of the distribution such that half of Canadians have higher incomes and half have lower incomes.
While the census showed that most Canadians benefited from income gains compared with 2005, the top 10 per cent grew away from the middle as has mainly been the case since the 1980s. Other sources of data show that income within the top 10 per cent is itself highly concentrated in the hands of the top 1 per cent and an even smaller group of the ultra-affluent. The median working-age adult had a total pretax income of $34,204 in 2015, up $3,845, or 12.7 per cent, from 2005. (The income gain is adjusted for inflation.) Median income after income tax was up $3,250, or 11.8 per cent.
While this was a welcome gain in real incomes, the increase was greater among higher-income groups.
Working-age adults in the top 10 per cent had an average total pretax income of $128,271 in 2015, up $18,394, or 16.7 per cent, from 2005. Income after tax for this top group was up by 16.1 per cent to an average of $94,390
One way of measuring inequality is to look at the average total or pretax income of the top 10 per cent compared with median income.
This ratio was 3.75 in 2015, up from 3.6 in 2005. In other words, the top 10 per cent have incomes which are now on average 3.75 times greater than the median.
