Paper Example on Canadian Inequality

Introduction

Inequality is the difference in circumstances, size or degree. It can also be defined as the unjust circumstance in the society where some people have a lot of opportunities such as money, compared to other individuals. Inequality is mostly in monetary terms such as income inequality. Income inequality is when there are some people in the society who earn more than others. Income or earnings can either be individual or family income. The paper intents to discuss the various measures of income inequality and the factors that drive to income inequality.

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The measures of inequality can either be earnings and income depending on the choice made differently over a short period of time. Individual and family income is one of the main differences in measurement. The different units of measures are essential such that even if the individual income is constant the family income can expand; this is because there are certain factors such as the rising numbers of single parents and increased marriage between high- earning partners. Another difference in measurement of income and earnings is between pre-tax and market income, and post-tax and disposable income that lead to inequality (Fortin, Green, Lemieux, Milligan, & Riddell, 2012). Market income mainly involves the total amount of income from various sources such as employment and net investment revenue, and private retirement returns. The addition of government transfers and market income then subtracting the taxes estimates the total amount of disposable income. The tax and transfer system may reduce the rising market income inequality as it is experienced in Canada over the 1980s. Also, the differences in taxes and transfers can contribute to the increased disposable income inequality as it is experienced in Canada in the late 1990s. The difference in wage rates or working hours is also another factor that leads to earnings inequality.

The evaluation of the family market income inequality for Canada between 1976 and 2009 is measured using the Gini Coefficient. The Gini coefficient shows the difference between the real allocation of income and a criterion of all the individuals earning the same income. As much as the use of Gini coefficient is important, it also has some disadvantages such that, it places excessive weight on the motion in inequality in the same center of dispersion and less at the ultimate ends. The advantage of using the Gini coefficient is that it allows comparisons with other nations.

The Gini coefficient in the upper line represents the family market income disparity for Canada. In the past few decades, the market income inequality has increased. Between 1980 and 2007 the Gini rose from 0.37 to 0.44, in which the years were at the peak of economic booms. The rise shows that there is an 18% increase in inequality. To understand this better, in 1980 the firsts 20% of income earners acquired 45% of the total earnings, and by 2007, they acquired 52%.During the recession period, the inequality increases at a higher rate because the low-income earners are the ones who suffer most the effects of the bad economy. Recession occurred in 1981-1983 and the early 1990s. During this time the inequality did not decline but instead, it ratcheted upwards over the time. Before the downturn in2008 in the labor market, inequality reduced but it has been increasing again in the current slowdown.

The bottom line in the figure above represents the Gini for after-tax and transfer family income or disposable income. It implies that inequality can reduce due to the taxes and transfers. In 2009 the inequality in disposable income was less than and market income inequality. This shows that Canada is positioned in the top middle of the group of developed states. The Gini for disposable income in Canada is greater than Sweden's but is less than the United States. The disposable income inequality in Canada increased by 13% between 1980 and 2009, while inequality of southern border increased by 17.5%. The disposable income line shows an essential shift in the policies bringing change in redistribution in Canada. According to Frenette, Green, and Milligan (2012) they argue that the growth in market income inequality changed into a straight disposable income inequality. Statistics show that the concentration of earning at the management and leadership level has increased at a higher rate over the past few decades.

Forces Driving Income Inequality

Age and educations are some of the factors that increase inequality. The impact of technology development and the associated off-shoring of work are elements that increase inequality. There are also institutional suggestions are not the same in different nations such as inadequate wages and the work of unions. Education is an important factor that determines future earnings of an individual. In Canada during the year 1980, men at the university level who are holders of bachelor's degree earned 32% more than those men in the low education level with a high school diploma. By 2005 the gap had risen to 40%. It implies that the wage difference is determined by the education level of individuals. The difference in age group has also created wage gap. During recession period the wage gap increased, this is because the new labor market employers face inadequate workers and never adjusted. The starting wage of high-school educated men was over 20% less than in 1980 after accounting for inflation. In the better labor market, the starting wage of new job starters increased. The young workers with limited education level suffer a worse earning than their parent's generation. The inequality will increase further if the older employees retire and the average wages are reduced.

Technology changes particularly advance in information and computer technologies affect the wages structure. The technology development requires skilled personnel which means that the need for highly educated workers will increase, raising their wages while the need for low wages workers reduces. Unions have indeed contributed to the lower earnings inequality. The wage distribution of unions is less compared to the distribution wage of the non- unions.

Gender and wage inequality is a measure of inequality in Canada. In the past 40 years, the participation of women in the labor market has increased from 58% in the early 1980s to 74% in 2011. The average number of women joining the university has increased than the number of men. The transformation of women work corresponds to their education level and not the age group of the wage distribution. Women along the distribution of wage experiences high wage increase than men, in which these increases are smaller compared to the wage distribution.

Conclusion

The income inequality analysis in Canada has produced essential results that should help or guide any developing policy. At the family level, income inequality has increased at a high rate over the past few decades. There is also an increase in the share of the total income rising to the richest group. The top-earning jobs are occupied by mean that is highly educated. The forces that drive inequality include technology changes, age, and wage and off shoring to institutions factors such as the role of unions and little wage. For everyone in the society to benefit or increase their living standards the economic growth is the only factor that will enable this. If the economic gains from growth continue to accrue then the public support for pro-growth policies will also increase.

References

Fortin, N., Green, D. A., Lemieux, T., Milligan, K., & Riddell, W. C. (2012). Canadian inequality: recent developments and policy options. Canadian Public Policy, 38(2), 121-145.