Every other week, we release 5 Minutes for Business, a publication written by Hendrik Brakel, our Senior Director of Economic, Financial and Tax Policy. In these publications, Hendrik briefly describes current issues that affect the Canadian economy and provides insight on what it will mean for Canadians today and the future. In this week’s edition, he examines what’s driving income inequality in Canada and what can be done.
The gap between rich and poor has been widening in most OECD countries. In Canada the top 1% earns about 12% of all income, up from 8% in the early 1980s. In the U.S., the top 1% earns 23% of income, up from 15% in the 1980s. What’s more troubling is that income growth for the average family has been fairly flat.
We believe that this is driven by technology, trade, and much tougher global competition. These are causing fierce competition for highly skilled knowledge workers while reducing the demand for low-skilled jobs.
What can we do about income inequality? If we know employers will pay more for skills, then part of the response is improved education and training. But the other part of the response is to foster more innovative firms that develop the new technologies and productivity to compete and win. The firms that succeed in the global economy will happily pay higher wages, hire more people and create prosperity for Canadians.
Read 5 Minutes for Business.