Gap Between Rich and Poor Not So Wide, Says Fraser Institute

par Andrew Rickard | August 03 2015 10:42AM

The Fraser Institute has released a report which argues that once taxes, family size, and government transfers are taken into account, there is no income equality crisis in Canada.

While the gap between how much the rich and poor earn has grown significantly since 1982, the Fraser Institute study argues that earnings alone (defined as wages, salaries, and net small business income) should not be the sole measure of income inequality since it ignores a number of key factors.

"Specifically, fewer families (and individuals) have earnings than was the case 30 years ago, many more people (students, seniors, welfare recipients) are receiving government transfers now, and families have gotten smaller," note the authors Christopher Sarlo, Jason Clemens, and Joel Emes. "Accounting for these important changes — and choosing a broader definition of income — provides a very different view of inequality."

The report points out that if one considers individuals rather than families, the level of income inequality can vary significantly depending on how income is defined. "The income shares for the top 10 percent of individuals in 2010 vary from a low of 30.0 percent (for after-tax income) to a high of 41.7% (for earnings) — a 39% increase in the level of income inequality entirely due to the choice of definition," reads the report.

Overall, the paper concludes that the share of after-tax income received by the wealthiest 10% of families only increased by 12.9% between 1982 and 2010. "After-tax income includes government transfers and income taxes. Adjusted for family size to take account of the number of people supported by the family’s income, it is therefore a much better reflection of the family’s actual living standard," say the authors. "This is a far more modest increase than many other studies show."