Canadians’ Market Income Dropped, Inequality Increased in 2009

The recession caused that
Canadians’ medium market income dropped

The report released by Statistics Canada showed that the median market income fell in 2009, resulting in the first significant drop since the early 1990s. However, it was compensated for by higher government transfers and lower income tax, so the median after-tax income remained almost unchanged.

Market Income Lower for All Types of Families

Families with two or more people (3.23 per cent) faced the highest decline in median market income, while the government transferred to their households 29.17 per cent more than in 2008. Senior families enjoyed the highest drop in tax income, from $2,400 to $1,900 (20.83 per cent down), but their median market income was lower than in 2008 (almost 2 per cent down). Non-senior couples without children spent less on taxes, and they received $300 more than the previous year, so their median after-tax income rose by almost 1.5 per cent despite the decline in market income. After-tax income grew the most (up 2.75 per cent) in female lone-parent families due to greater government support.

Government Transfers Increased

After tax Income
Albertans had the highest after-tax income,
despite the lowest government transfers

According to the report, the after-tax income for individuals rose by 1.4 per cent between 2008 and 2009 on average. However, in 2007 it grew by 6.9 per cent from the previous year. Moreover, only 55 per cent of individuals had higher after-tax income than in 2008, while 45 per cent experienced a decline. The government helped Canadians by increasing expenditure.

“About 86% of families and 79% of persons not living in families received some form of government transfer in 2009. The total amount transferred to all Canadians increased 10% in 2009,” says the report.

The government supported the most senior families (the median amounted to $24,700) and female lone-parent families (median was $9,200). If the government transfers remained stable, the median after-tax income would have fallen for most types of families (e.g. about 6 per cent down for families from 2008).

Alberta: the Highest Income

The median after-tax income didn’t change in 2009 for families of two or more members in every province except Saskatchewan and New Brunswick. Albertans had the highest medium market income ($82,300), but they received the lowest government transfers ($2,700) and spent the most on taxes ($11,300). Alberta’s median after-tax income ranked the first among all provinces, amounting to $77,800. To compare, Canada’s average was only $63,800.

Income Inequality Has Increased

Income inequality within a country is often masked by the national average or medians, but it’s an important measure of a country’s economy. If the inequality is high, it means that the country isn‘t fully using the capabilities of all of its citizens, and this could lead to serious social tensions. High inequality also sets concerns about social justice.

According to a report by the Conference Board of Canada, the income gap between rich and poor in Canada widened in the period from 1993 to 2009. “Canada had the fourth largest increase in income inequality among its peers,” said Anne Golden, President and CEO of the Conference Board. “Even though the U.S. currently has the largest rich-poor income gap among these countries, the gap in Canada has been rising at a faster rate.”

However, Canadians in the poorest income group still saw their income levels rise, albeit minimally. The report also established that the average income had increased by 17 per cent from 1957 to 2009 — even after adjusting for inflation. But using a median income, dividing the sample into two equal parts, the growth was only 5.5 per cent. Moreover, the gap between the real average income of the richest 20 per cent of Canadians and the poorest 20 per cent widened from $92,300 in 1976 to $117,500 in 2009.

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