ILO report shows increasing income inequality — Where does Canada stand?

Latrese Williams of Dedham, Mass., snuggles with her daughter Desirae Shealey, 4, at a rally against income inequality in Boston on April 14, 2015. Jessica Rinaldi/The Boston Globe via Getty Images

A new report from the International Labour Organization (ILO) reveals that 10 per cent of the workforce earns almost half of all global pay, whereas workers in the lowest 50 per cent earn about 6.4 per cent of global pay.

Taking home an average of US$7,445 a month, workers in the top 10 per cent earn vastly different amounts compared to the bottom 10 per cent, which takes home about US$22 a month.

“The majority of the global workforce endures strikingly low pay, and for many, having a job does not mean having enough to live on,” ILO economist Roger Gomis said.

“The average pay of the bottom half of the world’s workers is just $198 per month, and the poorest 10 per cent would need to work more than three centuries to earn the same as the richest 10 per cent do in one year.”

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The lowest 20 per cent of income earners, or about 650 million, receive less than one per cent of the total global income — a statistic that has not moved in the last 13 years.

While those figures illustrate a stark contrast between the world’s top and bottom earners, the data shows income inequality actually decreased over the last 25 years — but not entirely in a positive way, according to Gomis.

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Attributing the decrease in income inequality to emerging economies such as China and India, Gomis says that because these countries have such a strong effect on the labour force, the decline doesn’t accurately represent income inequality rates, which he believes have actually grown.

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“Given that these countries start with very low income levels and they grow very rapidly, this causes the inequality of the whole world to be reduced just because they are closer to the world average, they are closer to the high-income countries than they were before so this is not really on the global scale, and it produces inequality,” Gomis said.

Pay distribution to the middle class decreased between 2004 and 2017 from 44.8 per cent to 43 per cent, whereas the top 20 per cent of global workers increased their share from 51.3 per cent to 53.5 per cent of global pay.

According to the report, the increase was most pronounced in developed countries such as the U.K., U.S. and Germany. In Canada, however, it’s unclear whether or not the income gap has closed or widened, according to several economists.

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By measuring Canada’s wage demographics through the Gini coefficient, an economics measurement that shows where a country’s population ranks compared to others, Conference Board of Canada chief economist Pedro Antunes says Canada has been on a downward trend of income inequality over the last few years.

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“When you look at things like the Gini coefficient, as we look at wage growth overall, especially in Canada, it’s been pretty good,” Antunes said. “At least after tax, the [Gini] coefficient has been essentially flat for 20 years now.”
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Francis Fong, chief economist for Chartered Professional Accountants of Canada, says that while the measurement shows a decrease in income inequality over the last 20 years, Canada still has a wider income gap today than it did in the 1980s.

Inequality is, in no uncertain terms, higher than it was in 1982,” Fond said. “What we can also say, though, is that based exclusively on the Gini coefficient, inequality has not risen since around 2000.

“You could make the case that that hasn’t really changed all that much — if you’re looking at the last 15, last 20 years or so — but over time, it is absolutely higher relative to certain points in history.”

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Fong attributes the majority of income inequality felt in Canada “exclusively” to those living in major cities, such as Toronto, Montreal, Vancouver and Calgary. A 2017 CPA report that Fong authored found that because such a large chunk of Canadians — over 80 per cent — live in urban areas, the rapid pace of urbanization is a huge factor in the rising income inequality of dense cities.

While experts have different perspectives on whether or not Canada’s income gap has increased in recent years, the ILO report shows that income inequality still exists on a global scale.

An important point of view to keep in mind [is] that in countries, inequality is not being reduced,” Gomis said. “In fact, it is being increased … Let’s picture, for instance, a worker that it is in the low-earning end of a high-income country, and let’s imagine that the labour income has been stagnant for 10 years, whereas the top incomes have increased. You see that, within [a high-income] country, the inequality is increasing.”  

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