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Ultra-rich getting richer while middle class stagnates, report says

By: Heather Scoffield, The Canadian Press
Posted: 30/11/2010 11:14 PM

OTTAWA - Canada has entered a 1920s-like Gilded Age, where the super-rich consolidate their wealth while the middle class stagnates.

That's the conclusion of a new study based on income-tax forms filed up until 2007, showing that the richest one per cent of Canadians took home 13.8 per cent of all incomes claimed that year.

The share of total income going to the richest of the rich has risen steadily since the early 1980s, reversing a long-term trend toward a more equal distribution of the country's income during the postwar '50s, '60s and '70s, the study says.

"The higher up the ladder you go, the more colossal this glomming of wealth becomes," author Armine Yalnizyan, senior economist at the Canadian Centre for Policy Alternatives, said in an interview.

Her paper, to be released Wednesday, is based on unpublished tax form data crunched by Mike Veall, an economics professor at McMaster University in Hamilton.

The numbers show that the richest one per cent quickly gained ground in Canada between 1925 and 1935. It was the era epitomized by the writings of Horatio Alger — the days of rags to riches, when millions of poor North Americans believed they could strike it rich.

"Like the Gilded Age a century ago, Canada is awash in money generated by an emerging new global economy," Yalnizyan writes. "During both slow and rapid periods of growth, incomes have increasingly become concentrated in the hands of the elite few rather than creating greater prosperity for all."

The inequality gap of the '20s and early '30s eventually collapsed and then switched direction with the Second World War, narrowing and steadily declining until about 1982. Since then, the super-rich have gradually claimed larger and larger pieces of the total income pie.

"Most Canadians are inching their way through recovery, trying to hang on to what they've got," Yalnizyan writes. "But for some Canadians, things have never been so good."

The higher up the income scale, the more dramatic the gains. For the richest one per cent, the share of all Canadian incomes almost doubled between the late 1970s and 2007. For the richest 0.1 per cent of tax files, their total share almost tripled during those 20 years.

And for the creme-de-la-creme — the richest 0.01 per cent making more than $640,000 a year — their share of total incomes more than quintupled.

The trends shown in the tax data are undeniable, analysts say. What is in question, however, is why the trends are so relentless, whether they are cause for concern, and what the appropriate public-policy response should be.

"It's best data we have on the issue," said Andrew Sharpe, executive director of the Centre for the Study of Living Standards. "The key issue is, what's driving this?"

Yalnizyan's study shows that the super-rich are increasingly reliant on their wages — much like the rest of us. That hasn't always been the case. In the 1940s, for example, the top income-earners were mainly entrepreneurs who made it rich directly from the proceeds of their businesses.

In other words, the super-rich in Canada are mainly the top executives of large companies who are being well compensated by their boards and shareholders.

At the same time, the income tax regime has not kept up with the super-sized salaries of the ultra-rich, Yalnizyan says, so they're able to retain more of their earnings.

There's no solid explanation for why executives are being so well paid, especially when wages for most other sectors of the economy have stagnated.

A similar phenomenon can be seen in Australia, New Zealand, the United Kingdom, and especially the United States, said Veall at McMaster. But non-English-speaking countries such as France and Italy don't show the same inequality gap.

While some researchers believe the super-rich are beneficiaries of advancing technology in a global economy, the discrepancies between countries undermine that theory, Veall said. Corporate governance structures in English-speaking countries may offer a partial explanation, but there too, there's no reason why the trend would suddenly change in the early 1980s, he said.

Long-time policy guru Peter Nicholson — who published his own analysis on an earlier version of the income-tax findings — suspects the numbers speak to a cultural shift.

"Corporate chieftains have entered the realm that was formally reserved for sports stars and rock stars," Nicholson said.

In his earlier paper, Nicholson warned of social unrest if the trend towards increasing inequality were to persist. The trend has indeed persisted, but Nicholson said any backlash would likely start in the United States, where the inequality is far more exacerbated than here in Canada.

There, public discontent over large salaries going to bankers who nearly brought down the global financial system and required taxpayer-funded bailouts has simmered down somewhat.

More concerning, said Nicholson and other researchers, is that Canadians have no firm grasp on why the super-rich are increasingly in an untouchable league of their own.

"At least you have to understand why this is happening. Is it fair, or is it a good thing?"

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Added: Dec-1-2010 
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  • Comment of user 'Incredulous' has been deleted by author (after account deletion)!
    • paper dreams? Your right but on the wrong side of it. I thought I was dreaming when I saw "Market Value of Securities" on my fidelity page...it said 74,000.00 dollars right after that sentence...I thought I was dreaming, looked at it several times, didnt really believe until I withdrew it to my bank account. Now making money in the market is easy...thats all I do.

      Posted Dec-1-2010 By 

      (-1) | Report

    • Man, I hope you get a really big tax break on your money for nothing. It would be a shame to see someone who contributes so much to society have to pay a few more percentage points.
      Stick it to the man, dude!!!!!!!!!!!

      Posted Dec-1-2010 By 

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    • I wont get a big break but its no big deal, its still thousands of dollars more than what I had after paying the capital gains taxes...I suppose I should have said "thats all I do now after giving the US Army 20 years" I hope that you can lay claim to that type of contribution. 20 years I serve, 8 of those years was overseas and in combat zones. By the way, I just celebrated my 25th wedding Anniversary, its one blessing after another in my life....

      Posted Dec-1-2010 By 

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    • Thanks for your service.
      My Son is a nuke tech in the Navy and is setting himself up nicely.
      I still can't get excited about someone making money by doing nothing.
      I think that is part of what is destroying this once great nation built on manufacturing and actually making useful products.
      Glad you are happy and having a good life and hope I don't have to hear you moan about taxes and how the poor are taking all your money.
      Not saying you are doing that, it just really bothers me when people do.
      More..

      Posted Dec-1-2010 By 

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  • Why do you care how much someone else made? And what makes you think you're entitled to it?

    Posted Dec-1-2010 By 

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    • Perhaps the fact they made some fat pig all their wealth with their own hands, while that right wing asshole pays them pocket change ? Modern day slavery.... It's only a matter of time before the bubble busts then were all screwed.

      Posted Dec-1-2010 By 

      (2) | Report

    • And he forced you to work for him?
      I think not. You're just a whiny little bitch that's jealous because you don't have the talent, ambition, or intelligence to earn your own wealth.

      Posted Dec-1-2010 By 

      (-2) | Report

    • You obviously don't know history. There was once a time when coal miners were not even paid money. They were paid company credits only usable at the company's owned stores, such as grocery stores.

      Workers were charged for every item that their job required. This meant not only uniforms, but oil to light the lamps on the top of their head also. They even made them pay for them to lease the company donkeys to pull the coal carts. They were charged for explosives, and the fuel the locomotives use More..

      Posted Dec-2-2010 By 

      (0) | Report

    • Oh, where to start?
      Let's begin with your cute little statement: "I don't divert the argument and go back to 3rd grade calling the other person an idiot because I can actually objectively argue my thoughts", which you promptly followed with name calling.
      Good work. You are a fine example of a Democrat. A complete hypocrite.

      Now go pick up some books and educate yourself about the causes and effects of the Great Depression. Because you missed it by a mile. And while you're at it, do s More..

      Posted Dec-2-2010 By 

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  • Trickle down economics has yet to ever work. Workers are paid less today and upper management executives are paid more then ever. The shift in wealth trickles up, not down.

    Posted Dec-1-2010 By 

    (1) | Report

  • Comment of user 'bouymarker' has been deleted by author (after account deletion)!
  • Welcome to the dirty little secret of socialism and communism. Notice how any socialist society has almost no middle class. And notice only the people in power seem to benefit with wealth and riches. Its purely a scam to control the masses to get what you want handed to you without obstruction. All you have to do is "promise" you will give some of that to them to get it.

    Posted Dec-1-2010 By 

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  • The pendulum swings ... what comes around goes around.


    :-)

    Posted Dec-1-2010 By 

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  • nothing new here

    Posted Dec-1-2010 By 

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  • Ultra-rich getting richer while middle class stagnates, oh man that sucks. If only govt. would tax the rich more then the middle class will have more many than the rich.

    By taxing the rich and creating more government jobs like more T.S.A airport security, hiring thousands of more I.R.S. workers and buying full body scan vans the recession will end.

    Posted Dec-1-2010 By 

    (-1) | Report

  • You know what? I just can't get upset over news of someone being rich and making more money. You know why? Because they are not taking it from me. It's that simple folks.

    Stop being so damned concerned with what your neighbor has already.

    Posted Dec-1-2010 By 

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    • I hope this trend continues and if not, accelerates. Once the sheeple see a fall in their living standards and find it harder to feed their children, it'll be great breeding ground for a revolution.

      Maybe they'll rise up at some point and cut off the heads of the oligarchy. That'll be great to see. The system no longer benefits society, only the top 1% are enjoying the way things are going right now.

      Posted Dec-1-2010 By 

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  • lol Money breeds money, without it you cant make it...I'll give you a winner for the 1st quarter 2011...NewCardio, NWCI.OB this company has a replacement for the 12 Lead EKG and heart monitors. Patents were approved. FDA approved QTinno, NewCardio submitted QTinno to a FDA Test, the only Cardiac care company to do so, the test had harsh standards, an annoucement at the FDA headquarters will be on 9 DEC 10, NewCardio passed the test...This is disruptive technology, it will change every clinic, More..

    Posted Dec-1-2010 By 

    (-3) | Report

    • Do you have any steadier, safer longs? I don't really mess around with penny stocks.

      Posted Dec-1-2010 By 

      (1) | Report

    • Range Resources, Crossfire energy, BSD Medical Corp. Ford Motor Co...each have done well for me, I've been invested with these for several years. The one I would tell you to look at is BSDM. They have a new item on the market as well, the ground work is complete and looks like sales is the only thing keeping the price down. The economy is also slowing sales. It jumped several dollars recently due to FDA approval. The stock is reversing right now, Im looking for the bottom, if they announce More..

      Posted Dec-1-2010 By 

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  • The fact that jews have taken over the West has nothing to do with it, there is not a single country in Europe that don't have a jew for president.

    Posted Dec-1-2010 By 

    (-4) | Report