Monday, December 5, 2011

OECD reports that wealth gap in Canada is increasing

The Organization for Economic Co-operation and Development has released new figures on the wealth gap between rich and poor in OECD countries. The gap is widening in most OECD countries including Canada. In Canada the top 10 per cent of Canadians earn ten times what the bottom 10 per cent own.
The actual annual income of the top ten per cent was 103,500 in 2008 while the average of the bottom ten per cent was just 10,260. This is the highest the gap has been in decades. Even in the early nineties the gap was just 8 to 1.
The richest one per cent are doing just fine as their share of income has gone from 8.1 per cent back in 1980 to a whopping 13.3 per cent in 2007. The richest one tenth of one per cent have done even better as their share in the same time period has gone from 2 per cent to 5.3 per cent.Furthermore, the share owned by the richest 0.1 per cent of Canadians more than doubled, from two per cent to 5.3 per cent.
Norway, Germany, Sweden and Denmarks all have much lower ratios between top and bottom ten per cent. In those countries the ratio is 6 to 1. The UK, Italy, Japan and Korea have the same ration as Canada at 10 to 1. The U.S. and Israel have a higher ratio at 14 to 1. But there are many countries with much higher ratios than these. Mexico and Chile have a ratio of 27 to 1 and Brazil although it is not a member of the OECD has a whopping 50 to 1 ratio.
While tax rates are often being lowered on the well off benefits that used to make up for the wealth gap are being eroded. The OECD Secretary General put the matter succinctly:"The social contract is starting to unravel in many countries,""This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that greater inequality fosters greater social mobility." It seems that the trickle down theory should be replaced by a trickle up theory. For more see this article.

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