Rich man, poor man: A closer look at Oxfam's inequality figures

A combination of static disposable incomes and rising costs has created a feeling among many middle-class Canadians that they are falling behind.

Reports point out the declining quality of our jobs and that the top CEOs earn 193 times what the average worker earns.

• 2 richest Canadians have more money than 11 million combined

Oxfam tells us the wealth of two Canadian billionaires equals that of the 11 million least-wealthy Canadians, reinforcing the impression of vast inequality.

There are people left behind in today's economy, but those figures don't tell the whole story about the Canadian situation, critics say.

Oxfam's argument is that economic growth is benefiting the richest people in the world, while leaving little for anyone else.

"Why we are concerned about inequality is not because we have a problem with the rich. Our concern is that in countries where there is great inequality it's harder to fight poverty," says Lauren Ravon, director of policy and campaigns for Oxfam Canada

"The super-rich [are] avoiding taxes … putting pressure on wages and also just corrupting the rules of the game, in the sense that they have influence over decision-making, and so the rules are written in favour of the wealthy few and not the majority of the population," she said.

Oxfam's figures, released on the eve of the Davos World Economic Forum in Switzerland, are meant to grab headlines and draw attention to inequality around the world.

Wealth vs. income

Oxfam's report was questioned today by Mark Littlewood, director general at the Institute of Economic Affairs, a London think-tank, for using a net wealth figure to measure inequality.

Wealth is a measure of what a person owns, minus debts, so that a law student with high earning potential but a large student loan could potentially fall into the "poor" category, as he or she has more debts than assets.

"No thanks to Oxfam, there has been a huge fall in poverty in recent years," Littlewood said. "In countries where there has been the most dramatic progress — such as India — this has gone hand in hand with a growth in inequality."

Free-market defenders point out that inequality is part of a system in which entrepreneurs risk their capital in return for a chance at wealth, but that those same people create new wealth for everyone.

Xuejuan Su, associate professor of economics at the University of Alberta, says inequality in itself is not harmful.

"What economists say is that the trend of income inequality and wealth inequality in the past few decades is alarming," she said.

"When it gets too bad there are negative consequences."

Not so very poor

In the case of Canada, long considered more equitable than most countries, it's often disposable income, rather than wealth, that seems to be the measure of how well we are doing year to year.  

The billionaires named in the Oxfam report — David Thomson and Galen Weston Sr., are outliers —  born into wealthy families and also well-compensated in their positions at Thomson Reuters and Loblaws Co. Yes, they're rich, but not necessarily because Canada is becoming more inequitable.

And the 30 per cent of Canadians who own the least are not necessarily poor — they may be students, or have a large mortgage that takes their net worth below zero.

Median net worth rising

For a more nuanced picture of the difference between rich and poor in Canada, consider these numbers from Statistics Canada.

• 4.5 million people, or 13 per cent of the population, had a low income in 2014, as measured by after-tax income. Recent immigrants, the disabled, Indigenous people and children in single-parent families were more likely to fall into the low-income category.
• The median income of families rose from $46,700 in 2000 to $55,600 in 2014 (as measured in constant 2014 dollars), a 19 per cent increase.
• The median net worth of Canadian family households was $243,800 in 2012, up 44.5 per cent from 2005 and almost 80 per cent more than in 1999, adjusted for inflation.

Andrew Heisz, assistant director of income statistics for Statistics Canada, points out that the rapid rise in housing prices has boosted net wealth for Canadian families. Demographics also play a role, with the large number of baby boomers who have money in retirement accounts.

Heisz says studies following individual low-income people over an eight-year period in Canada show that many don't stay poor, but might move in and out of the poorest group.

But that doesn't mean they're not at risk, especially as more jobs become contract or part-time. 

When queried about the Oxfam findings, a spokesman for the Liberal government said Canada has already taken steps to reduce inequality, including the introduction of the Canada child benefit and raising the payments of Old Age Security and the guaranteed income supplement for seniors.

What's to come?

But futurists such as Chris Kutarna, author of Age of Discovery, argues that bigger changes to social welfare are needed to deal with increasing inequality caused by globalization and automation.

"Many of the jobs that the middle class grew up with are just not going to be there," he said. "Welfare systems are going to have to evolve to cope with those changes."