Canadian data on income stagnation

by on March 3, 2011 at 2:23 pm in Data Source | Permalink

The median earnings of full-time Canadian workers increased by just $53 annually — that's right, $53 annually — between 1980 and 2005.

Here is more, or here.  This is one reason why I do not adhere to some of the progressive or "class struggle" explanations of relative stagnation in median income growth.  Canada is not ruled by the so-called Republican Right.

There is another reason I don't buy the redistributive theory: here is a chart on The Great Stagnation of Capital.

The "class struggle" hypothesis makes at least some sense for 2001-2004, when measured productivity is high but the gains do not accure to the median.  It does not make sense for the last forty years as a whole, or for the international evidence across countries.

Madison March 3, 2011 at 10:32 am

Is that link for "the international evidence across countries" supposed to be a cartoonish picture? It seems a little weird.

Rahul March 3, 2011 at 10:58 am

Keep in mind that Canada has the highest per capita immigration rate in the world. Each year they take in close to 200,000 immigrants mostly from third world countries. For the period Tyler lists, i.e. 1980 – 2005 the total immigration is ~7 million people. (For reference, Canadian population is 34 million)

Now, if only the survey tracked how much the median earnings of those people increased. I bet a lot more than $53 a year. Depends if or not your welfare maximization unit is the geography or the people in it.

aaron_m March 3, 2011 at 11:38 am

I do not get it.

What is the argument against the claim that economic elites are capturing the gains of economic growth for themselves while largely excluding the majority of middle and lower class workers?

It can't simply be because the middle class has failed to make gains in other countries as well.
It can't be that you really think that the governments and policies adopted in places like Canada and the UK 'make not possible' elite capture!

William March 3, 2011 at 11:52 am

Could be that globalization far outweighs policy in it's impact on income stagnation. Do you see class struggle playing a role in social infrastructure? I should think education and health care have significant impact on worker competitiveness and therefore future wages.

Yancey Ward March 3, 2011 at 12:04 pm

Boy, a few of you can't read.

mark March 3, 2011 at 12:33 pm

Germany has also shown a stagnation of income and increasing income disparities over the past 20 years.

Mark March 3, 2011 at 12:57 pm

Because Republican-inspired American policies have no impact on anyone else…

The refrain from think tanks (and most politicians) in Canada is 'we have to cut taxes [or insert any other 'business-oriented' initiative] to be competitive with the US'. Whether true or not, it has a significant impact on policy.

Nemi March 3, 2011 at 1:45 pm

@Sigwald. “The plain assertion that "the rich get richer" off the backs of everyone else is utterly insupportable.”

Well, it is true that I can’t say how much more productive the financial institutes has become over the last couple of years – but neither do they who would claim that your statement is true.

To me, it seems like progressive as well as conservative economist don´t have a f”#king clue about how this could happen (40 % of corporate profit to the financial sector) – but choose to not discuss it. Partly because no one even know where to start, but mainly because it would be kind of embarrassing for the whole profession to admit it.

CBBB March 3, 2011 at 2:19 pm

Canada has largely followed the sort of neoliberal policies advocated by the Washington Consensus over the past few decades. Canada does have a better social safety net then the United States but that doesn't really matter in terms of incomes.
I don't see how Canadian income stagnation really refutes the class-warfare argument Tyler.
The class-warfare position isn't really that income inequality is the result of a weak safety net as much as it is a result of a combination of regressive taxation policies, the weakening of unions, and trade agreements that have focused on lowering government protections for certain types of jobs (factory workers, software developers, etc.) while maintaining or even strengthening government protections for other types of workers (lawyers, doctors, etc.). All of this is as true in Canada as in the United States.

Cliff March 3, 2011 at 4:02 pm

Josh,

Your quote is asinine. A few things have happened in the last 250 years… like anti-trust laws and anti-collusion laws.

ziel March 3, 2011 at 5:46 pm

Keep in mind that Canada has the highest per capita immigration rate in the world. Each year they take in close to 200,000 immigrants mostly from third world countries.

The vast majority of these immigrants are "Economic Immigrants", meaning they are allowed in only if they have a useful skill. Unlike the U.S., the majority of immigrants do not come from Central America. Out of 252k immigrants to Canada in 2009, just over half came from these countries:

China, People's Republic of – 29049
Philippines – 27277
India – 26122
United States – 9723
United Kingdom – 9566
France – 7300
Pakistan – 6214
Iran – 6065
Korea, Republic of – 5864

See here.

And, again, Canada requires proven skills from the vast majority of its immigrants. So, to suggest that Canada's immigrants are "tired, poor, huddled masses" is a bit disingenuous. It's unlikely immigration contributes significantly to inequality in Canada.

ziel March 3, 2011 at 6:08 pm

CBBB – that's a nice story – any facts to back it up?

ziel March 3, 2011 at 6:53 pm

Well it sounds like Canada might need to improve its assessment of immigrant skills – reading between the lines* of these articles, it appears that the immigrants may arrive with necessary credentials but don't really possess the actual talent to back them up. I find it highly unlikely that Canadian companies are uniquely disinclined to hire immigrants compared to their American counterparts.

(Also, there were only 4,000 health professionals among 2009 immigrants – I'd assume most of these would be nurses – so the doctor-as-cab-driver canard is probably not contributing much to this).

Still, the numbers aren't that terrible. We would expect immigrants to earn less than native workers if they are coming from poorer countries. China, the Philippines and India provide about 1/3 of all immigrants – these immigrants are naturally going to demand a lower salary than native workers, a demand with which employers will be more than happy to comply (again, unless Canadian employers are strangely averse to paying a lower salary for similar skills).
I'm doubtful that immigrants from the U.K., U.S., Germany and France are experiencing terribly reduced salaries. But yes, I can see that Canadian immigrants, though on paper skilled, might well be a drag on growth.

* Necessary, as I see the first one is from a group run by the notorious Richard Florida, who believes that high-tech companies follow Mexican immigrants around to find where to set up shop, rather than the other way around. The second link discusses a study based on 1996 data – maybe not relevant today.

K. March 3, 2011 at 8:24 pm

@ziel and @CBB
This is anecdotal and based on my casual reading and experience as a resident of Toronto. I can say with reasonable certainty that the recent immigrant population is the dominant group in the lowest income neighbourhoods. However, they have extremely high mobility into higher income brackets after a few years. (i.e. they come here poor, but get on their feet within ~10 years)

However, there are other groups that are represented highly in low income areas without moving out across generations.

CBBB March 3, 2011 at 8:51 pm

Here's a more comprehensive study http://www.statcan.gc.ca/pub/11f0019m/11f0019m200

Another problem is that trying to attract professionals such as engineers and scientists to Canada is a mistake. Canada actually doesn't do fantastically at creating jobs for even its homegrown university graduates – even those in technical fields.
Canada is a country whose economy is heavily dependent on natural resource extraction, with a low rate of productivity growth by OECD standards and delusions of being a high-tech power house and cutting edge innovator.
Perhaps Canada would do better trying to attracted skill tradespeople: carpenters, metalworkers, plumbers, electricians.

Stan March 4, 2011 at 3:09 am

The median earnings of full-time x workers increased by just $y annually — that's right, $y annually — between 1980 and 2005.

Now fill in x and y for other developed countries, say the US, the UK, France, Germany, and Japan. If y is of the same order of magnitude for these countries as it is for Canada, I'll believe the argument that increasing inequality in the US since the mid 70's is primarily due to economic factors. If not, I'll take regard this article as bogus.

anon March 4, 2011 at 9:42 am

Bill, most of the world thinks of Canada as an extra state / colony / dependency of USA. So discussion is inevitable.

Lord March 4, 2011 at 11:40 am

Relative to capital, dividends have been doing well, http://modeledbehavior.com/2011/02/07/are-the-own

Sigivald March 4, 2011 at 12:56 pm

Yancey: I refer to it as our "Strategic Snow and Timber Reserve".

(Canadians I know seem to find this amusing.)

Sam March 6, 2011 at 8:49 pm

@CBBB
We do have a huge problem with our immigration system but it is not with recruiting skilled migrants. In fact the categories you mentioned are not recruited at all, but rather penalized (They get zero or very few points to rank in the skilled immigrant evaluation). The point system rewards trades people, IT (less so in the last few years) and in demand skills that can start off right away. Note that and I don't disputing the issue we have with doctor evaluations, thats another broken system, but these doctors don't arrive here because they are skilled immigrants, mostly arrive due to other reasons.

The problem we have is that a big chunk of the immigrants are not in fact skilled, but either family or refugee status immigrants, these usually come here without the needed skills and can't speak either of the official language.

Cheers!
s

GA March 8, 2011 at 7:46 am

This is by no means a complete answer to the original data point, but here is median family income, nominal (but during a period with low inflation) , 2004-2008.

58,100 60,600 63,600 66,550 68,860

I have also found notes – not precisely the 1980-2005 period – indicating household size in Canada dropped from 2.6 to 2.5 1996-2006. If this pattern roughly holds, household size probably dropped by (on the order of) 8-10% over this period, and hence, median household income per member of household needs to be corrected by a similar amount.

Does this strike anyone as indicative of anything remotely approaching the story told above?

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