Economic inequality in Canada - Essay Example

?Economic inequality in Canada Introduction Economic inequality, defined in terms of individual or household incomes, refers to difference in levels of resource accumulation among the subjects and is a social issue that is significant in Canada. This paper reviews trend in economic inequality in Canada, causes and impacts of the realized level of inequality, and possible solution to the social problem. Trend in economic inequality Economic inequality is a common social issue that affects many Canadians, either directly or indirectly. It has for example led to social stratification by economic capacities. Osberg identify five economic classes in the Canadian society and offers a review of times series data for percentage income distribution among Canadians. The evaluation of five economic classes, “bottom 20 %,” “second 20 %,” “middle 20 %,” “fourth 20 %,” and the “top 20 %” identifies concentration of resources in the hands of a few individuals while a majority of the Canadian citizens are within average and poor economic classes (Osberg, 2008, p. 7). Data, obtained from Statistics Canada, reported that by the year 2005, 60 percent of Canadian population only controlled less than 30 percent of the country’s wealth while the larger portion, more than 70 percent was in the hands on the top economic class that forms only 40 percent of the country’ population. In the year 1951, however, the lower 60 percent owned about 34 percent of the country’s wealth while the top 40 percent controlled about 66 percent of wealth. This increasing inequality has been consistent over the six-decade period with higher shifts in the middle quartile and the highest quartile of the economic classes. The middle class registered the highest percentage decline in income while the top class registered the highest increasing trend. The data therefore means that wealth concentration continues to shift from the poor classes, especially the middle class, to the top economic class. As a result, the poor becomes poorer while the rich increases their wealth (Osberg, 2008). Causes of economic inequality in Canada One of the identified causes of economic inequality is wage rates across the economic classes. The top class receives hefty remuneration while the bottom classes are lowly paid. This is attributable to the great depression of the 1970s that contracted profit margins for business organizations and prompted measures for increasing profitability. Reduced wage rates for employees, and layoffs became characteristics to reduce the percentage of wealth ownership by the low classes while the capitalists retained their share of profits. The move to increase organizations’ profitability also led to high remunerations for top managers to facilitate their inputs towards operational efficiencies. Change in demand for labor is another factor to the increasing economic inequality. While Canada is becoming more industrialized and oriented to developing skills-based commodities, demand for skilled labor has risen while demand for unskilled labor has lagged. The trend in demand has therefore led to higher remuneration among skilled workers than among the unskilled to contribute to economic inequality. Effects of globalization that allows the capitalist class to dictate low wage rates for employees has also ensured higher profit margins to increase wealth concentration among rich investors. This is because enterprises can obtain alternative cheap labor through importation of workers or relocating to other countries, and these forces Canadians to accept low remuneration rates (Conference, 2012). Macroeconomic factors have also significantly facilitated the increasing trend of economic inequality. The decreased effectiveness of trade unions has weakened workers bargaining power for equitable remunerations and consequently led to high wage rate disparity. Minimum wage rate has also remained constant and allowed employers to stipulate low wages among the bottom economic class. A shift from a regulated economy to a deregulated economy has also established the power of the private sector to dictate income distribution among workers and has increased vulnerability of the lower economic classes to manipulation by the businesses. Deregulation of financial sectors, which is a source of borrowed capital for economic growth, has also been a factor to increasing economic inequality. Lending policies by financial institutions have for example favored the rich and allowed them to invest towards expanding their wealth base while the poor and middle-income earners face barriers to capital acquisition through bank lending (Conference, 2012). Impacts of economic inequality in Canada Economic inequality has a number of negative impacts on the Canadian society. It determines economic growth potentials and means that the society will grow at different rates. Economic inequality also has impacts on education as it determines people’s ability to afford education. The poor may therefore be unable to take their children to school and consequently remain in poverty and in the lowly paid unskilled jobs while the rich affords higher education towards skills and highly paid jobs. People’s economic status also affects their ability to afford healthcare services and consequently determines people’s quality of life. The poor may therefore fail to get care leading to high mortality rates than among the rich. Poverty driven crime is another consequence of economic inequality whose barriers forces the poor to acquire wealth through criminal avenues (Thorbecke and Charumilind, 2002). Possible solutions to the Canadian social problem of economic inequality The identified factors to increasing trend in inequality identify deregulation, weakened unionism, and globalization as major factors. These factors have concentrated power in the hands of business organizations, allowed them to discriminate on employees, and restricted capital acquisition to the rich economic class (Conference, 2012). Conflict theory that identifies the stake of the oppressed and calls for “liberation movements and radical change” is therefore a necessary approach to resolving the power based status quo (Godwyn and Hoffer, 2011, p. xii). The civil society and labor movements should therefore actively advocate for government intervention in the labor and capital markets to facilitate redistribution of income (Godwyn and Hoffer, 2011). Conclusion Economic inequality is a significant social problem in Canada and the gap between the poor and the rich has been on an increasing trend that is expected to continue. Causes of the inequality include deregulation of the economy, globalization, and weakened labor unions. A conflict theory based approach that advocates for a regulated economy and activism to facilitate equitable income distribution are identifiable solutions. References Conference. (2012). Canadian income inequality. The Conference Board of Canada. Retrieved from: http://www.conferenceboard.ca/hcp/hot-topics/caninequality.aspx. Godwyn, M. and Hoffer, J. (2011). Sociology of organizations: Structures and relationships. Thousand Oaks, CA: Pine Forge Press. Osberg, L. (2008). A quarter century of economic inequality in Canada: 1981-2006. Canada Centre for Policy Alternatives. Retrieved from: http://www.policyalternatives.ca/sites/default/files/uploads/publications/National_Office_Pubs/2008/Quarter_Century_of_Inequality.pdf. Thorbecke, E. and Charumilind, C. (2002). Economic inequality and its social impact. World Development. (xx.x). Read More