The West’s Boom Has Indeed Benefitted the Poor

Ben Eisen, Commentary, Poverty, Uncategorized

 In a recent column published in The Toronto Star, Calgary-based journalist Gillian Steward laments a widening gap between the rich and the poor in Western Canada.

Steward invokes images of women pushing shopping carts full of bottles and cans past expensive condo towers and men lined up outside of homeless shelters near the Calgary Tower in support of her argument that the benefits of the West’s economic growth are not being felt by those at the bottom of the income distribution.

Happily, the evidence does not square with Steward’s bleak analysis. In fact, low-income Western Canadians have been among the greatest beneficiaries of the region’s economic growth.

Steward’s argues that while the rich have prospered, the poor have stagnated, comforted only by the mere hope that the “conspicuous wealth” of others would “somehow rub off” on them. 

Her argument is based largely on statistics recently released by the Canada West Foundation showing that income inequality has increased in Western Canada in recent years, to the point that British Columbia and Alberta now have the most unequal after-tax income distributions in Canada. This much is true. However, Steward’s narrow focus on the question of inequality causes her to miss the good news to be found in the data about the real increases in living standards low-income Westerners have experienced over the past decade.

Income inequality has indeed increased in Western Canada in recent years, but not because the poor have done worse there than in the rest of the country; inequality has increased in the West primarily because rapid economic growth has enabled large income gains at the top of the income distribution.

But what has been going on at the bottom? Although Steward paints a disturbing picture of stagnation for low-income individuals in Western Canada, the reality is that the bottom twenty percent of the income distribution has fared better in the West than in any other region of the country.

Across Canada, average inflation-adjusted incomes for those in the bottom fifth of the income distribution increased by 20 percent between 1999 and 2009. By comparison, the average income for similarly situated Albertans increased by 39 percent – almost exactly twice as much. In British Columbia and Saskatchewan, the average income for this group increased by approximately 30 per cent. Yes, inequality is rising in the West due to wage gains at the top, but low-income Westerners are experiencing faster real income gains than similarly situated Canadians elsewhere.

As these statistics suggest, the recent economic boom in Western Canada has led to major material improvements in the lives of low-income residents. In fact, as the Canada West report cited by Steward explicitly notes, far fewer residents of all four Western provinces live in low-income status than was the case a decade ago. For the poor in Western Canada, material conditions are improving faster than in most other parts of the country.

Unfortunately, the question of income inequality has surged to the forefront of public discourse about economics in Canada, leading to an unhealthy fixation on how much money is being made by the affluent rather than the more urgent question of whether life is getting better for those near the bottom. As a result, statistics such as those released by Canada West showing solid income gains at the bottom of the income distribution along with large income gains at the top in Western Canada are often, somewhat bizarrely, interpreted as bad news. 

Steward is concerned by rising inequality in the West– but would anybody prefer the records of Ontario and Quebec where real incomes for those at the bottom have grown by less than 15 percent in a decade?  It sounds preposterous, but this is precisely the kind of faulty thinking that occurs when individuals focus on measures of income inequality rather than on statistics that actually measure changes in material circumstances for low-income individuals and families.

Economic growth may not be a rising tide that can “lift all boats.” The poor, after all, will always be with us.  However, the Western Canadian experience once again demonstrates that high rates of employment and economic growth are the best anti-poverty programs in existence.