Income inequality in Canada is growing, finds new research from the Canadian Centre for Policy Alternatives.

The CCPA reports that Canada’s richest 1% — whose average income is $405,000 — accounted for almost a third of all growth in incomes from 1997 to 2007. By comparison, when the economy grew at a similar rate, in the 1950s and 60s, the richest 1% of Canadians only accounted for 8% of all income growth, it says.

Due to this faster growth rate, and top marginal tax rates that are much lower than they were in post-WWII Canada, income inequality is growing, too. “Combine record-breaking growth in incomes with historically low top tax rates, and the richest 1% is taking a bigger piece of the economic pie today than at any time in the past century,” it says. It reports that from the beginning of the WWII to 1977, the income share of the richest 1% was cut almost in half, from 14% to 7.7%. But by 2007 the share for the richest 1% was back up to 13.8%.

The CCPA also says that while the richest 1% has seen its share of total income double, the richest 0.1% has seen its share almost triple, and the richest 0.01% has seen its share more than quintuple since the late 1970s.

This outsized income growth for the richest Canadians is increasingly due to their jobs, it finds. Back in 1946, paycheques accounted for less than half, 45.5%, of the income of the wealthy. Today, 67.6% of their income comes from wages, with the balance mostly coming from professional fees, dividends, interest and investment income, it says. For the richest 0.01%, almost three-quarters of their income, comes from employment pay.

Back in 1946, 24.3% of the incomes of the richest 1% came from running a business, the CCPA says. That dropped to 3.1% in 2007.

The CCPA says that the last time income inequality was so sharp in Canada, back in the 1920s, the result was ultimately policy reform to reduce inequality; and it says that a similar result could emerge this time.

“The excesses of the Gilded Age induced its own collapse and triggered, in response, a wave of public policy that helped redistribute prosperity through fair taxation and fair wages in order to grow the middle class, reduce poverty and keep a lid on income inequality in Canada. As the story unfolds anew, the response to Canada’s neo-gilded age may very well be the same,” it concludes.

IE