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Canada Seeing ‘Dramatic Widening’ Of Income Gap Amid Pandemic: CIBC

More than a fifth of Canada’s lowest wage jobs have disappeared, but high-earning jobs are booming.
Images By Tang Ming Tung via Getty Images

Canada’s income gap is growing rapidly amid the COVID-19 pandemic, a new report says ― but it’s not just because many low-wage jobs have been lost, it’s also because of an unexpected surge in high-wage jobs.

Canada ended 2020 with some 640,000 fewer jobs than it began the year with, but the loss of those jobs was not evenly spread.

“Not only did high-wage earners not experience job loss, but in fact they have gained almost 350,000 jobs over the past year,” CIBC economist Benjamin Tal wrote in a report issued Tuesday.

Meanwhile, more than 20 per cent of jobs in the bottom quarter of wages disappeared over the past year, Tal’s analysis found.

Employment change by age range
CIBC Economics
Employment change by age range

The data offers “a much clearer sense of the dramatic widening in the income gap due to COVID,” Tal wrote.

This wage gap could be reflected in a widening of the gender gap as well. Women, which are over-represented in low-wage service jobs, have seen larger job losses than men during the pandemic.

As of December, employment among women 25 and over was down 2.3 per cent of all jobs, compared to 1.8 per cent for men.

Tal says his main concern here is children being taught remotely during lockdowns, “which is impacting the participation rate of women more than men (as we saw earlier in the crisis),” he told HuffPost Canada. “The hope is that it will not last beyond the crisis.”

In an interview with Bloomberg News, the CIBC economist suggested Canada could see tax hikes ahead as governments struggle with ballooning budget deficits at a time when higher earners are seeing rising fortunes.

“We are talking about this cash sitting on the sidelines, we’re talking about this pent-up demand. We know where the money is, and we know that there’s more money where the money is than we thought, because of this huge increase in well-paying jobs,” he said in the interview.

“Here we see a very, very significant asymmetrical picture, and it would be very tempting for governments to actually look at taxation down the road when we are safely far away from the crisis to raise taxes, and I think they will.”

In an email exchange with HuffPost Canada, Tal said he isn’t “recommending” a tax hike, but suggested that governments would likely look at capital gains taxes as a potential source of revenue.

“I think better job-loss coverage and protection for the gig economy is needed,” he added. “And I think that recent moves by governments establish the plumbing for that.”

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