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Canadian Income Inequality Is Shrinking, And Liberals Can Take Some Credit

Meanwhile, inequality in the U.S. is hitting new highs.
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MONTREAL ― Income inequality has started shrinking in Canada, and policies designed to help low-income earners ― including minimum wage hikes ― can take credit for some of that.

According to data released by Statistics Canada Monday, after-tax incomes were largely unchanged for Canadian families and persons living alone in 2018, but among the bottom 40 per cent of earners, incomes grew 2.5 per cent.

And since 2012, the bottom 40 per cent have seen after-tax incomes rise by 10.4 per cent, compared to 6.5 per cent for all Canadians, StatCan said.

Watch: What you need to earn to join Canada’s “one per cent” club. Story continues below.

StatCan’s “after-tax income” measure takes into account transfers from governments, and some of these transfers have become more generous under the federal Liberal government.

The overhauled Canada Child Benefit (CCB), which the Liberals introduced as a replacement to an earlier benefit, has become one of the most generous such programs in the developed world, largely responsible for giving Canadian families with children one of the lowest tax rates among OECD countries.

“The CCB does appear to have had a meaningful impact, alongside healthy labour market gains and a pretty sizeable minimum wage change in Ontario in 2018 as well,” TD Bank senior economist Brian DPratto told HuffPost Canada.

Ontario’s previous Liberal government hiked the province’s minimum wage to $14 an hour from $11.60 at the beginning of 2018, sparking protests from industry and a debate over whether such hikes are harmful to the economy.

An analysis by HuffPost last year found Ontario’s minimum wage hike had little impact on trends in the job market, though it did appear to depress job growth for the under-25 crowd.

Income inequality in Canada experienced a large increase in the 1990s, when governments ― struggling under massive debt loads ― cut transfer payments to households, as well as health-care and infrastructure spending. Unlike in the U.S., however, income inequality did not continue to grow in Canada after that.

Canada’s shrinking inequality today is not being reflected south of the border. Data from the U.S. Census Bureau last year showed income disparities in the country hit the highest level ever recorded, in 50 years of data.

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