The phrase “The rich get richer, while the poor get poorer,” has never been truer for Canada.
A report by the Organization for Economic Co-operation and Development finds, the gap between Canada’s richest and poorest people is widening.The survey conducted in 2008 found, the top 10 per cent of Canadians earned 10 times as much as the bottom 10 per cent. This 10-1 ratio is above the OECD average of 9-1. The U.S ratio is 14-1. In Germany, Denmark and Sweden the ratio is 6-1.
We’re not the worst, but we certainly aren’t the best.
Why is the Gap Widening in Canada?
In 2008 Canada’s richest people made on average $103,500 a year compared to Canada’s poorest who made $10,260 a year, the OECD said. Two factors explain Canada’s growing gap: a widening disparity in labour earnings between high- and low-paid workers, and less redistribution. Taxes and benefits reduce inequality less in Canada than in most OECD countries, the study said.
In my opinion if this survey were conducted today, the gap between rich and poor would be even wider. Here’s why I think that way.
The report was conducted the year the global financial crisis started. In December 2008 Canada’s unemployment rate was 6.6 per cent, currently the national rate is 7.4 per cent
On top of this, between October 2008, and July 2009, the Canadian labour market lost a stunning 503,000 full-time jobs and a total of 588,000 permanent jobs. That’s worse than any rate of job loss in a nine-month period since before the Second World War.
Canadians Looking for Work.
There’s proof the labour picture is not improving.
Canadian job creation declined unexpectedly for a second consecutive time in November 2011, the first back-to-back loss since the recession. Overall, 18,600 net jobs were shed in November following the huge 54,000 loss in the previous month, the worse in almost 3 years.
The meager recovery has been fueled by self-employment, temporary work and part-time positions. Many Canadians who lost their job in the last 3 years are back at work but with lower pay, fewer benefits and in many cases no job security.
The Winners and the Losers
Amidst all this Canada’s financial industry has continued to thrive. As early as last week, four of Canada’s biggest banks posted higher-than-expected fourth-quarter profits.
Banks continue to make money because of wealth management fees and by lending more money, albeit at smaller margins, to Canadians already in record debt.
To make matter worse, Canadians doing the right thing and saving are being punished. Canada had the highest mutual fund costs of 22 countries surveyed, according Chicago-based Morningstar Inc., an independent investment research company.
Bank fees in general are disproportionately higher for those who carry a smaller balance. Whether it’s a chequeing or savings account or an online trading portfolio, the less money you have in it the more likely you’re to pay fees to keep it open.
Ways to Shrink the Gap
So what can we do to help shorten this gap?
Canadians need to be more proactive when asking for a raise in their job, they need to be aware of how much their work is worth and demand a salary that reflects it. Part of the problem is employers are trying to get away with paying their workers the lowest possible salary for the greatest amount of work.
If you are suffering from a longer than expected period of unemployment this is the time to get out and learn a new skill or update the ones you already have. I know many people reading this will say, easier said than done, but the change in the labour force has to come from each and everyone of us, we can’t be discouraged.
Make eduction a priority for your kids. Research shows the benefits of learning and higher education levels include higher earnings and lower unemployment risks. Both contribute to overall financial security.
And for goodness sakes, stop paying bank fees, clearly those guys are doing okay. Find an institution that offers no fee banking it will help put some money back in your pocket.