The Canadian financial dream is well within reach

The gap is growing! The gap is growing! The rich are getting richer. And the poor, well, they just remain poor. At least that’s what one would gather from the hysteria reported in the media on the latest Conference Board of Canada report on income inequality.

With headlines screaming ‘Canada becoming a nation of haves and have-nots’ and ‘The Canadian dream is out of reach for an increasing number,’ it’s plain to see why young Canadians might be filled with angst at the prospects that they can no longer shape their economic future.

Nothing, however, is further from the truth. Despite the old cliché about the rich and poor, the Canadian dream of climbing the income ladder is not a fantasy.

By examining the share of national income going to the ‘richest 20%’ and ‘poorest 20%’ of Canadians, the Conference Board continues to perpetuate the myth that most Canadians are born into, live, and die within certain income groups. But in reality, with some hard work, young Canadians can and will live better than their parents.

Most young people start out in the low-income group and work up to the middle or high-income group over time. Given their initial lack of experience, education, and/or training, their incomes start out low but peak when they hit middle age (the prime earning years) and then taper off as they approach retirement.

Consider the experience of the authors of this piece, experience to which many Canadians can relate. We come from hard working immigrant families. Not long ago, we both were low-income earners working part-time jobs to support ourselves through school. After completing our education and gaining skills and experience, we moved up the income ladder (although admittedly, we are still far from the highest earners in the population).

The reason why so many Canadians can relate is because our experience is actually the norm. Over the past 15 years, more than a dozen Canadian studies have examined changes in income using data that tracks people’s income over time. These studies have found that, except for a very few cases (about 2% of the population), most Canadians transition from low income into higher income groups in a relatively short period of time.

For example, a 2001 Statistics Canada study examined data on low-income earners over a six-year period (1993 to1998). It found that 67% of low-income earners moved into a higher income group in a year’s time and 80% did so in two.

A more recent 2010 Statistics Canada study found the same results. It tracked low-income earners between 2002 and 2007, and found 60% moved into a higher income group after one year, 79% did so after two, and nearly 90% after six.

These findings are critical because they show that being a low-income earner is generally a temporary experience and stepping stone to better paid employment. They also suggest the ability to move up the income ladder hasn’t decelerated over the past two decades.

While individual Canadians are financially mobile over their own lifetimes, a growing body of research shows that Canadian families are also financially mobile over generations.

Several studies, most of which are published by Statistics Canada, have uncovered a surprisingly high level of what’s known as ‘intergenerational mobility’ – the finding that a Canadian child’s future economic success is not strongly linked to the financial position of his or her parents.

In 2006, Miles Corak, an economics professor at the University of Ottawa, measured intergenerational mobility in nine highly developed countries and found that Canada is one of the most intergenerationally mobile societies in the developed world, a conclusion that is consistent with research by the Organization for Economic Co-operation and Development (OECD).

We are lucky to live in a dynamic society where the ability to move up the income ranks is a reality for many Canadians. The Conference Board’s failure to incorporate this reality into the discussion of income inequality gives Canadians the impression that the opportunities available for them to advance economically are limited. But as the evidence shows, that’s simply not true.

Amela Karabegovic and Charles Lammam are economists with the Vancouver-based Fraser Institute

Just Posted

Blackfalds RCMP investigate break and enter at Fas Gas

RCMP search for suspect who cut through an outside wall to gain access

Operating Budget focuses significantly on community safety

Proposed 2% tax increase for operating budget, debate runs in January

UPDATE: Red Deer RCMP investigate non-suspicious death downtown

48 St. behind transit terminal was closed off earlier Wednesday

Team Canada dancer returns to Red Deer laden with medals

Red Deer dancer wins three silver medals and a bronze at World Championship

Local author releases brand new international thriller

Retired teacher Larry Stewart hosting a book launch this Saturday

Troubled Monk releases new spirit

Troubled Spirit vodka was introduced in early December

Google searches suggest 2017 a tough year

What were Canadians were curious about: Google searches suggest 2017 a tough year

Democrat wins stunning red-state Alabama Senate upset

Democrat Doug Jones wins stunning red-state Alabama Senate upset against Roy Moore

New fighter-jet competition to have national ‘economic interest’ requirement

Trudeau government wants to replace Canada’s aging CF-18s with 88 new fighters by as early as 2025

The top-binged shows on Netflix in 2017

Which show did you cheat on your spouse with by watching ahead?

2017 word of the year: Feminism

Merriam-Webster’s word of the year for 2017: ‘Feminism’

200 Russians to compete in Olympics as neutrals

The Russian Olympic Committee expects 200 to compete in South Korea

Researchers claim the ‘man flu’ does exist

Review of scientific studies suggests ‘man flu’ may be more intense: researcher

Trudeau appoints Supreme Court chief justice

Prime Minister Trudeau appoints Richard Wagner as Supreme Court chief justice

Most Read