Economic news fl ash: Inequality is complex
Like just about everybody else, it seems, the OECD is interested in inequality. It hosted a forum on the subject last week and has a new inequality study coming out later this year. In the backgrounder to the conference it published a number of tables and charts, a selection from one of which is reproduced at right.
The chart shows the growth rate of real incomes in both the top 10th and bottom 10th of the income distribution in a number of OECD countries over the last 25 years. Not surprisingly (that's why we're having all these conferences and studies), in most countries income grew more in the top decile than in the bottom. There were exceptions -France here, also Belgium, Chile, Greece, Ireland, Portugal, Spain and Turkey in the full sample of 27 countries -but in most places growth was more rapid at the top than at the bottom of the income distribution. Across the OECD, it averaged 1.4% per year at the bottom, 2% at the top. Canada's numbers were 0.9 and 1.6, the United States' 0.5 and 1.9.
Note that this is not a case of "the rich getting richer and the poor getting poor." Except in Japan and Israel, the poor didn't actually do worse. Almost everywhere there was growth at the bottom. But incomes at the top grew more quickly than incomes at the bottom. In effect, the rich were pulling away.
You can imagine where this is going. Neo-liberal economic policies -deregulation, free trade, fiscal conservatism (yes, that would be neo-liberal conservatism) -are rewriting the post-war economic and social contract at the expense of the poor and to the benefit of the rich. Add in financial chicanery by giant banks and investment companies and corporate control of most of the world's governments, but especially the U.S. Congress, and you have a conspiracy theory worthy of the NDP shadow cabinet.
Except that that's not where the OECD takes the data. It's true that globalization may be playing a part. Standard trade theory says rich countries' high-skilled workers and poor countries' less-skilled workers, which groups the respective regions have in relative abundance, should benefit most from trade. That's consistent with increased incomes for already high-income skilled workers in the OECD's rich countries.
Technology also plays a role -in fact, a greater role than trade if the consensus of studies is to be believed. People who can handle the new technology on which most production is based are increasingly in demand and in many cases such brain (as opposed to brawn) workers are already well paid, so paying them even more only widens the income gap.
But the computer revolution isn't really the stuff of conspiracy (unless you think Al Gore and the U.S. Defense Department were in cahoots to screw workers) and it's hardly surprising that an economic revolution should rearrange the income distribution. The first Industrial Revolution's switchover from agriculture to manufacturing shook things up, too.
But beyond that, there's just not much for conspiracy theorists to work with. The oldest conspiracy theory of all -capital versus labour -doesn't achieve traction. On average across the OECD, only 7% of the household income being looked at comes from capital (in the form of interest or capital gains). The great bulk of income, and therefore the source of the great bulk of income inequality, is from wages and salaries.
Changes in household size do seem to be part of the problem. In most countries, there are fewer people per household. Across the OECD, the number of households with only one head has risen from 15% to 20% of the total. In calculating households' real income, the statisticians try to factor in the economies of scale families enjoy. (Kids are cheaper by the dozen, yes, but also by twos and threes.) If more families are smaller and therefore not enjoying such economies of scale, more are going to be poorer. Why more families are smaller probably has more to do with changes in divorce laws and women's participation in the labour market than with neo-liberalism or even neo-conservatism. So-called traditional conservatives didn't like such changes.
It's not only family breakup that's causing trouble. Something called "assortative mating" also seems to blame. More than in the past, the same kinds of people -or at least people with similar earning power -are marrying each other. Doctors increasingly marry other doctors, rather than nurses. Today, 40% of couples in which both partners work have similar incomes, compared with only 33% in the 1980s. If rich people are more inclined to hook up with other rich people than formerly, that tilts family incomes in the direction of greater inequality. Some studies suggest most of the increase in inequality in the United States, where people worry most about inequality, is due to demographic changes of this sort. Ronald Reagan, Margaret Thatcher and Milton Friedman had nothing to do with it.
It's also the case that the wives of top earners have experienced greater employment growth than the wives of lower earners. When that happens, family income grows more quickly at the top than at the bottom. Again, that's not the result of neo-anything.
As mentioned, the OECD has another inequality study coming out this year. It's bound to conclude that inequality is complicated. And that conclusion seems bound not to make it into the public debate.
Respect for life, respect for free speech
Ottawa's new mayor, Jim Watson, has come under fire from pro-choice activists for signing a proclamation that declared Thursday to be "Respect for Life Day" in the nation's capital, to coincide with the National March for Life rally on Parliament Hill, which attracts approximately 20,000 abortion opponents annually. Opponents charge that the proclamation threatens a woman's right to choose. But to his great credit, Mayor Watson -who is himself pro-choice -insists he signed the document out of respect for free speech and a diversity of opinion.
Every Ottawa mayor in the past decade has signed a similar proclamation. Yet Melanie Stafford, a member of the Pro-Choice Coalition of Ottawa, insists the proclamation -which calls on Ottawanians to protect "the rights of people in Canada, including the unborn," uses "dangerous language around the rights to the unborn," and sends the "wrong message" to women that they do not have the right to decide for themselves whether they were wise to terminate their pregnancies.
What rubbish. If a woman must be protected from opposing points of view in order to choose abortion, then perhaps her decision was ill-considered in the first place.
The city clerk's office in Ottawa must vet all requests for special-day proclamations. In this case, staff there deemed the "Respect for Life" application to meet the standards required and presented it to Mayor Watson for his signature. If pro-choicers object, the proper recourse is to request a proclamation for "Respect for Choice" day, not to try to censor those who disagree with them.
The non-partisan Conference Board of Canada has released a new study enumerating the weaknesses in Canada's public health-care system. In short, the report says that while Canada spends a lot on public health care, our health outcomes are middling compared to other developed nations. Many countries -such as Australia and Sweden -spend less but with better results.
Why the difference? The Conference Board offers no easy answers. The North American lifestyle, it contends, plays a significant role. A grossly overweight person consumes about 42% more health dollars per year than a person with the proper body weight. Japan, for instance, spends relatively little on health care, but because of its skinnier population (and perhaps its focus on high-tech diagnostic equipment), Japanese have significantly longer, healthier lives than Americans and Canadians.
Looking beyond lifestyle factors, creating better health outcomes for Canadians will mean finding the right balance between private and public care. An over-reliance on private care drives down the health outcomes of poorer citizens who are dependent on government care, which skews downward the averages for the citizenry as a whole. But a dogmatic commitment to publicly funded and publicly run health care, such as we now have in Canada, prevents competition that can increase efficiency, improve delivery and hasten the adoption of new technologies and new drugs.
Every country above us on the Conference Board's list permits a better mixture of public and private spending on health. None of them outlaw private insurance for treatment in private clinics, as we (wrongly) do here in Canada. Indeed, policy makers in countries such as France, Germany and the Netherlands would likely be baffled by Canada's rigid insistence that private options somehow sully health care. Even in Sweden -once the standard bearer for public-only health care -private companies provide nearly a quarter of the care, even though most care is still paid for by the government.
The focus of any health-care system should be the best-possible outcomes for the greatest number of people -not abstract questions of "national identity." Now that Stephen Harper has his majority, we would urge him to bring our health system into line with the more successful mixed public-private models that have long been the norm on the other side of the Atlantic.
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