Insecurity amid wealth

John Foster
North-South Institute

The Canadian economy continues to lead the OECD in many respects. The federal government, after a near-decade of surpluses, expects another surplus even larger than its own predictions. Employment is relatively high in spite of a crisis in manufacturing. Yet ordinary Canadians are worried, and with good reason. Their society is becoming more unequal by the day, and the public policies which combat inequality and sustain social security continue to be eroded.

Canada’s‘system’ of social supports is a complex patchwork. Its origins extend tothe 1920s (old age pensions for long-term residents 70 years and older). In 1965Canada established a national pension scheme, the Canada Pension Plan, whichbuilt on a model established in the Quebec Pension Plan: universal,contributory, portable pensions with funds invested by the government. In 1966the federal government picked up 50% of social assistance costs with the CanadaAssistance Plan, which established national guarantees and the principle of aright to welfare assistance, and provided the poor with the legal right tochallenge denial or reduction of benefits. This key element of rightsrecognition was abolished in 1996 and national standards and the concept of theright to welfare disappeared with it.

Canada has ratified the International Covenant on Economic, Social and CulturalRights and was most recently reviewed by the ICESCR Committee in 2006. Canadianrights organizations and NGOs submitted detailed testimony on Canada’s failureto fully implement the Covenant.

It is important to keep in mind that Canada is a federal state, in whichjurisdiction in a number of areas essential to social policy is either almostexclusively provincial or shared between provincial and federal governments,while overall economic policy is orchestrated by the federal authorities. Thisdivision of jurisdiction, while it can lead to positive creativity at theprovincial level, also often results in a confusion of regulations, frequentlynegative in its impact on basic security.

Working more, earning less

Inequality in Canada is on the rise. As documented in a study of Canadianfamilies earlier this year, Social Watch’s Armine Yalnizyan (2007) noted that“In 2004, the richest 10% of families earned 82 times more than the poorest10% – almost triple the ratio of 1976, when they earned 31 times more. Inafter-tax terms the gap is at a 30-year high.”

The issue touches many more than the defined ‘poor’. Between 1976 and 1979,the bottom half of Canadians earned 27% of total earnings. Between 2001 and2004, their share dropped to 20.5%, though they worked more. Up to 80% offamilies lost ground or stayed put compared to the previous generation, in bothearnings and after-tax terms. This is occurring despite the fact that 90% ofCanadian families are working more –200 hours a year more – than in 1996.

For the employed the reality is that average real wages (wages adjusted forinflation) have not increased in more than30 years. The economy has grown 72% between 1975 and 2005 in real per capitaterms. Labour productivity (in GDP per hour) grew 51%. Prior to 1975, realhourly wages grew steadily. Since 1975 they have stagnated. Thus theoft-repeated promise that “a rising sea/growing economy raises all boats”proves hollow.

There are some winners. For example, in the insurance, finance and real estatesectors, wages are up. There are also losers, such as transport sector workerswho are losing ground.

This wage stagnation is a significant factor in explaining the growth in incomedisparity and insecurity in Canada. In terms of the overall economy, it is clearthat some benefit, and benefit immensely. The share of corporate profits in theeconomy has been rising steadily, and is now at its highest point since 1961 –33.68% of the economic pie, after taxes and some other factors are allowed for.

The federal government could innovate and lead in guaranteeing security for all.It had enjoyed nine successive budgetsurpluses as of 2006. Recently announced projections for 2007-2008 indicate ahigher expected surplus than the government’s initial projection of around CAD3 billion.

Among Canadians there is a demonstrable majority (80%-plus in most cases) thatfavours government intervention to address the growing gap and eradicatepoverty. What steps do people favour? Among the most popular are increasing theminimum wage, improving the tax system by closing tax loopholes on the wealthyand corporations, providing low tuition to increase access to higher education,subsidizing housing for those on lower incomes, and assuring accessible childcare.

A sense of insecurity

In polling undertaken by the Canadian Centre for Policy Alternatives (part ofSocial Watch Canada) the majority of Canadians (65%) indicate that they are notbenefiting from economic growth. Many state they are only “a pay cheque awayfrom poverty” (
CCPA, 2006).

Canadians believe that there is a widening gap, with no significant variation inthe strength of that belief across income sectors. Some 65% believe that therichest Canadians are those benefiting from economic growth and prosperity. Thecontinuation of these impressions erodes belief in the possibility of economicmobility.

Inequality yields many related expectations. Canadians believe the growing gapwill feed an increase in crime, although crime rates have been largely indecline in recent years. They believe it erodes community solidarity which hasbeen an important part of ‘being Canadian’, that society is becomingincreasingly characterized by greed. They worry about their children living lesswell than they have done. Canadians see a more unequal society as a society morelike that of the United States.

Clouds on the horizon

Perhaps the most serious threats to Canada’s ability to assure greater socialor human security to its people come from the commitment of some of itsgovernments to increasing the privileges of those powers, particularly in thecorporate sector, while reducing the ability – some would call it democraticsovereignty – of governments themselves.

The North American Free Trade Agreement (NAFTA) has acted as a ‘chill’ onfurther government intervention, while reinforcing unequal income distribution.Chief among current processes is the ‘Security and Prosperity Partnership’between Canada, the United States and Mexico. This executive-led processincludes a myriad of trinational administrative committees working onderegulation and ‘harmonization’ of practices, as well as a large agenda ofsecurity and surveillance measures affecting the movement of people, bordersupervision and prioritizing the movement of goods and international trade.Canadian federal officials asked by a parliamentary committee if they could citeany specific example of where a higher Canadian standard had been accepted bythe other two countries were unable to do so. This ‘NAFTA-plus’ approachinstitutionalizes processes which have encouraged the growing gap in the lastdecades, rather than addressing them.

A provincial level initiative, the so-called Trade, Investment and LabourMobility (TILMA) accord between British Columbia and Alberta, extends corporateprivilege by allowing private interests to sue for up to CAD 5 million for anyalleged violation by provincial governments, publicly owned corporations, schoolboards or municipal governments. The sort of policy which could be questionedwould be, for example, the ‘buy local’ policy of a provincial crown(government-owned) corporation, related to its own development strategy.Adjudication would be by commercial tribunals, rather than Canadian courts. As akey academic expert noted, “unrestricted private access to the disputemechanisms…would make almost any provincial and municipal programme subject toattack” (
Helliwell, 2007). This move is an intrusive extension of corporateprivileges created by NAFTA (Chapter 11). It has been rejected by the governmentof the province of Saskatchewan, but is under consideration by others.

Who benefits?

The government has guaranteed that the middle class in Canada, unlike that inthe United Kingdom and the Netherlands, has not declined. Canada, like Norway,has seen a growth in the middle class segment of the population, from 33% to 37%over the two decades prior to 2000. The essential component, rather than levelsof employment, age, working women, etc., is government policy: tax breaks forretirement savings, public medical care insurance, tax breaks for first homepurchase and much more.

Are these carefully orchestrated ‘tax and spend’ policies, focused on themiddle class, also helping the poor? According to the OECD, Canada dedicates 64%of spending to the middle-class four tenths of the population and a paltry 22%to the poorest three tenths.[1]

The ideological affection for continuing tax cuts, voiced by leading members ofthe current federal government, conflicts with the evidence that it is a moreactivist tax and spend approach which has kept Canada a competitive and agileeconomy and kept a significant sector of the population relatively comfortable.Tax cuts will not assist extension of the helpful elements of income policy tohelp lift the poorest out of poverty.

Continuing elements of social security

Decent work at a decent wage: Employmentis relatively high currently, with a declining domestic labour pool and thelikelihood of increased dependence on immigration and an expanding interest inguest workers, whose temporary status lacks the guarantees which unionprotection could provide. The quality of work has shown no improvement, and theproportion of people in precarious employment has not been reduced.

One of the key guarantees is that of minimum wage levels in both federal andprovincial sectors of the labour market. There are currently positive signs thatseveral provinces are increasing minimum wages (although not necessarily topoverty line incomes), in part due to active public campaigning by the labourmovement and allied organizations.

Unemployment insurance: Canada’sunemployment insurance programme was conceived in the lee of the GreatDepression as a contributory plan in which the government backed working peoplein providing guarantees against sudden or catastrophic loss of wage income. In1996, Unemployment Insurance was changed to Employment Insurance, and theresulting changes in eligibility rules have led to dramatic reductions incoverage, from 82.9% of unemployed Canadians in 1989 to 43.5% in 2004. The mostseriously affected include new immigrants, recent entrants to the labour market,youth and non-standard workers. Women have fallen further behind men as thegender gap trebled between 1996 and 2004.

Child care: The Liberal federalgovernment in power prior to 2006 introduced Early Learning and Child CareAgreements with the provinces, subsidizing an expansion of high-quality childcare provision. The Conservative government which took its place ended thoseagreements and introduced the so-called Universal Child Care Benefit, whichoffers much reduced funds (a flat payment of CAD 100 for every child under theage of six provided to all families, including those that do not need it) and noguarantees that the funds will be used for public child care. Thus the promiseof a nationally available, quality public child care system has been deferredonce more.

Health care:
Canada’s universal, portable, public health insurance systemis the envy of many neighbours, and a number of social movements seek itsexpansion into dental, optical and pharmaceutical insurance. It is underconstant attack by advocates of private insurance, renewed since a Supreme Courtdecision struck down the prohibition of private insurance alternatives inQuebec. While the federal government has responsibility for enforcing guaranteesin the Canada Health Act, it has proven very timid about doing so.

An aging population together with more precarious work lives withless secure benefits make the public system more important than ever, but thereare strong pressures to convert what is essentially a pool for public investmentinto a high exposure to risk in the stock market.

Housing: A national housing policy andnational initiatives to assure affordable housing have virtually disappearedfrom the federal government agenda.

Access for the poor and First Nations: Recentgovernment actions have shut down assistance for recourse to the courts indefence of rights, essential for the poor, women and marginalized groups. Thecurrent federal government struck down a broad accord with First Nations withoutyet replacing it with anything as comprehensive. A decade without CanadaAssistance Plan guarantees has left many segments of the poor and marginalizedwith eroded security.

Moving forward?

Twelve years after the Copenhagen Summit on Social Development, Canada lacksa national strategy for eradicating poverty. Even Parliament, which more than adecade ago pledged to end child poverty, has failed miserably to implement its‘commitment’. Early in 2007 the National Council of Welfare, aquasi-official advisory body, called for a joint federal/provincial strategy forCanada, built on four cornerstones: a national anti-poverty strategy withtargets and timelines; a coordinating plan of action; ensuring accountability;establishing clear poverty indicators.

The most recent federal budget (March 2007) initiates a Working Income TaxBenefit (WITB) designed to encourage those venturing from welfare support toworking income. The working poor may be minimum wage earners, and those earningmore than the minimum but still below official poverty lines.

If the objective of the new tax benefit was to get working families out ofpoverty, it stumbles partway there. It phases out below the poverty line, andthe need to coordinate the federal initiative with existing provincialprogrammes will take lengthy negotiation and a good deal of confusion meantime.

Nevertheless, as one key policy group commented, “WITB has economic as well associal justice purposes that must be taken into account in any evaluation orcost-benefit analysis. It should help reduce welfare caseloads – to someextent – and resulting costs. More Canadians working will translate intoincreased consumer spending and tax revenues. At a time of growing labourshortages, it is all the more important to help make work pay better forlow-earning workers and keep them from falling into the welfare net where theymight no longer participate in the labour force at all.” (Battle et al., 2007)

Quebec has implemented a ‘comprehensive’ strategy to combat poverty andsocial exclusion, including increases in the minimum wage, housing withattention to people with disabilities, work premiums and additions to socialassistance. The latter have been indexed to inflation.

Newfoundland, after extensive community consultation, has recently announcedperhaps the most comprehensive package of policies designed to explicitly reducepoverty, including specific attention to the needs of First Nations. Included inits objectives are increased disability support, increased availability ofaffordable housing, increased income support levels, support for skillsdevelopment, income support for youth and strengthened public early learning andchild care systems.

The Ontario provincial government recently introduced an Ontario Child Benefit.

It is not yet possible to tell whether the Newfoundland and Quebec initiativeswill lead either to a cross-country provincial competition at raising the bar ofsocial support and/or to a national anti-poverty strategy.

When Canada appeared before the ICESCR Committee in 2006, the Committeeexpressed particular concern that amid such a prosperous country, 11.2% ofCanadians remained in poverty, including many First Nations, immigrants, women,single mothers and disabled Canadians. Clearly Canada had continued to fail tofulfil its obligations to adequacy of social supports.

Most worrying was the Committee’s assessment that Canadian governments treatedrights such as the right to adequate social assistance and the right to adequatehealth care as “principles and programmatic objectives rather than legalobligations.” It noted that enforcement mechanisms for these rights werelacking and that governments argue before courts against including Covenantrights among those protected by the Constitution’s Charter of Rights andFreedoms.

The Committee underlined many of the reforms which Canadian groups have longsought including: social assistance at levels adequate for a decent standard ofliving, increases in minimum wages, assured access to employment insurancebenefits and measures addressing food insecurity, hunger, homelessness andinadequate housing (NAPO, 2006).

A national anti-poverty strategy might embody these steps. Twelve years afterCopenhagen, Canadians still await it.


Battle,K., Torjman, S., Mendelson, M. and Tamagno, E. (2007). “Mixed Brew for the‘Coffee Shop’ Budget”. Ottawa: The Caledon Institute of Social Policy.

Canadian Centre for Policy Alternatives) (2006). “Growing Gap, GrowingConcerns: Canadian Attitudes Toward Income Inequality”. Ottawa: CCPA.

Helliwell, J. (2007). Review of the report “Assessing the Impact ofSaskatchewan Joining the BC-Alberta: TILMA”. Prepared by the Conference Boardof Canada for the Government of Saskatchewan.

NAPO (National Anti-Poverty Organization) (2006). “Don’t Ignore UN CommitteeRecommendations on Human Rights, Canadian NGOs say”. Ottawa: NAPO. Pressrelease, 22 May.

Saunders, D. (2007). “The secrets of Canada’s world-leading middle-classsuccess”. The Globe and Mail [online],4 August. Available from:<>.

Yalnizyan, A. (2007). The Rich and theRest of Us: The Changing Face of Canada’s Growing Gap. Ottawa: CanadianCentre for Policy Alternatives.


[1] These findingsare based on OECD figures and on the study “The Decline of the Middle Class:An International Perspective” by Monmouth University professor StevenPressman, as outlined by Saunders (2007)