Tag Archives: income disparity

The dread pirate “Wagegapper”

We could sell the snow. There's plenty of that

We could sell the snow. There’s plenty of that

Pity the poor rich man. In this economy, he just can’t catch a break. Oh sure his castle continues to glisten in the rising sun. His moat is pristine and his crocodiles are well fed. But can he actually accumulate money. . .you know, the way he used to?

According to a Bloomberg/HuffPost Canada post this past August 8, “The stock market rout gripping the world last week and today is bad news for just about anyone who uses money, but when the value of assets collapses, it’s the richest who lose the most.

“Take, for instance, Facebook founder Mark Zuckerberg, who lost $1.9 billion U.S. in a day’s trading on Friday; or Amazon co-founder Jeff Bezos, who was down $1.8 billion; or famed investor and Berkshire Hathaway head Warren Buffett, who lost $1.7 billion. And that was all last Friday – before Monday’s even wilder ride on the stock market.

“According to the Bloomberg Billionaires Index, the world’s richest 400 people lost $182 billion in wealth last week. It was the largest drop ever seen in the index, but it only launched last September. The recent drop in stock markets around the world means the world’s 400 wealthiest people have in total lost money this year, with their combined net worth at $3.98 trillion, down $75 billion from the start of the year.”
Under the circumstances, we in the Atlantic Maritimes should count ourselves lucky. We have managed to avoid such calamitous outcomes concerning money, as we don’t have any.

According to Environics Analytics two years ago, the median family income in New Brunswick was just about $57,300 – the second lowest in Canada, just ahead of Prince Edward Island. Since then, the numbers for both provinces have dropped by more than seven per cent (about the rate the central bank has reduced the cost of borrowing for businesses and consumers).

Meanwhile, unemployment in this region has spiked as wages have fallen. In fact, the Atlantic region has become a jurisdiction of “wagegappers”.

In economic terms, that simply means the more desperate an individual is for work to pay his or her bills, the more likely those with money will prey on his or her fears. This calculus drives down the cost of labour, and the vicious cycle of downward spirals ensues, further separating the moats of the rich from the slush puddles of the working poor (a class we once called bourgeois).

It’s not like we oughtn’t to have seen any of this coming. Back in 2013, Christine Saulnier and Jason Edwards of the Canadian Centre for Policy Alternatives had this to say in a widely circulated opinion piece:

“Statistics Canada released new data on high income trends in Canada with nary a mention of the Atlantic Provinces. From a Canadian comparative perspective, the data told a story that was more striking for most of the rest of the country and in particular, Alberta, Ontario, B.C. and Quebec where 92 per cent of the top 1 per cent of tax filers are found, with only 3.4 per cent in Atlantic Canada. These data reveal that the Atlantic Provinces are all significantly less equal today than they were in 1982. The trends are. . .not surprising.”

Indeed they were not, and they are not today in this region, where the income gap between the rich and the poor has widened.

Pity the wealthy for their losses of late? Absolutely.

After all, they may soon join the club around the burning barrel beyond the moat in the deep, dark woods along with the rest of us.

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New Brunswick for sale: Everything must go!

 

What am I bid for the Petitcodiac River

What am I bid for the Petitcodiac River?

After reading the Canadian Centre for Policy Alternatives’ (CCPA) assertion that, together, the country’s 86 wealthiest residents could buy New Brunswick, lock, stock and barrel, and still have enough in the kitty to pay for a round-trip expedition to Mars, I have but one thing to say to that estimable, left-leaning think tank: Oh, you tease.

Perhaps our good premier, David Alward, and his finance minister, Blaine Higgs, have been approaching this economic development thing all wrong from the get-go. Their much-reviled predecessors in the Graham government may have been right, after all; they just didn’t go far enough. Sure, sell NB Power for a cool $4 billion if you can. But why stop there?

“New Brunswickers held $141 billion worth of assets in 2012,” writes the CCPA’s senior economist, David Macdonald, in his new paper, Outrageous Fortune: Documenting Canada’s Wealth Gap. “Of all of the provinces, this most closely approaches the net worth of The Wealthy 86 of $178 billion, without exceeding it. 

“What this means is that The Wealthy 86 could buy up all of New Brunswickers’ 545,000 motor vehicles, all of their 314,000 houses and cottages, all of their undeveloped land, all of their stocks and bonds, all of their pension funds, all of their RRSPs, all of their jewellery, and all of their furniture. The Wealthy 86 have enough money to buy absolutely everything in the private hands of every New Brunswicker, 

with billions to spare.” ($37 billion, to be precise). 

Following the data’s release last week, and in the collective interest of the rest of us, local CBC radio host Paul Castle helpfully informed his listening audience that the per-capita haul on a bounty of 141 billion simoleons is $188,000, which isn’t bad. But, it’s nowhere near enough to propel anyone over the gates that surround the super-rich. And, of course, that’s the CCPA’s point.

“The latest Statistics Canada wealth survey reveals income in equality isn’t Canada’s only problem: wealth inequality in Canada is worse,” Mr. Macdonald observes “For instance, many gasp at the fact that Canada’s richest 20 per cent of families take almost 50 per cent of all income. But when it comes to wealth, almost 70 per cent of all Canadian wealth belongs to Canada’s wealthiest 20 per cent.”

All of which proves there’s truth in the old adage that you have to have moolah to make moolah; indeed, the more boodle you have, the more boodle you tend to generate (thanks to the miraculous effects of certain financial instruments, not least of which is  compound interest). 

 Of course, real money is also incredibly rare. If everybody had it – lots of it – who would care about concepts of fairness predicated on simple pocket-book envy?Certainly, the CCPA wouldn’t, but that’s only because it would be out of job chronicling and cataloging the rapacity of the gilded galoots and pampered plunderers among us.

“The level of wealth inequality in Canada has reached such extremes that in 2012, according to figures derived from Canadian Business magazine, the 86 wealthiest Canadian-resident individuals (and families) held the same amount of wealth as the poorest 11.4 million Canadian combined,” Mr. Macdonald writes. “To put these findings into historical perspective, in 1999, The Wealthy 86 held the same wealth as the bottom 10.1 million Canadians.”

Naturally, Mr. Macdonald and his fellow travelers want Government (big surprise, here) to fix the situation and pronto. 

Maybe it should remove some of the protections on wealth, such as the favorable capital gains tax rate (half of that levied against income), or slap new taxes on the income of the wildly wealthy on the theory is that such “progressive” moves will redistribute some of the accumulated capital to the rest of society where it can do some broad, general good. 

It’s a nice theory that rests on only two flawed assumptions: first, that higher taxes on fat incomes will have any effect on “breaking up” private pools of capital; and, second, that capital gains exclusions will only affect the super-rich, and not the majority of entrepreneurs who dutifully ply their trades somewhere in the middle of the pack of affluence.

Nope, the solution is, was and and always shall be right in front of our faces: Persuade The Wealthy 86 to buy New Brunswick. 

Make them an offer they can’t refuse: Throw in P.E.I. as a signing bonus. It won’t mind. Honest.   

 

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The dos and don’ts of reducing disparity

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In an astonishing turn of events, worthy of major international coverage, your humble scribbler finds himself in actual, authentic agreement with the right-wing, free-market- loving think tank, the Fraser Institute.  Sort of.

How this happened is less important than why, which I can summarize thusly: Even a blind pitcher will hit the broad side of a barn once in a blue moon if he’s standing next to a silo. . .or. . .something like that.

The point is when the Institute’s recent report, The Economic Effect of Living Wage Laws, concludes that such legislation in the United States – which is designed to raise poor people’s salaries and, so, reverse growing income disparity – are backfiring, it is largely, albeit lamentably, correct.

“The best available evidence from the U.S. serves as a cautionary tale for us in Canada about adopting living wage laws,” said Charles Lammam, the study’s author and Fraser’s resident scholar in economic policy. “When governments try to legislate wages, there’s typically a trade-off – while some workers may benefit from a higher wage, their gain comes at the expense of others who lose as a result of fewer employment opportunities,”

The press release continues on to explain: “Although activists claim living wage laws can increase wages with minimal costs, the reality is quite different. According to the best available research, a 100 per cent increase in the living wage (for example, going from an hourly minimum wage of $10 to $20) reduces employment among low-wage workers by between 12 and 17 per cent.”

The reason has to do with labour market shock. When living wages are “mandated” to rise regardless of other factors and circumstances, businesses cut back jobs – especially the lower-end ones – and training programs precisely because they are not likewise “mandated” to employ anyone. The relationship between the supply of jobs and the regulations governing pay rates asymmetrically disadvantages workers.

This has the corollary effect of undermining overall productivity and innovation in the private sector despite the fact that Mr. Lammam found evidence suggesting that “employers also respond to living wage laws by hiring more qualified workers and passing over those with fewer skills thereby reducing the opportunity for less-skilled workers to participate in the labour market.”

All of which only means that which we already know: Governments are lousy micromanagers of wages and prices. But can they play any productive role in narrowing the income gap between the rich and the rest? Fraser doesn’t say, but I suspect their answer would be: “a minimal one, thank you very much.”

This is where I (with a sense of great relief) would part company with the Institute.

The socio-economic costs of wage disparities, which are growing rapidly in the western world, are several and serious. As more money flows to fewer people, lobbies and special interests skew public spending priorities.

Suddenly, the infrastructure on which a fair and democratic nation relies – everything from public transportation, roads and bridges to schools and hospitals – becomes less important than tax cuts for the wealthy.

The malign effect on the culture is equally worrying. Prolonged, structural economic inequality creates class systems and all the attendant evils of social immobility: little access to high quality education and jobs; and few, if any, opportunities for meaningful career advancement. In effect, permanent, grinding working poverty becomes the norm for millions until, of course, comes the revolution.

Governments, then, owe it to themselves and to the people – all the people – they represent to be mindful of even the slightest imbalances in the scales of social justice. The role they play is not properly reactive (living wage legislation, as one example), but proactive. Robust, progressive, encompassing social policy designed to create the conditions for broad and general prosperity is what they can and do best.

They should start with a redistributive frame of mind by tithing the personal wealth of rich more aggressively. The notion that economic opportunity trickles down from the top is utterly bankrupt. Rich people spend less of their incomes, per capita, in their local economies than do middle-class wage earners.

Governments should also provide corporate generators of wealth with more incentives for plant reinvestment, job training and apprenticeship programs – for, in effect, a national, private-sector “manpower” program that focusses, once again, on people as much as it now does on profits.

Such are, of course, humble proposals that have, in the current political climate,  about as much chance of being adopted as I have.

On this matter, too, I am certain the Fraser Institute would concur.

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