Politics, not economics, the main hurdle to addressing income inequality: expert

A homeless person sleeps as people walk past near Times Square on Black Friday in New York November 28, 2014. REUTERS/Carlo Allegri (UNITED STATES - Tags: SOCIETY)

Addressing Canada’s income inequality is more of a political challenge than an economic one, according to a senior economist with the Canadian Centre for Policy Alternatives.

The CCPA’s David Macdonald was one of the guests at Wednesday’s Senate Liberal open caucus meeting to discuss income inequality. He told a roomful of Liberal senators that something like a guaranteed annual income — an option that has been floated by many thinkers and economists as an answer to poverty — needs substantial political capital to be implemented.

He said that such a policy may never become reality due to the political heavy-lifting that would be required.

Those who trumpet a guaranteed annual income believe that every citizen has the right to a certain standard of living, including a certain level of income. The Basic Income Canada Network (BICN) has been campaigning to set $20,000 as the base income for all Canadians so they can make ends meet.

Those who oppose this sort of policy tend to believe that a guaranteed income is a disincentive to work, while the BICN website claims it actually encourages productivity by creating stability in individuals’ lives, allowing them to seek employment.

At the meeting Wednesday, Macdonald said many are earning less than they did 30 years ago. Adjusted to inflation, the bottom 90 per cent of earners in large cities such as Montreal and Toronto are earning less than they did decades ago.

Miles Corak, a professor at the University of Ottawa, said wages in Canada are polarizing in ways we haven’t seen before.

Families are “running hard just to stand still,” he said, and we should be most concerned about those at the lower end of income distribution levels.  

Despite Macdonald’s reservations about its political feasibility, Corak suggested a guaranteed annual income policy could be a solution to Canada’s income inequality ills.

“But (it would have to be) conditional on working. Conditional on engagement in the labour market,” he noted. “So you want to keep people on the lower end engaged in work,” Corak explained. “And you want to be sure that in the end, they come away with a reasonable social wage.”

This proposal isn’t in line with what the Basic Income Canada Network has been pushing. The organization wants funding for everyone, regardless of whether or not they’re working.

But Corak said the conversation around guaranteed income is changing.

“The way…guaranteed annual income was discussed (was) without any conditions, almost as a right of citizenship,” he said.

Something like an income tax benefit, that would not be clawed back as someone moves into the workforce the way many provincial programs do, seems like a good model, he said.

“People are certainly still talking about guaranteed annual income as a principle, it’s a question of what is the best design.”