Income gap widens between Canada's Rich and Poor, OECD study says By Canadian Press: Michelle Mcquigge, 21 October 2008

The gap between the rich and poor in Canada widened significantly in a recent 10-year period partly because Ottawa spent less on cash benefits than many other developed countries, the Organization for Economic Co-Operation and Development (OECD) says.

It was a reversal of the trend in the two previous decades when the gap was narrowing, the OECD said in a report.

The report said both Canada's poverty and income inequality rates spiked between 1995 and 2005 until they both exceeded the 30-member organization's average.

The organization said Canada experienced an especially rapid increase in both numbers; only Germany's gap widened at a comparable rate.

The study, released Monday, found Canada's well-to-do enjoyed a more substantial income than their counterparts in other developed countries. The report said Canadians in the top 10 per cent income bracket were earning an average of $71,000, more than 30 per cent higher than the OECD average of $54,000.

While the average incomes for Canada's middle and lower classes also exceeded the OECD average, the margin was less pronounced at 18 per cent.

The OECD attributed the widening gap in part to the Canadian government's spending policies.

"Canada spends less on cash benefits such as unemployment benefits and family benefits than most OECD countries," the report said. "Partly as a result, taxes and transfers do not reduce inequality by as much as in many other countries. Furthermore, their effect on inequality has been declining over time."

The OECD said the rate of people living in poverty, or earning less than half the organization's average income, rose to 12 per cent during the study period, an increase of up to three percentage points. While the report found only six per cent of seniors were impoverished, it said 15 per cent of Canada's children were living below the poverty line.

But the study praised opportunities for social mobility in Canada, saying children of poor families stood a better chance of improving their circumstances over time.

OECD Secretary-General Angel Gurria urged all governments to address the "divisive" issue of growing inequality, adding that efforts to educate the country's entire workforce rather than the elite were necessary to level the playing field for future generations.

"Greater income inequality stifles upward mobility between generations, making it harder for talented and hard-working people to get the rewards they deserve," he said in a statement. "It polarizes societies, it divides regions within countries, and it carves up the world between rich and poor."

The Paris-based OECD is a group of 30 mostly developed countries that aims to promote economic growth and help governments fight poverty.

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Canadian Press: Income gap widens between Canada's rich and poor