Canada's income gap decreased thanks to pandemic assistance programs

Latest statistics reflecting impact of CERB strongly support basic income systems, experts say

Canada's income gap decreased thanks to pandemic assistance programs

Despite COVID-19's devastating effects on the labour market, income inequality significantly declined as a result of pandemic assistance programs, which increased household after-tax income, according to recent census figures made public by Statistics Canada.

Experts argue that this data makes a compelling case for the introduction of basic income programs in Canada to assist low-income households, reported the Toronto Star.

Canadian incomes showed a general uptrend in 2020 except for Alberta, Newfoundland, and Labrador, StatsCan reported. While the median after-tax household income rose 4.5% from 2010 to 2015, it jumped by 9.8% to $73,000 in the succeeding five-year period that ended in 2020.

Household income increased despite fewer Canadians earning employment income during that time as COVID-19 upended the labor market, which Statistics Canada attributes primarily to federal government transfers during the pandemic.

The Canada Emergency Response Benefit (CERB) was one of the relief programs that paid out to almost two-thirds of Canadian adults.

“After-tax income growth was faster for households with lower incomes, reflecting greater contributions of the Canada Child Benefit and pandemic relief benefits to the incomes of lower-income families,” the agency said.

The number of Canadians living in poverty decreased simultaneously with the drop in income disparity between 2015 and 2020.

The percentage of Canadians with low incomes fell from 14.4% in 2015 to 11.1% in 2020, the biggest drop in any five-year period since 1976.

“What these data shows is that basic income works, and I think if we have the political will to actually put an income floor under people, I think this is evidence to show some of the benefit,” Elaine Power, a professor at Queen’s University and co-author of “The Case for Basic Income,” told the Star.

The number of Canadians making under $20,000 grew by more than 415,000 as lower-paying positions disappeared. However, nearly one million fewer Canadians reported having no income in 2020 compared to 2019. In general, the low-income rate decreased in 2020, particularly for households with children who received the Canada Child Benefit.

Because pandemic benefits have largely ended, the agency was quick to note that the income trends shown in the data offer only a snapshot, which might no longer reflect the current economic reality.

“Income trends could therefore remain unsettled into 2021 and 2022,” the agency said. “Some of the most striking developments for 2020, specifically the strong growth in household after-tax income and the drop in income inequality and in the low-income rate, are not expected to continue in 2021 and 2022 because the driving force behind the recent movements was temporary in nature.”

According to health economist Evelyn Forget, the data demonstrating that CERB was in many respects effective should prompt low-paying employers to reconsider their strategies for drawing employees and enhancing working conditions.