Worker Power, Rent-Seeking and Income Inequality in Canada: A Sector-Level Analysis

This paper develops novel estimates of income inequality at the sector-level in Canada and examines links between sector-level income inequality and different conceptions of power. Using income tax tabulations, it finds that within-sector income inequality is relatively stable over time but there is significant variation in inequality across sectors. In particular, finance and insurance and real estate have high levels of inequality while public administration and utilities have low levels of inequality. Sectors with higher levels of unionization have lower top 10% income shares and higher bottom 50% income shares. Overall, the power held by different income groups should be better integrated into theories of the income distribution.

Key-findings

• The top 1% of income earners in finance and insurance earn about 16% of income in the sector while in most sectors the top 1% of earners earn 6-10% of income
• Sectors with 1% higher unionization rates have on average 0.2pp higher top 10% shares after controlling for sector-level characteristics
• Previous-year growth in sector-level average income is associated with higher sector-level income inequality
• Conventional measures of income inequality which show stagnating top income shares in Canada could miss the recent rise in equity-based executive compensation

Figure: Income Concentration and Worker Power

Policy Recommendations

• Strengthen labor laws to improve workers’ bargaining power relative to top executives

• Improve data transparency so that researchers can better understand market power and its relation to income inequality

Author

• Silas Xuereb: Paris School of Economics. silasxuereb@gmail.com

Media Contact

• press@wid.world.com

Acknowledgements

The author thanks Facundo Alvaredo for his guidance and supervision, and Marc Morgan and Matthew Fisher-Post for helpful comments on earlier drafts.