Income inequality in Canada – historical trends and regional comparisons since 1982

How have inequalities evolved in Canada since the 1980s? How Quebec and other provinces compare to each other? What are the most effective fiscal and social policies for redressing pre-tax and post-tax inequalities ?

This paper estimates the distribution of all national income in Canada, and five sub-regions, from 1982 to 2021. Key findings are:

• Top income shares published by Statistics Canada tend to underestimate income inequality relative to top income shares calculated using DINA, as DINA account for people who do not file taxes and for undistributed capital income that is retained in corporations.
• Income inequality in Canada increased significantly from 1982 until the mid-2000s. From 1982 until 2000, the real income of the bottom 50% of Canadians stagnated while that of the top 0.01% quadrupled. Since the mid-2000s, income inequality has decreased slightly although it remains far above the levels observed in the early 1980s.
• Across Canadian provinces, Ontario has consistently had higher inequality than Quebec although the gap has closed in recent years. Quebec has the most progressive tax and transfer system of the six sub-regions. In Alberta, record levels of inequality were reached in the mid-2000s and these appear to have been a significant driver of the national peak in inequality during this period.
• Post-tax income inequality initially fell during the pandemic because large temporary transfer programs were introduced. However, pre-tax income inequality increased, especially in 2021 when record levels of corporate profits were reached.

AUTHORS

• Silas Xuereb, WIL, University of Massachusetts, Amherst
• Matthew Fisher-Post, WIL
• François Delorme, WIL, Research Center in Taxation and Public Finance, Université de Sherbrooke
• Camille Lajoie, London School of Economics

MEDIA CONTACT

•  Alice Fauvel, Communications Manager, alice.fauvel[at]psemail.eu ; press[at]wid.world