‘The rich and everybody else’: Financial inequality in Canada keeps growing

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Jan. 25, 2023

TVO Today speaks with author John Peters about the billionaire class, deregulation, and why the workforce is becoming more precarious

f the past few years have demonstrated anything, it’s the presence of inequality in Canadian society. Yet, historically, Canada has been perceived as a relatively equal country. What gives? TVO Today sat down with John Peters, a research fellow at the Université de Montréal and author of Jobs With Inequality: Financialization, Post-Democracy, and Labour Market Deregulation in Canada, to talk about his 2022 book and what it reveals about the divisions in our society.

TVO Today: I’m going to ask a bunch of questions. I’m kind of anticipating that we may end up going off script a few times and just talking about this stuff. But I want to start simple with, like, what prompted you to write this book?

John Peters: The 2008 financial crisis was the first big impetus. It was this huge eye-opener, not only for me, but for governments and policy-makers and academics around the world, about how much finance had really been driving the show and how little regulation was often behind it.

Just as striking was how governments bailed out the finance industry and just carried on essentially as before. Despite massive unemployment and all sorts of evidence about inequality, we didn’t really see much in its wake in terms of remedies or real lessons being learned.

There’s so much international research on financial inequality going on. I thought, let’s take a look at Canada. There’s a lot of evidence to show what’s happening in the worst example, the United States, but sort of the worst processes and dynamics are also happening here in Canada.

TVO Today: Can you talk to me a bit about your research process?

Peters: You want the honest answer? Long and painful.

TVO Today: I mean, that certainly describes writing a book. But other than long and painful, was there anything notable about the research process you’d like to share?

Peters: I think the biggest thing the process showed is that we can really get an understanding about what’s happening in our economy by looking at tax data. The use of tax data has been the biggest breakthrough for inequality research both here in Canada and around the world.

There’s the World Inequality Lab now, in Paris, that produces the World Inequality Report each year. They’re sort of on the leading edge of this. And there’s research from the Organization for Economic Co-operated and Development on low-wage work. They’re both tax-data-driven.

Previously, a lot of research was based on generalities about inequality. We had this thing called the Gini Coefficient, and we had indicators of poverty, but we typically focused on the average rate of inequality. Focusing on the average doesn’t tell you what’s happening at the top, and it doesn’t tell you what’s happening at the bottom 50 per cent or more of the working population.

By using tax data, you can look at the labour market and what people are actually getting paid, not only in terms of hourly wages, but also in terms of annual earnings. You can look at households and see whether after-tax transfers and benefits are actually doing something to reduce inequality.

TVO Today: Can you give me a sense of what tax data is available to researchers in Canada and around the world?

Peters: Well, it varies by jurisdiction. The World Inequality Lab is part of a large European consortium that has created these world-inequality reports and data sets that use tax data. It’s quite the resource for people and policy researchers and progressive politicians to say, look, we’ve got a problem here.

For Canada, it was also about custom requests to Statistics Canada. There’s a number of researchers there who were really helpful to me. We had to really talk through the data and what made the most sense. So the data I use is not sort of completely publicly available, but you can request it and begin to make use of it.

TVO Today: In the introduction to Jobs With Inequality, you note that Canada is conventionally seen as a rich, relatively equitable country. Help me understand why, from your perspective, that’s not the case.

Peters: All the data shows that’s not the case, either at the top or the bottom. Those who are in the top 1 per cent of earners have done extraordinarily well. They’ve more than doubled their incomes across the 1990s to 2015.

And the most recent data shows that those who are in the billionaire class have done even better just over the past couple of years, taking roughly 60 per cent or more of all wealth. And the number of billionaires has gone up — we’ve had a tripling of billionaires. What are referred to as ultra-wealthy individuals have also seen a massive expansion. I think it’s almost triple now, just over the past 20 years.

So certainly in the top end, there’s this idea that we’re equitable or we’re not the United States. Yeah, the U.S. is in another category, but we’re usually somewhere in the realm of being number two or number three in terms of seeing top income inequality expand.

TVO Today: And what about the bottom end?

Peters: This is really striking once you get into the tax data and stop looking at averages. We often think of the average income of workers as being somewhere between $50,000 and $60,000 per year. But the fact is that there’s a huge discrepancy between those who are making millions and the 50 per cent of [adult Canadians] who are making less than $15,000 or $16,000 dollars a year, statistics I unpack in my book. Even if you put all that money together in households, as of 2015, you’re still somewhere below $16,000 to $17,000 for those households.

Fifty per cent of  households are earning less than $16,000 to $17,000. That’s even after taxes and transfers and benefits. That gap between the 50 per cent of the population, roughly 8 million people or more, and that top 1 per cent of earners, a very small slice of the working population, is huge. And it’s growing bigger. I think that’s the most striking thing for me.

TVO Today: That 50 per cent statistic is really striking. Can you just talk to me a bit about how you worked that out and some of the implications?

Peters: So, if you try to work your way up from the bottom of the working population, in terms of earnings, instead of using an average or working from the top down, you can begin to really think about what people are earning.

And then, if you stop looking at hourly wages and you start looking at annual earnings and the different kinds of employment arrangements that people are in — whether that’s full-time, full-year work or part-time work, etc. — all these different ways people are employed, you begin to see that there’s a very different sort of picture. There’s a big difference between what’s happening to the roughly 50 per cent plus of the workforce who have full-time, full-year jobs and everybody else. And it’s that everybody-else category that’s been expanding over the past two to three decades.

You used to talk about the working poor. But it’s not just the working poor anymore. It’s the workforce. And more of that workforce is becoming low-wage; more and more of that workforce is becoming precarious and economically insecure.

Despite the fact that we like to talk about how Canada is one of the biggest countries in terms of post-secondary education spending and training, it looks like all those education dollars are being wasted. Even people with college and university degrees are part of that low-wage, precarious workforce now. The gap is not getting any smaller. And that’s not necessarily an individual problem. It’s a systemic one. 

TVO Today: How did this happen? Based on what you’re saying, I detect an age divide as well as a class divide here.

Peters: All those people who had a certain amount of labour experience prior to or into the early 1990s and then carried on, they weren’t necessarily the ones who have seen that sort of precarity and job loss. Their experience carried them through.

People entering the workforce since then have had to contend with the continual erosion of labour standards, labour law, and collective bargaining, as well as all these different kinds of carveouts, especially around self-employment.  

It creates what looks like an age divide, but it’s not really. It’s a deregulation divide.

TVO Today: What else is happening here? 

Peters: We’ve seen major shifts in government policy, how our government operates, and who it listens to, which really helps us account for this growing gap between the rich and everybody else. Economic policy has been restructured to really favour big finance, and that, in turn, has played a key role in restructuring how business operates and how it wants to operate in terms of getting more profit and more short-term returns, usually at the expense of workers.

It’s also using new kinds of finance and credit as a way of continuing to expand.  But that’s kind of a deal with the devil, because the more you use big debt and credit, the more economic pressure is on all these firms, as well as throughout the supply chain. Then, once that happens, everyone’s looking to get more cash out of workers and to find ways to make the workforce more flexible and cheaper.

TVO Today: You argue that business and finance have recast government policy to enable this transition over the past few decades. Can you walk me through how this happened in, like, medium detail?

Peters: Across the board, banks have become more self-regulated. Over time, the rules more broadly for business, banking, insurance, and pension industries have all changed so that they can offer more credit and devise more kinds of credit and financial assets. They then can use those to develop and expand their businesses.

In fact, the banking industry was able to create a whole sort of secondary sector, completely outside government regulation, called the shadow-banking sector. It’s worth trillions of dollars. Similarly, the pension industry used to be very regulated. Well, guess what? They’ve all dived headfirst into every financial-asset derivative, collateralized debt, obligation, credit-card debt, whatever. You name it. And then all these new financial actors — like hedge funds and private-equity partners — have entered the game.

So by changing all these rules right across our economy in ways that really favour business and finance, our economy really becomes a moneymaking machine and a way to extract money out of the general working public. Then, just to top it off, if you have all this money and you want to keep going with this kind of model, what do you do? You keep on investing in lobbying your politicians to do more of the same.

TVO Today: Who is the biggest culprit in all this?

Peters: There’s no one finger to point, I think. In terms of setting the general framework, it’s the central banks, it’s the investment banks, and it’s the American central bank — the Federal Reserve — which evidence shows is often setting the general framework. At a secondary stage, it’s the banks themselves and the pension and insurance industries. They’re very interested in deregulation and liberalization. At the same time, it’s the big business and especially the American big businesses in auto, mining, oil and gas.

TVO Today: How do we see this manifesting in Ontario?

Peters: You can see it in Toronto’s financial sector. It’s not necessarily referred to as a tax haven, but it’s certainly tax friendly in all kinds of ways. You can see it play out in housing markets. And you can also see how financialization has restructured manufacturing.

TVO Today: This book is pretty stark. Do you ever get really bummed out? How do you deal with the psychological costs of looking deeply at this stuff?

Peters: I mean, if we don’t know what’s happening, we can’t fix it. Without that knowledge, we’re never going to say that we’ve got to change this, that people are making way too much money and they’re running the show.

I think that has always been part of building democracy over the past century plus. Capitalism and democracy have always been in contestation. People want votes. People want rights. And they see that, usually, they can’t get them, because there’s a whole bunch of rich people who aren’t willing to do it.

It’s in some ways depressing, but, in another way, I think it should be eye-opening.

This interview has been condensed and edited for length and clarity.

Ontario Hubs are made possible by the Barry and Laurie Green Family Charitable Trust and Goldie Feldman in Memoriam.

[Top photo: John Peters is the author of “Jobs With Inequality: Financialization, Post-Democracy, and Labour Market Deregulation in Canada.” (intuilapse/iStock)]