Transcript
Speaker: I'm Jane Williams. This is the Red Eye Podcast. You can hear our live broadcast on Saturday mornings from 10 till noon at 100.5 FM in the Lower Mainland.
Speaker: In this episode, Laurentism talks with Alex Hemingway about two important drivers of worsening inequality in Canada, billionaires and housing.
Speaker: People living in highly unequal societies experience a broad range of health and social problems which affect everyone, no matter how much money they have. That's why we should be paying attention to the latest Statistics Canada data on rising economic inequality in Canada.
Speaker: The latest numbers on household finances show a near record gap in the share of disposable income held by the top 40% of Canadian households compared to the bottom 40%.
Speaker: The wealth gap is even larger than the income gap. Yet even these shocking statistics don't tell the whole story about wealth inequality in Canada. Alex Hemingway is Senior Economist and Public Finance Policy Analyst with BC Policy Solutions.
Speaker: He joins me today to talk about these two facets of wealth inequality, billionaires and housing. Hi, Alex. Hi, thanks for having me. and It's really good to talk to you again.
Speaker: What is that near record gap between the top 40% the bottom in terms of income Yeah, so it's actually a 47-point gap between those two segments of the population at the top, the income distribution and the bottom.
Speaker: that is that you know And the record was a quarter or two ago in the reporting on this. So you know we're near the top end of the recording in that measure. As you mentioned off the top, that's actually really understating the extent of of inequality in this country, which has really grown and grown.
Speaker: Now, there's another gap ah that I mentioned, that's the wealth gap. What does that refer to? Yeah, so there's different ways of measuring this. So when you look at the Statistics Canada data, which does actually understate the wealth gap, you can see, for example, that the top 20% of Canadian households control about 65% of the wealth.
Speaker: If you look at the bottom 40% of households by wealth, they've only got about 3% of the wealth. So it's it's a huge gap. 3% of the wealth. I'm just going to repeat that because that's shocking.
Speaker: In the bottom 40%, that's right. An average of $80,000 per household roughly. And you know some of those households actually have negative wealth. Not surprisingly, we know many households are in debt. so But when you average it out, that's what you get.
Speaker: Now, that sounds bad enough, but you say that the data from StatsCan is missing some very significant data about inequality. What what is that? Yeah, so some of the surveys they rely on aren't aren't actually well suited to capturing the richest of the rich. You know, when you talk about the top 1% or the top fraction of 1%, that's often missed in the these samples. So we have had efforts from the Parliamentary Budget Office to to estimate that very high end of the wealth distribution.
Speaker: We find that the richest population 1% in Canada controls about a quarter of the country's wealth. ah Maybe more than that, depending on which estimate you look at, there's some academic modeling of this as well.
Speaker: And you can see it in the, you know, there there are these so published lists of the richest Canadians and of Canadian billionaires by Canadian Business Magazine and by Forbes. So,
Speaker: Just the richest 10 billionaires in Canada control a $261 billion, dollars according to Canadian Business Magazine. So that is really just a whopping slice of inequality right there.
Speaker: It really is. And, you know, I've been following these numbers for some years now, and it's extraordinary to see them grow and grow at the very top. Let's turn a little bit to housing now.
Speaker: The other facet of wealth inequality that you looked at comes from housing. How much wealth do homeowners hold? Boy, it's a lot and it's and it's concentrated in certain places. So if you look at nationwide, the sort of net wealth of homeowners that their property value minus any outstanding mortgage debt they have, just in the principal residences across Canada, that's $5.8 trillion dollars right there in
Speaker: And i think another good way of seeing this is to you know look at the concentration in cities like Vancouver and and Toronto. So in greater Vancouver, you know including the Fraser Valley, just the value of the land under the just the detached houses in this region was $744 billion dollars last year. So that is actually even more than the total wealth of Canadian billionaires. So that tells us that you know, when it comes to understanding inequality, we have to look at both the top end and the housing driven side. That's, you know, a level of wealth that is enormous and really can't be ignored.
Speaker: So the wealth gap then between people who own houses or the land under houses and renters must be pretty high at this point. What's that look like?
Speaker: It is. And we get it we get a nice window on this in in the SAT scan data. so And it does depend on on the age group. But in general, homeowners have between 10 and 30 times more wealth on average than renters.
Speaker: So look at, for example, in the 55 to 64 age range, homeowners there had a median net wealth of a little over a million dollars, 1.2 million in 2023.
Speaker: Compare that to just $43,000 of net wealth for renters in that age group. So it's enormous. And, you know, obviously that has a big effect on people's livelihoods, ability to live their lives, their mobility, and obviously their ability to make ends meet.
Speaker: it It seems almost like if you managed to buy a house through some feet, then you're kind of on the up escalator. And if you're a renter, you're either on the down escalator or you're not going anywhere.
Speaker: Well, that's exactly it. Some folks have gotten very lucky, particularly who got into the property market some years ago and have have ridden that escalator up. And I think many recognize that and recognize that it's a it's a problem that so so many people are squeezed out. Because the issue is there that's fundamentally, you know, wealth gains through land and housing is fundamentally a zero-sum game.
Speaker: Because, know, Any uplift you're getting on that escalator comes at the direct expense of someone who's having to pay a very high price for a home or pay very high rents.
Speaker: So, you know, it's not the kind of wealth accumulation that could be viewed in in a positive way because it's by definition coming at someone else's expense. So let's turn to look at the the impact of this worsening inequality on our society. While we don't have an Elon Musk in Ottawa yet, what impacts can you see on Canadian democracy from the influence of the super rich?
Speaker: Yeah, well, I think we we we should be alarmed by, and I think everyone listening is alarmed by what we're seeing south of the border right now. You know, we have billionaires not just influencing policy, but actually directly wielding power in the US. And I think we should be concerned about going down that road ourselves.
Speaker: You can see, i think, so some indications of that distorted democracy in Canada. So, you know, one example, ah you look at the polling on the idea of a wealth tax on the super rich,
Speaker: That's one of the most popular policies in the polling that you can find, 80 to 90 percent support for that across party lines. ah Yet, where is it on the federal policy agenda?
Speaker: You know, it's been nowhere to be found. So that's one measure of a very popular policy. You know, is is democracy working well when ah policy of that level of popularity isn't on the agenda?
Speaker: And I think, you know we've been seeing as things unfold in the US, some tech CEOs in Canada getting similar ideas. they've They've been starting new groups like Build Canada to push their agenda in our politics. And and we've seen some reporting out there that even some of these CEOs are even flirting with the idea of creating a Canadian version of Elon Musk's Doge, which is dedicated to gutting federal public spending. They want to see the same thing happen here. And that's no joke. I mean, there are policy proposals on on the table in this election from a major party to defund the CBC, even when I think most people would agree there's a need to be strengthening national institutions under threat from the U.S.,
Speaker: Alex, you you write that the inequalities generated by the housing crisis are deeply corrosive. How so? Say more about that. Well, in a number of ways, you know, for example, there there is ah growing economic research literature that shows that high levels of inequality are actually just a drag on economic growth.
Speaker: And, you know that's in many ways not surprising. When you have extreme inequalities, many people are not flourishing. Many people are not having their their needs met. And that means they're not able to contribute as much as they might otherwise to the society and economy. So it's negative in that sense.
Speaker: There's epidemiological literature on the negative health effects that I believe you mentioned off the top. There are significant negative health effects that are observed in countries with extreme levels of inequality relative to more equal countries. so that And that actually includes those at the very top in some cases, seeing those worse effects.
Speaker: Because it's, you know, it's not a nice thing to live in a society where people are deeply struggling, where they're out on the street without homes, where, you know, we have a deficit of infrastructure investment that we've been neglecting for too long.
Speaker: And you know, the final piece there is is what we were talking about a moment ago is, you know, these high levels of inequality distort our democracy. And I think all of that adds up to what I think most of us can feel right now in this political moment, which is that our social fabric feels like it's fraying, it's sort of threadbare, you know, we've got a little boost of ah nationalism as we oppose Trump right now. And there's some heart to be taken in that. But
Speaker: I think there's no doubt we're in a precarious situation if we keep going in this direction of of extreme inequality and you know dispossession when it comes to ah basic ah human rights like housing.
Speaker: Now, obviously, fairer taxes are a good place to start. We talked a little bit about the wealth tax and how popular that is and but capital gains tax.
Speaker: What can we do beyond that to blunt the power of the super rich and start to tackle inequality? Yeah, so I think vote those tools are essential to creating more equality in the country, those tax tools. But beyond tax, I think there's a lot that we can and should do.
Speaker: i think fundamentally, you know, and including when it comes to actually winning those types of progressive tax policies, we need to build more working class power in this country.
Speaker: We need to make it easier to unionize so people can fight for higher wages in their workplaces, but also so that there can be more countervailing power that can offset the influence of corporations and the business lobby and our politics.
Speaker: We need to increase working class representation in government, you know having workers serve in legislatures and parliaments. yeah That was actually the topic of my doctoral dissertation, was looking at the severe underrepresentation of workers in in legislatures across advanced democracies and and the very real effect that has on policy outcomes.
Speaker: And, you know, one thing that I've been thinking a lot about in the past couple of years and and published a report on is I think, you know, we need to look at the possibilities for workers to take charge in the workplace, in the companies that they work for and make profits for through things like worker cooperatives and other forms of democratic employee ownership of firms in our economy.
Speaker: What about on the housing front? Oh boy, there's there's a lot we need to do on housing. First and foremost, we need to deal with the shortage of homes. and And most critically, we need to significantly increase public investment in dedicated, affordable, non-market housing. You know, that type of investment really fell off a cliff in the early 90s in Canada. The federal government largely got out of that.
Speaker: business and you know we saw similar trends provincially. There's been some reinvestment in recent years, but not enough. So much more non-market housing. We also have to increase the overall supply of homes. It's very severe, the shortage we're facing today.
Speaker: Part of that results from policies like the exclusionary zoning that we see in our cities. It's still, despite there has been some genuine progress on housing policy in BC, for example, in recent years, but it remains the case that on about 80% of the residential land in in Vancouver,
Speaker: You can't build apartments. They're banned. You can build very expensive detached houses, can't build apartments. So, you know, that has to change. And, you know, the senior levels of government can play a helpful role there by providing some of the infrastructure funding that municipalities need to to upgrade their infrastructure and enable the the creation of the housing that we need.
Speaker: Are you seeing these issues, these critical issues around wealth inequality being raised in this federal election campaign? I got to tell you, i I have not so far very much, certainly not as as much as I would like to.
Speaker: For example, I haven't seen a wealth tax put on the table yet. I wonder if we will. i know ah the NDP has advocated for that in the past. I believe the Greens did as well in in a previous election cycle.
Speaker: So I'm curious if that's going to come back on the table. I'm concerned that, you know, so far, actually all four of the major parties in English Canada, including the NDP and the Greens have put tax cuts on the table.
Speaker: Now, those are aimed at lower brackets. But actually, you know, when you dig into the details, many of the benefits of those tax cuts still flow, tend to flow, the the biggest benefits flow to those a little higher up on the income distribution. And of course,
Speaker: we actually need more revenue right now. We need to be increasing public investments in housing, in infrastructure, in healthcare. care ah So this is not the time to be cutting taxes in my view. So I think that's a little concerning, but you know it's early days in the campaign. So we'll see. And I, you know, I think there's an appetite for Canadians to pitch in together, ah particularly if we're asking the richest to pay their fair share, to build a more self-reliant and more resilient economy.
Speaker: economic economy and country in the face of just these relentless threats from Trump and and from the United States. Well, it's been really good talking with you about this. Thank you so much, Alex.
Speaker: Thanks again for having me. Good talking to you. I've been speaking with Alex Hemingway. Alex is Senior Economist and Public Finance Policy Analyst with BC Policy Solutions. And you can find his latest piece on wealth inequality in Canada at bcpolicy.ca.
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