Better education, more taxes, more public spending addresses economic inequality in Canada: SFU professor

With the rate of job inequality growing in Canada, one Simon Fraser University economics professor says improving education, changing labour laws and increase public spending will minimize the inequality gap.

Krishna Pendakur gave a public lecture to a packed room in Burnaby this week. The lecture was called “What does inequality really mean in Canada? Ninety-nine per cent of us want to know.”

Other suggestions in the lecture include strengthening unionization and raising the minimum wage.

After talking about the distribution of wealth in Canada and how the nation compares to the rest of the world, historically to present day, Pendakur addressed what the Canadian systems and its citizens can do to reduce inequality.

One suggestion is taxation.

“Tax rates have been declining in Canada since the late 1990s.”

Taxation supports public spending, he said, and public spending goes to citizens in need of resources and social services.

“The federal government writes a lot of cheques,” he said.

Public spending is a move towards reducing inequality.

Pendakur said, “When you reduce taxing, you reduce public spending.”

When it comes to personal income tax, the professor said it’s harder to tax the one per cent. “They have the money to spend to save their money, to hide their money.”

For corporate taxation, he said it’s awful because companies are able to move locations to different countries with different laws. “It’s a losing game.”

The professor said Nordic countries hardly bother with corporate taxation and instead, focus on tax consumption and personal income. Tax consumption in Canada is the GST and PST, which, he said, is slightly progressive. “It’s a little low compared to Europe.”

Property tax is perfect though, Pendakur said, because property doesn’t move. “It’s the classic immobile thing to tax.”

However, in British Columbia, the contribution is very small. He said property tax makes about five per cent of British Columbia’s revenue.

Pendakur noted, “[Canada has] no luxury taxes to speak of.”

Another suggestion to minimize inequality is by improving education. Quality K-to-12 and post-secondary education may make a difference.

“B.C. has steadily shifted public spending away from education into health care since 2000.”

The United Kingdom, he said, had massively increased post-secondary rates in the 1990s. “The rate of return to education did not fall. It’s a win-win situation.”

In other words, educating students beyond high school did not result in a huge surplus of unemployed qualified labourers.

During Q-and-A, an audience member asked Pendakur what he thought about the Conservative Party of Canada’s income-splitting tax plan.

Pedakur said, “Income splitting is awful.”

He said the plan values two-parent, two-income families and ignores every other demographic in the country. “Why is this particular demographic worth more than others?”

Single mother and University of Fraser Valley student Anoop Tatlay agreed with him.

“I couldn’t pinpoint what it was about the [income-splitting tax] proposal that bothered me but once he said it, it clicked. I’d thought the same thing.”

Pendakur presented complex information in an engaging manner, said Tatlay. The newfound knowledge motivates her to look more closely at the federal budget and public spending and try to understand it better.

For actions she can take as an individual Canadian citizen, the 37-year-old Mission woman said she’ll vote on Oct. 19 in the upcoming federal election and give her teenage daughter the best education she can give her.

Inequality is more about wealth than income according to the professor.

Wealth is money generated from stocks and bonds, Pendakur said, and income is based on labour. With time, as wealth piles up and remains unevenly distributed, he said, inequality grows. “The trend of inheritance – saving and giving money to the future generation, future sons – is making a comeback.”

The professor explained, “The historical tendency is that the rate of return on wealth is higher than the growth rate of national income.”

This meant the rich got richer and left everyone else to catch up, he said.

Pointing to dotted graphs projected behind him, Pendakur said the United States and Canada follow each other closely with both countries having a concentration of wealth in the “rich” demographic.

He said before the 1930s, inequality was high. The countries used in his example were the United States, Canada, United Kingdom, Japan and Italy.

From the 1930s to the 1980s, inequality in these countries were low due to a few factors. One of them was “a whole raft of egalitarian laws aimed for equality.” Another is labour movements and philosophies such as Fordism and Taylorism that favoured skilled blue collars.

However, he said, inequality started to creep up after the 1980s, especially in the United States.

Zoe Ducklow, 29, journalism student at University of British Columbia, found the historical part of Pendakur’s lecture interesting, especially during the 1930s and 1940s.

“It was more equal then. It means we can get back to that place without disassembling capitalism.”

Copyedited by: Kayla Isomura