Income Disparity and Wellbeing

Income disparity in some of B.C.’s coastal regions is greater than the B.C. average, which is greater than Canada’s overall score (Figure 1). Income disparity is a significant indicator of social wellbeing and is commonly known as the wealth gap between the rich and the poor. In this article, we consider two metrics of income disparity. Both metrics agree that among B.C. coastal census divisions, Comox Valley demonstrates the least income disparity and the Central Coast has the highest disparity score. Depending on the metric, Greater Vancouver, Mount Waddington, and Skeena-Queen Charlotte areas also score relatively high in disparity, while Strathcona, Cowichan Valley and Alberni-Clayoquot areas exhibit lower disparity scores.

Figure 1. Income disparity (decile ratio) in Canada and B.C. from 1976 to 2015. Higher values mean greater disparity. Data source: Income Statistics Division, Statistics Canada.

Standard of living is one of eight categories of wellbeing identified by a Canadian network of academics and documented in the Canadian Index of Wellbeing (CIW). A 2016 CIW report concluded that the gap between national economic growth and overall wellbeing is widening. Since the recession in 2008, Canada’s economy has recovered and grown by 8.1 percent, as measured by growth in Gross Domestic Product (GDP). However, when overall wellbeing was calculated using a metric that included standard of living and seven other aspects of human wellbeing, the results showed a mere 1.1 percent gain in overall wellbeing over the same time period. In short, not all citizens are benefitting from the growth in GDP. In fact, across Canada, scores for several components of the wellbeing index have declined.

Income disparity is one indicator that illustrates the growing gap between economic growth and general wellbeing. The gap between Canadians in the top income brackets and those at the bottom has widened. According to the Conference Board of Canada, income inequality increased over the 20 years following a low in 1989 and has leveled out since. After-tax income data from Statistics Canada show that inequality scores for B.C. have been consistently higher than inequality scores for Canada as a whole since 1998 (Figure 1). A look further back in time suggests a pattern of higher inequality at the beginning of the 20th century, falling rates through the 1970s, and rising inequality since then, but only for certain countries including the U.S., U.K., and Canada. Inequality in continental Europe and Japan has not risen to the same extent since the 1980s.

Income inequality matters because societies with greater disparity are shown to have worse health and wellbeing outcomes. Further, these negative outcomes are not restricted to the poor. They are felt by those at both the bottom and top of the socioeconomic ladder, meaning everyone suffers in unbalanced societies. Currently, scientists are studying potential causal relationships and looking for evidence that once a certain threshold of inequality is crossed, impacts to health and wellbeing become evident.

We looked at two common metrics of income disparity:

• An income decile ratio, or the ratio of the income of the 10 percent richest to that of the 10 percent poorest (Figure 2), and
• The Gini coefficient, a statistical measure of inequality (Figure 3).

Figure 2. Income decile ratio for B.C. coastal census subdivisions. Higher values mean greater income inequality. Data source: Statistics Canada.

Income ratios are the most basic inequality measures and are widely used because they are easy to understand, but they are vulnerable to extreme values and outliers. Income decile ratio, which in our case compares the adjusted household income of the top 10 percent to that of the bottom 10 percent of households, in coastal B.C. ranges from 4.14 to 6.68 (Figure 2). For example, the top 10 percent in the Central Coast division earn 6.7 times as much as the bottom 10 percent in that region. Higher values indicate greater income inequality and may imply lower overall wellbeing. Strathcona, Powell River and Comox Valley census divisions have the lowest disparity among coastal divisions.

Figure 3. Gini coefficient for B.C. coastal census divisions. Gini values range between zero and one, with higher values indicating greater disparity. Data Source: Census mapper.

The Gini coefficient can be used to measure any form of uneven distribution, and is the most widely used single measure of inequality. Values range from zero, where all people have equal income, to one, where one person has all the income. Therefore, higher values indicate greater inequality. The Central Coast and Greater Vancouver have the highest Gini coefficients of the B.C. coastal census divisions (Figure 3). Researchers have found that not only are negative health outcomes related to income inequality despite individual income level, but also that association between negative outcomes and income inequality is stronger above a threshold of 0.3 for the Gini coefficient.

Interpreting either of these metrics has limitations and caveats. In any region, the relative size of urban versus rural  populations will contribute to the inequality metric – incomes are generally lower in rural areas – as will the relative proportion of the population receiving income from sources such as self-employment, investments, or income assistance. These factors can be broken out and studied in more detail to inform policy to address the increasing gap between the rich and the poor.

Individual and Organization Actions:

• Be aware of income inequality issues in your community and support government policy and action to address change and imbalance.

Government Actions and Policy:

• Provide a universal basic income as part of social assistance to reduce income inequality.
• Further extend health and social benefits to low and modest income Canadians, to reduce income inequality.
• Mitigate the inequality impact of technological progress by improving the general skills level across all geographies through broader access to high-quality education and training programs.
• Remove obstacles to women’s participation in the labour force.
• Work to reduce and minimize tax evasion.
• Convene a Fair Tax Commission to review the entire provincial tax system