If you’ve been suspicious that wealth equality is getting worse in Canada, you’re right. World Economic Forum (WEF) researchers have been trying to figure out why countries are seeing their Gross Domestic Product (GDP) rise, but more people are claiming things are getting worse. These researchers finally figured out that GDP is a crappy way to measure the success of an economy. Instead of relying on GDP, they created a new index for measuring inclusiveness. Canada might be booming in terms of GDP, but we’re one of the least inclusive advanced economies in the world.
The Inclusive Development Index Is A Better Way To Measure Social Progress
WEF researchers feel that GDP is still an important factor to measure, but not the only one. A few grocery oligarchs are making mad dough, doesn’t mean everyone is in a booming economy. Instead, of guessing how wealth is being distributed, WEF designed a new index, the Inclusive Development Index (IDI).
The IDI isn’t a replacement for measuring GDP growth, but WEF considers it an “alternative.” GDP should be used to measure “top-line” performance, giving a broad measure of the country’s macroeconomic success. IDI should be used to measure “bottom-line” performance, which is how that wealth is reaching people. As the gap between GDP and IDI ranks increase, so does wealth inequality. If you’re in the top half of the wealth inequality, you probably don’t care. But a healthy lower half is who buys the s**t that keeps you rich. So smarten the f**k up.
Canada Ranks At The Bottom For Economic Inclusiveness
WEF researchers actually rank Canada in the bottom fifth of advanced economies, when measured by the IDI. Canada comes in number 17 out of 20, a couple of spots below the Czech Republic and a couple of spots above Slovenia. Probably not where most people would have placed it, if they had a list they had to rank. Researchers noted Canada is “lagging behind on inclusion,” but the country is stable.
That not so hot rank becomes even worse when WEF researchers compare GDP to IDI. The closer the gap between GDP and IDI, means the economy is very inclusive. The larger the gap, the worse the inclusion. Canada ranked 17 for the gap, placing us amongst the bottom 20% of advanced economies for economic inclusiveness. If that was too technical, it means Canada is making a mad amount of cash, but most people aren’t benefiting from it.
Which Area Is Canada Doing Well In?
None. Unfortunately, Canada isn’t in the top 20% of advanced economies in the 5 year trend for IDI. We did land in the top 40% of advanced economies for life expectancy, net income, poverty reduction, and median incomes. The report wasn’t all bad, we’re just not getting the kind of return we should be getting for the wealth in this country.
Canada Did Pretty Good In These Areas
Canada got decent ratings in three categories. We landed right in the middle for our scores on GDP per capita growth, labour productivity, and wealth GINI. The last one is a statistical distribution of wealth, but doesn’t mean what most casual observers think.
Wealth GINI is unable to determine structural changes of society, or distribution. For example, a country where 50% of people are ballin’, and 50% of people have nothing, would have a GINI coefficient of 0.5… right in the middle, at “balanced.” Few people would consider such a large gap as “balanced,” and that’s why it’s only a minor factor to consider.
Canada Is Doing Terrible In These Areas
Canada scored in the fourth quintile, or bottom 40% of advanced economies in the other 5 categories. Low marks were given for the employment trend, adjusted net savings, carbon intensity, public debt, and dependency ratio. These are big ones, and are mostly self-explanatory, except dependency ratio.
The dependency ratio, is the ratio of people too young or too old to work, versus the ratio of people that can work. This is an extremely important indicator. The higher the number of people that are not in the workforce, the more pressure is placed on those that are in the workforce, especially in the area of taxes. The higher the rate of taxes, the less free income to push the economy forward, and less money to push real estate higher. This is an important indicator that we’ll be breaking out on another day, but the point is that WEF gives us a low score here.
Canadians have been becoming suspicious that this economy has left behind many people. Unfortunately, the government hasn’t noticed these issues, because we’re measuring the wrong thing. We can’t improve what we can’t measure, and that quietly eroded the economy. So no, you’re not crazy if you think things are getting worse economically. One of the largest economic research organizations finally gave data points to confirm it.
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Photo via WEF.