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World Economic Forum Questions Canada’s Income Equality and Economic Sustainability

World Economic Forum Questions Canada’s Income Equality and Economic Sustainability

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.

 

World Economic Forum Questions Canada’s Income Equality and Economic Sustainability – GDP to IDI
Source: World Economic Forum.

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.

World Economic Forum Questions Canada’s Income Equality and Economic Sustainability - 5 Year Trend

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.

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9 Comments

  • Reply
    Ahmed 4 weeks ago

    The Canadian government can only pump the economy up with so many fake data points before it collapses. First the IMF testifies to the Senate that they don’t know the country is doing with debt, then the World Economic Forum. Everyone in the world is watching Canada decline, and homeowners are cheering their “wealth.”

    • Reply
      Redd 4 weeks ago

      Most people are unaware that countries need to spin positive data, because they operate like a brand. They need to project a healthy image in order to attract more business and more immigrants to build revenue (taxes). You’ll never receive a proper negative assessment from a government for this reason.

  • Reply
    TJ 4 weeks ago

    Excellent find and explination. Bonus points for the jokes in the institutional report this morning. LOL.

  • Reply
    Igor D. 4 weeks ago

    What kind of impact does this have on immigration?

    I’m assuming once this starts spreading, an increasing number of reports will show Canada isn’t as prosperous as a “top-line” analysis shows. I wouldn’t move here based on the trend declining.

  • Reply
    Im Therious 4 weeks ago

    As a general comment, the top 1% (5%, 10%, however you want to break it up), will always be the haves.

    Unless we all have access to unlimited resources, this likely won’t change.

    Putting together fuzzy indices doesn’t change the fact that we are ape-people who evolved from cave-dwelling, blood thirsty savages to figuring out how to send humans to the moon just 49 year ago.

    We just happen to be condo-dwelling now. 🙂

  • Reply
    bluetheimpala 4 weeks ago

    Isn’t it telling that the leaders of the world sit side-by-side with the richest people in the world and. with a straight face, they all try to convince the plebs that that we must stamp out inequality and help the poor. Sandberg literally looks like fucking Senator Palpatine overseeing her padawan.

  • Reply
    Chris 4 weeks ago

    I’m not saying the 0.01% should worry. It’s not like we are collecting pitchforks and torches, perfecting the naptha/cooking oil ratio for the fuel, testing the aerodynamics of torch handles, noting the homes of particularly egregious exploiters. Nope, you can keep doing this forever.

  • Reply
    Justin Thyme 3 weeks ago

    Do I detect a bias in the sampling?

    The countries above Canada are all very socialist. They are well known for redistributing income through strong social nets. What is missing are the rest of the countries that are predominantly right-leaning capitalist (the US is an obvious exception, and this chart makes it look like an outlier instead of the norm).

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