Income inequality in Canada: Part 6 – gender and age

For my next step in looking at income inequality in Canada, I thought it would be interesting to look at average wages with respect to age and gender.  It would have been nice to include level-of-education and number of years of work experience (rather than just having the age of the individual), but I was unable to find a dataset with all these properties.  I did find some interesting data regarding education-level and escaping from poverty, but that’s for another post.

Today, I will show the overall results for Canada and the provinces.  In following days, I will publish more detailed results for the individual provinces which will show average wages for the different categories of occupation.

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Explanations for the 1995-2000 surge in inequality

In my last post, I was happy to come across my first unexpected result: that the vast majority of the rise in income inequality in Canada from 1976-2011 occurred within the 5 year span of 1995-2000.  I was looking for some possible explanations to why this occurred when I came across this interesting paper by Emmanuel Saez and Michael Veall.  They also remark on the 1995 surge in inequality and offer some explanations – I will summarize two which I found to be the most relevant and interesting:

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Income inequality in Canada: Part 5 – what happened in 1995?

In my previous post on this subject, I showed that the distribution of incomes in Canada has trended very slightly since 1976. Although I think the dataset I used is a good start, by no means does it offer a complete perspective on the issue of income inequality.  One of its limitations is with respect to the top bracket of earners.  To illustrate with a hypothetical example, suppose that the proportion of earners in the top bracket did not change over time, but they captured the vast majority of income gains.  This trend would not be picked up in the data I used.  If instead, the majority of income gains were captured by any other bracket than the top, we would see one bracket shrinking and another growing.  It is only with the top bracket that the data has this blind spot.

In part answer to this, I looked at the Gini coefficient which is a measure of income distribution.  How does it work?  This is the explanation from the StatsCan website:

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Income inequality in Canada: Part 4 – simplified data

In parts 2 and 3, one of the issues with interpreting the plots was that there was too much data.  In this post, I have simplified the data by combining some of the family income baskets together.  Deciding which baskets to combine is a subjective exercise which is why I started the analysis with the full dataset.

Methodology:

I used the same data as in parts 2 and 3 and combined the income brackets to get the below datasets:

cansim_202_0201_1_1

cansim-2020201_1a_1

cansim-2020201_1ua_1

With the new datasets, I re-ran the same R code shown in part 2.

Results:

Using simplified datasets, we obtain plots that are easier to interpret.

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Income inequality in Canada: Part 1 – Preamble

Over the past few years, I have noticed that the topic of income inequality has gained increasing presence in my country’s media and political discourse.  As an average joe, this is one of those issues where opinions appear to never change.  Some believe that income inequality is a severe problem that threatens the middle class and that action should be taken, and others believe that its best to leave markets be.  As I cannot think of a single example where polarization is a desirable attribute in any facet of society, I doubt family incomes would be the exception case.  The question I have is: what is the trend and severity of income inequality in Canada?

Before I start digging through the data, some food for thought:  Do you think that the middle class represents a stable equilibrium?  In other words, does a free-market society naturally trend towards the formation of a middle class? Or is it an unstable fixed point where current members of middle class and their families tend to diverge to either upper or lower classes?  I don’t really have any strong views on this, but I may post more on this subtopic down the road.