Applied Research Bulletin - Volume 1, Number 2 (Summer 1995) - July 1995

Social Outlook: Five Crucial Challenges for Canadians

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Trends now point to the risk of a growing underclass among disadvantaged Canadians. This is just one of five significant and unsettling challenges identified in a social outlook prepared by the Applied Research Branch.

Canadians now face five crucial social challenges:

• Under investment in human capital - Much of Canada's labour force - its human capital - is inadequately prepared for today's economic reality. Too often, education and training systems in Canada are failing to adjust to the increasing demands of the new information economy.

• The wasted productivity of 1.4 million unemployed Canadians - Globalization and technological change are altering industrial structures but many individuals can't keep up with the changes. The result? Unemployment. Some major barriers for the unemployed? Low levels of education combined with a lack of access to learning opportunities, lack of jobs in certain regions and low levels of public spending on active programming to get people back to work.

  

• Growing economic insecurity among the middle class - How is the middle class feeling? Stressed out and insecure. Real earnings for full-time, full-year earners have stagnated since the mid-1970s. Older workers (45+) are experiencing increasingly long spells of unemployment - up from 17 weeks in 1976 to 32 weeks in 1993. Those who find reemployment often suffer a decline in their wage rate. Middle-class families are finding ways to maintain their standard of living but they're paying a price. Those strategies - rising numbers of two-earner families, for example - lead to increased stress and time pressures, particularly for working mothers of young children.

• The potential for a lost generation of youth - It's tough to be young. Even though they're much better educated than previous generations, today's full-time, full-year young workers have significantly lower real earnings than their counterparts in the mid 1970s (22.6% less for young men, 3.4% less for young women).

  Real Earnings of Full-Time Full-Year Male Earners by Age (1971-1993)

  
  Source: Survey of Consumer Finances

  Combine this with increasing difficulty finding stable employment and the result is increased poverty rates for all types of young families. At the same time, poverty rates for middle-aged families are declining.

  Unemployment Rate for 25-44 year old Population by Education Level (1994)

  
  Source: Statistics Canada, Labour Force Survey

• The risk of a permanent underclass emerging among disadvantaged Canadians - Poverty may become a persistent rather than a transitory condition for an increasing number of the poor. Among the poorest 20% of families, a rising proportion of income comes from government transfer payments and a growing proportion depends on welfare. Members of vulnerable groups, including single parents and recent immigrants, make up an increasing proportion of the poor. In contrast to mothers in two-parent families, the proportion of single mothers who are earners is declining.

  Income Equality in Canada and the United States

  
  * The Inequality Index is measured by the Gini Coefficient which can range in value from 0 to 1. An increasing index means increasing inequality. Comparing inequality before taxes and transfers to inequality on a pre-tax, post-transfer basis, isolates the effects of transfers alone on equality.

  Sources: Statistics Canada, Survey of Consumer Finances, U.S. Department of Commerce, Series P60-184, 1993.

In arriving at its conclusions, ARB identified trends over the past twenty years, assessing their implications for the future. The analysis focused on income inequality and polarization in Canada, on trends in earnings and poverty, and drew on information from academic studies, public opinion polls, the General Social Survey, U.S. and OECD data on trends in labour markets, income distribution and government income transfer spending.

Despite growing inequality in the distribution of market incomes in Canada, there has been no clear trend towards increased inequality among Canadian families over the last 15 to 20 years. This situation is markedly different from that in the United States where family income inequality has grown sharply since 1980. In Canada, government transfers have had a significant equalizing impact on family incomes. The percentage of the Gross Domestic Product spent on such transfers has been increasing over the past two decades. However, the continuation of this trend is in doubt in a fiscal climate dictating lower government transfer payments.

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