Thank you, Mr. Chairman, and my thanks to the committee for the invitation to appear today and speak on this issue.
I want to focus my remarks on a recent study that I co-authored, published by the Fraser Institute last year. It's called “Measuring Income Mobility in Canada”. To sum up my perspective, we can't have a meaningful discussion about income inequality if we don't understand the extent of income mobility in Canada.
One of the critical underlying assumptions in the inequality debate has been, and continues to be, that Canadians are stuck in the same income group year after year. If we pause and think about that for a second, it means that for the most part Canadians are born into a certain income group, where they live and die. Now that to me doesn't match up with common sense, nor does it match up with evidence. What we do in our report is we look at the evidence. What we generally find, when we think back to our own experiences, is that most of us follow an income trajectory such that we start off with a low income, mainly because we're young and we don't have education, skills, or work experience. Gradually, over time, as we gain these attributes, incomes increase. Incomes peak around middle age, around 55; as they approach the age of retirement, incomes start to fall. Of course, a lot of stuff happens in between. Some people may transition between jobs, they may lose jobs, or they may exit the labour force. But generally there's an upward transition in income until you're about in middle age, after which it begins to fall.
In our study, we looked at income mobility using historical data from Statistics Canada. We used both survey data and tax filing data. We looked at income mobility over various time periods—two five-year periods, a 10-year period, and a 19-year period. In the short term, over the two 5-year periods, we found that 50% of Canadians who were initially in the lowest 20% of income earners had transitioned outward from those groups. Sorry, I should state that in our study we broke up income earners into five groups of 20% income earners in each. Over the longer term, from 1990 to 2000, what we found was quite remarkable: 83% of Canadians who were initially in the lowest income group had transitioned to a higher income group. We found that 19 years later those same people, almost 9 in 10 of those in the lowest income group, had moved to a higher income group. It's not that they were just moving out of the lowest income group into the second or third quintile. We found that one in five who were initially in the bottom had actually made it up to the top 20% of earners; over two in every five had made it up into the top 40% of earners.
So our study reaffirms what we know from our own experiences. Where we were 5, 10, 20 years ago in income is not necessarily where we're going to be today or in the future. If we don't understand that people's incomes are changing over time, I think we can get misled by looking at snapshots of the income distribution, which is what most people do when they examine income inequality.
Those are my remarks. Thank you.