Evidence of meeting #116 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was education.
A video is available from Parliament.
NDP
Peggy Nash NDP Parkdale—High Park, ON
Thank you.
Professor Corak, I'd also like to ask why you think inequality is on the rise. You have written about a trend of wage polarization, about technological change, and changes in the labour market as contributing to rising inequality.
Can you expand on some of the structural factors that are influencing this trend?
Professor, Graduate School of Public and International Affairs, University of Ottawa, As an Individual
Generally, the way labour economists think about this is the interaction between technical change and globalization. This began, probably in the late 1970s and early 1980s, to polarize the labour market. People who traditionally did routine tasks, whether they were physical or cognitive, saw the value of those skills fall tremendously. As a result you saw weekly wages at the lower end fall significantly in Canada. On the other hand, people who did non-routine tasks, whether those were physical or cognitive tasks, saw the returns to their skills rise significantly.
The third reason that inequality rose was because of the very significant rise in the share of income going to the top 1%. That happened for different reasons as well—technology, globalization, but also changes in corporate culture and our proximity to the U.S.
All of this has led to higher inequality in Canada steadily since the early 1980s, but the take-home pay after taxes and transfers has remained basically the same. The tax and transfer system outdid the market in the growing market inequalities up until the mid 1990s. After that, either because of a lack of political will or for whatever reason, the tax system began to echo the market much more and we lost the distributive role.
That said, in Canada, the tax transfer system significantly does change inequality.
Conservative
The Chair Conservative James Rajotte
Thank you.
Thank you very much, Ms. Nash.
We'll go to Ms. McLeod, please.
Conservative
Cathy McLeod Conservative Kamloops—Thompson—Cariboo, BC
Thank you, Chair.
Thanks to all the panel members. This has been the start of a great conversation today.
First of all, I'd like to focus in a little on education. I think everyone here talked about the importance of education. I have to presume you mean finishing high school, and not necessarily university but some sort of post-secondary trade or skills.
Is that what people are defining as important in terms of income inequality? Does anyone care to jump into that one?
We're not saying it's just universities that are important but also getting the skills and trades for the jobs.
Mr. Muzyka.
President and Chief Executive Officer, Conference Board of Canada
If you look at it, I think education at all levels is important. This goes to getting people at early ages into the educational system, making sure we develop their natural skills and abilities and that they stay in.
Post-secondary education covers a whole array, not just universities but colleges, trade schools, the polytechnics.
Conservative
Cathy McLeod Conservative Kamloops—Thompson—Cariboo, BC
I just wanted to make sure we weren't completely focused on a university because I think that piece is important.
I know there's often talk about universality versus targeting. Certainly I feel very fortunate in my life. I know many people who feel very fortunate, whose children have finished university and have managed to finish debt-free, and of course have been supported by their families. Should we be creating a universal system, or should we be giving a hands up to those people who really need the help, who would be challenged to go to university or a trades program if nothing else existed?
Actually, the same goes for child care. I never thought it made any sense for the government to be supporting my child care and also the child care of my choice. Let's talk a bit about that targeting to those most in need versus universality.
Mr. Lee, do you have anything to say there?
Professor, Carleton University, As an Individual
First, I want to agree with your comments. When I said post-secondary, I meant university or college or trade.
I don't believe it's appropriate that everybody goes to university. The latest HRSDC stats show about 22% go to post-secondary. I can't remember the number—Professor Corak would probably know—but the number that go to college is a little bit higher. Of course, trades are the third one. That's the first point.
I'm not worried about who goes on to post-secondary. I just don't get worried about that. I'm worried about the 45% of adult Canadians who do not go on to post-secondary, whether it's college, trade, or education. The literacy network is using a methodology that ranks literacy on a scale of 1 to 5, and industry and government today need a level 3 literacy, as a minimum. They have found—I don't know the source of their methodology, but they're in partnership with HRSDC, as well as the association of manufacturers and exporters—that 48% of adult Canadians do not reach level 3 literacy. Well, if you don't reach the minimum necessary to work in federal, provincial, or municipal government, hospitals, universities, colleges, or private sector, then you're going to be in the bottom quintiles.
There's no magic to this. If you don't have the skill sets to be hired, you're going to be filtered out. You will not even be interviewed. You won't even be screened in. It's just a fantasy for anyone to think today that if you have grade 10 you can go in a management training program with IBM, or the Bank of Montreal, or the Government of Canada to become a vice-president or a deputy minister down the road.
We certainly have to address high school dropouts. The latest numbers, again from HRSDC, are that just under 10% of Canadians today are dropping out, so that's come down significantly. But we have to deal with the 45% who don't have PSE and the 48% who are not at level 3 on the literacy standards.
Conservative
Cathy McLeod Conservative Kamloops—Thompson—Cariboo, BC
I think what I'm hearing from that is, if we are providing support, instead of providing very expensive universal programs, we should look at the people who are really challenged in their lives and target the support to those people.
Is that something that—
Conservative
The Chair Conservative James Rajotte
We have three people who want to comment.
Ms. McLeod, who would you like? Can you direct it, for a minute here?
President, Canadian Medical Association
We know that the best return on investment, in terms of health outcomes down the road, is early childhood development and education. That means before you get to kindergarten.
We know that the kids of people living in poverty do not do as well by the time they get to kindergarten. They're already marked for life. So, that's the area, if we want a good return on investment. The numbers are anywhere from 1:6 to 1:8 returns. We need to start looking at those areas.
Conservative
The Chair Conservative James Rajotte
Thank you, Ms. McLeod.
We'll go to Mr. Brison, for your round, please.
Liberal
Scott Brison Liberal Kings—Hants, NS
Dr. Reid, to that point, the Fraser Mustard and Margaret McCain studies on this would bear that out, that the economic return for investment in early learning—particularly for children in high-risk situations—is probably the greatest area of return, in terms of investment in education.
Mr. Muzyka, you're experienced both in higher education and now with a think tank. You agree with this as well.
Is there a risk, Mr. Boadway, that we'll see a gap in the provinces' capacity to afford things like early learning and education, with the balkanization in the Canadian economy and the deeper divides, fiscally, between provinces in terms of capacity?
If we agree that it's important, is there a risk that inequality of opportunity among provinces is going to grow?
Professor, Department of Economics, Queen's University, As an Individual
I think that's key. That's the key argument behind equalization-type programs, providing basic services at comparable levels across Canada.
To me, equal opportunity is putting people on the same playing ground to begin with, which means giving everybody an opportunity to develop their skills early in life. To hark back to the universality versus targeting, I think where universality is important is in achieving equal opportunity. Targeting is more important in dealing with the consequences of how people use that equal opportunity.
Most of the programs that deal with equal opportunity are actually provincial responsibilities. Yet, if you look at subsection 36(1) of the constitution, it says explicitly that the federal government and the provinces have joint responsibility for achieving equality of opportunity.
Liberal
Scott Brison Liberal Kings—Hants, NS
Would you agree that there's a significant gap between the ability.... I have friends who are paying $12,000 a year for their kids to be in early learning programs where their two-year-olds are able to count to 10 in Spanish. Then I have other friends who can't afford that, and their kids are not getting that sort of educational opportunity. I know some other people who struggle with literacy themselves and can't even read to their children.
Is that not, perhaps, the best bang for the buck in terms of public investment in that early learning area? Again, with the gap between fiscal capacity among provinces, that will deepen in time if we don't address it.
Conservative
The Chair Conservative James Rajotte
We have Professor Wilkinson as well, Mr. Brison, but whom do you want to go to first?
President and Chief Executive Officer, Conference Board of Canada
If we look at the evidence from some of the programs, there's a recent study of the U.S. head start program. You want to invest early. You want to target those investments to those who can ill-afford them, to answer the earlier question. But there's a “but”—you have to follow up. This is why you have to go through the entire educational continuum. If you don't follow up in the early education, the lead falls off.
Emeritus Professor, Social Epidemiology, University of Nottingham, As an Individual
May I remind you that the rises in income inequality that have taken place in so many of the rich, developed countries has not been driven by changes in education systems. The runaway incomes at the top are a quite separate phenomenon, and that's what has driven the widening income differences. Of course education, particularly early education, is important. But it's a different subject.
Income inequality matters for its own sake. If you look at the major changes in inequality in the 20th century, you get high inequality until sometime about 1930, and then it slides all the way through the thirties, forties, fifties, sixties, seventies, and then you get the modern rise of inequality. That is, as Paul Krugman says, driven by politics. We know that the newer liberal economics that came in at the beginning of that rise is crucial.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you, Professor Wilkinson.
The CMA has indicated—and you, Dr. Reid, have said—that the changes in EI and in the old age security system could have a deleterious effect. Professor Boadway, you referred to an offloading of federal policy to the provinces.
Could those changes, and the requirement for provinces to pick up the slack through welfare systems, deepen income inequality?
Conservative