I'm glad to be here.
Today I will provide some highlights on a recent paper on Canadian wage inequality in Canada.
As others have said, it's important to note that the changes in income inequality in Canada have been different from changes in the United States, where the changes were larger, happened earlier, and resulted in greater gains at the top than in Canada.
Second, as already mentioned, the Canadian fiscal regime does somewhat lessen the blow of increasing inequality. In 2009, the inequality in the after-tax and transfer of family income was 28% lower than the before and after-tax transfer of family income inequality. Nevertheless, given the tension between redistribution and economic growth, it's important to consider the economic forces that are behind the changes and whether they can be addressed directly.
To understand how these forces work, we have to note that in the 2000s especially, the Canadian experience with wage inequality has been one of wage polarization. When we're talking about wage polarization, we're talking about situations where the wage of the median worker—and here I am talking mostly of the median male worker—is not improving as much as those at the bottom or at the top. In the 2000s, the real—meaning after inflation—hourly wages of the median male have increased by 5%, while the wages of the men at the top 90% have increased by 12% and those at the bottom by 9%.
That being said, in terms of the Canadian post-recession experience, from 2009 to 2012 we have seen decreasing wage inequality. This is in contrast with the U.S., where wage inequality has continued to increase.
So what are the driving forces behind the difficulties of the middle workers? They are usually attributed to two forces: declining unionization rates and technological change. In Canada, the decline in union coverage of males has been quite substantial; it dropped from 47% in 1980 to 25% in 2012. The reason that declining unionization rates do contribute to the polarization of male earnings is that the union premium is highest in the lower wage distribution of males.
Technological change is also thought to adversely affect mostly the routine, male-dominated jobs that are in the middle of the wage distribution, the wages on the plant floor.
Let's note that these forces apply less to women because they are more likely to work in the wider public sector, including the health and education sectors. So women fare generally better against these winds of change than men; however, there remains a gender gap.
In terms of some of the policy options that work with these forces, many of them come under provincial jurisdiction. They would include the support for public education. Most of the time we talk about higher education, but it's also important to have policy to foster high school completion. When we're talking about exclusion, we're usually talking about individuals who have not completed high school. Support for a minimum wage in an appropriate range is among the policy tools to be thought about, as is support for collective bargaining.
As I noted, Canada has performed relatively well in terms of generating new university degrees. However, it is important to note that not all carry the same prospect of high-paying jobs. In a changing environment, information relative to the prospects of the different degrees I think is quite important.
Raising the minimum wage is a tool that can help reduce inequality at the very bottom of the wage distribution. However, because there is limited spillover, it's not a very effective tool overall.
Moving in the direction of a policy environment that is more supportive of unions, especially in terms of the procedure governing union certification, is one option to be considered.
Let me conclude by saying, as many others have done before me, that while growth-oriented economic policies, such as encouraging trade and deepening investment in new technology, may provide the basis for economic success for future generations, these policies may also have the effect of exacerbating inequality. This should be kept in mind to continue to get public support for such policies.
This concludes my remarks.