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Winnipeg Free Press - PRINT EDITION

What about my budget?

By: Tom Ford

Posted: 02/6/2012 1:00 AM | Comments: 0 (including replies)

Every year about this time, some of the world's wealthiest business people and their political chums go to Davos in the Swiss Alps to look down on the rest of us.

But this year was different. The participants were subdued. They were worried about political chaos in Europe and sluggish growth in the U.S. And they were concerned about the increasing gap between the rich and the poor.

What's that? Rich people in a mountain retreat are picking up lines from the ragamuffin Occupy movement?

It would seem so.

The forum's usually upbeat founder, Klaus Schwab, said he remains a deep believer in free markets, but that capitalism is out of whack and needs to be fixed "to serve society." He welcomed ideas about how to fix it -- including these from the Occupy protest.

The Occupy movement is worried about the moral implications of the big income gap between rich and poor. Many business people are also concerned about the economic effects of inequality. Economies based on inequality are like a cart with one large wheel and a small one. They're unstable and they can tip over, causing serious losses.

The gap between Canada's rich and poor is growing, says a report from the Organization for Economic Co-operation and Development. Canada's income gap is well above that of the OECD's 34-nation average, but not as extreme as that in the U.S.

"Greater inequality causes economic, political and ethical challenges, as it risks leaving a growing number of people behind in an ever-changing economy," says the OECD paper. A study by the International Monetary Fund says nations with greater income inequality tend to see shorter, less sustained periods of economic growth.

Taxing the rich more is one way to narrow the gap, says the OECD. U.S. President Barack Obama is racing down that route, saying in a barn-burner state of the union address that America must restore an economy "where everyone gets a fair shot, and everyone does their share, and everyone plays by the same set of rules."

More important than taxation, says the OECD, is investing more in people, with an emphasis on education, skills training and job-retraining programs. "More and better jobs, enabling people to escape poverty and offering real career prospects is the most important challenge," says the organization.

Last month, a CIBC report highlighted the problems of the middle and lower classes. Employment quality deteriorated last year, says the bank. More people moved into self-employment or lower-paying positions. Nearly all the job growth occurred in the first half of 2011, says the bank. But it slowed a great deal in the last six months as the quality of work worsened.

As both the quantity and quality of employment fell, it's "hardly surprising that real disposable income was unchanged in the first three quarters of 2011 -- the worst showing in 15 years," says the CIBC.

Many new jobs, says the report, have come in low-paying sectors such as hotel services, restaurants, miscellaneous manufacturing and personal care. In addition, there's been a major shift away from full-time employment to part-time. As many as one in eight Canadians now holds a temporary job, Statistics Canada says. Contract positions in 2009 accounted for 52 per cent of all temporary positions. More than a quarter of the people involved were professionals.

Ken Lewenza, president of the Canadian Auto Workers union, says we're "in a race to the bottom." Ottawa, he adds, has to better measure the quality of employment, not just the quantity.

Last year was terrible for wage growth. By November, average weekly earnings rose only 1.1 per cent on a year-over-year basis. Inflation was at three per cent due to a jump in the prices of food and energy. By year-end, wages were falling in real terms.

The problems of individuals are reflected in our national statistics. Last week, Statistics Canada reported real gross domestic product shrank 0.1 per cent in November, following zero growth in October. In the last three recorded months, our economy has grown a measly 0.7 per cent.

Prime Minister Stephen Harper has been talking a lot about the government's budget. Fair enough. But, perhaps, he could talk a tad more about the health of the budgets of ordinary folks.

Tom Ford is editor of The Issues Network.

Republished from the Winnipeg Free Press print edition February 6, 2012 A11

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