Income Inequality “No Big Deal” according to Economists

By Diana Daghofer

In North America, the Occupy movement cast the spotlight on an issue that has been the focus of grave concern around the world – income inequality. So the media flurry that came with the release of Statistics Canada’s latest report on the Income of Canadians (September 11, 2013) was no surprise. CBC’s Kelowna-based Daybreak South (September 12, 2013) and the CBC national show, The 180 (September 13, 2013), are two examples that featured leading economists, both of whom were completely uninformed of the health, social and even the economic costs of income inequality.

The numbers simply confirm what we all know – the rich are getting richer, leaving the rest of us behind. At an average of $381,000 each, the richest 1% of Canadians earn more than ten times the average Canadian income. More than the numbers, though, it is the response from leading economists that is troubling for the future of our country.

Take, for example, the response to Daybreak South host, Chris Walker’s, excellent question “Why does it matter that there is a gap?”  His guest, UBC Okanagan economics professor Ross Hickey, was pretty nonchalant: “Things have been going better for most of us. The gap matters because people care about it. Extreme wealth bothers people.” The good professor proceeded to talk about the value these wealthy few bring to our nation: “There is no reason to try to trip these people up, because a lot of what they are doing is fuelling the economy and providing jobs for those at the low end of the income distribution.”

On CBC’s The 180, guest Terence Corcoran, editor of the Financial Post, echoed those sentiments, actually saying, “Inequality is not a bad thing. It is inevitable…in any political system.” When asked whether he thought anything should be done about growing income inequality in Canada, he said, “What’s the point? What are we trying to accomplish?” Well, I would ask him, “How about saving lives?”

No reason to reduce the gap?

Public health practitioners, and many beyond our circle, know that the social determinants of health – with income leading the way – are the prime predictors of disease and illness. Living conditions out-trump the effect of any behavioural risk factors, including diet, exercise and even tobacco use.[i]

Here are some of the effects of income inequality on health, comparing those living in neighbourhoods with the lowest 20% average income in Canada to those in the wealthiest 20% average income:

• Infant mortality is a very sensitive indicator of societal health, and Canada is a healthy place, right? So it would likely surprise most Canadians that 40% more babies die in their first year of life in our poorest neighbourhoods (7.1 of 1000 live births) than our richest (5.0 of 1000 live births).[ii]
• Suicide rates in the lowest income neighbourhoods are almost twice as high as in the wealthiest neighbourhoods.[iii]
• Men in Canada’s wealthiest neighbourhoods live, on average, almost 4.5 years longer than those living in our poorest neighbourhoods.¹
• People in our poorest neighbourhoods are almost one and a half time more likely to have a chronic disease than those in the wealthiest neighbourhoods, and almost twice as likely to be hospitalized for them.²

Literally hundreds of research reports show us that health inequities in Canada are widespread and affect us at every stage of life.

Does Wealth = Health?

It is true that, at every step up the income ladder, people are healthier, overall. The economists pointed out that the incomes of the poor are increasing. So, does more wealth mean better health? Not necessarily. It is actually the gap between the rich and poor that is the best indication of health, or the lack thereof. Countries with the smallest gap between rich and poor are those that report the best health of their populations.² Of course, those countries take an active role in distributing resources more equally among their populations, and tend to invest more in their social infrastructure.¹ In other words, income inequality – leaving people in poverty – is a choice that governments (and those that vote them in) make.

The Financial Impact

Leaving lives lost for a moment, more illness clearly increases healthcare costs. In 2010, the cost of ‘avoidable’ and ‘excess’ hospitalizations was over $400 million.³ And it hits us at the other end of the economic scale, too.  When people are sick, they can’t contribute to the workforce and other economic productivity.

So, while Messrs. Hickey and Corcoran could be excused for not recognizing the health impact of the income gap, they should understand its economic impact. In 2011, the International Monetary Fund identified “the increase in inequality (as) the most serious challenge for the world.”[iv]

Researchers, policymakers, the Canadian Medical Association and countless public health practitioners have expressed deep concern about the health, social and economic consequences of the increasing gap between rich and poor in Canada, and around the world. I applaud the media’s efforts to cover the issue, but the next time they interview economists about income inequality, I would ask them to include a public health professional who can bring to light the many evidence-based solution to this problem. Many people believe that poverty is inevitable. It’s time we show them that it is a choice our governments, with voter support, have made.

Diana Daghofer is a public health consultant living in Rossland, British Columbia and a member of the Public Health Association of British Columbia