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Watching a car crash in slow motion

We didn't know it then, but 2007 was a peak year for working Canadians.
Income data released by Statistics Canada shows Canadians in all income brackets had better incomes in 2007, compared to 2006, and still paid lower taxes.
The highlights of the 2007 income data include:
• Trend lines established in 1998, when jobs finally opened up to the poorest of Canadians, continued in 2007. There were more jobs to be had in 2007 and those jobs led to income gains for most Canadians.
• The richest 20% of Canadians enjoyed the lion's share of the nation's gains in market income, which includes earnings, investment income and pensions. They enjoyed an average $5,500 income increase in 2007 income compared to the year before. Compared to a decade before, the average income of the richest 20% is a walloping $23,300 higher, in inflation-adjusted terms.
• Compare this to the poorest 20% who, on average, saw an increase of $300 over last year's market income and gained $2,800 over the previous decade.
• Middle-income Canadians' market incomes rose by an average of $900 in 2007 compared to the previous year, at the peak of an economic boom.
• In after-tax terms, the same trends held: Canadians in every income bracket enjoyed income increases, but the largest gains went to the richest Canadians. In 2007, the average after-tax income for richest 20% was 9.12 times greater than the poorest 20%. This is virtually the same as the previous year and slightly larger than in 1998, when the richest 20% took home 9.05 times more after-tax income than the poorest 20%, on average.
• Despite a decade of blockbuster growth and job creation, the shares of earned and after-tax income remained unchanged from 1998.
The good news is that incomes went up. The bad news is that's as good as it gets. Unfortunately, looking at the 2007 income data is like watching an accident in slow motion.
Imagine cruising along the highway in a Thunderbird convertible -- top down, sun shining and music blaring - completely oblivious to the transport truck that is just about to hit you.
That transport truck turned out to be the global recession, turning 2007's income data into a distant memory of what success looks like after 10 years of blockbuster economic growth. 2007 may have been one of the best years on record for Canadians, but that story is decidedly over.
A short two years later, more Canadians are exposed to the vagaries of recession and an unpredictable global market than ever before.
The next chapter of loss and recovery begins with more than three million Canadians already living in poverty, including one in 10 children.
Recession has hit Canada hard: Over 400,000 full-time jobs were lost in the first six months of this recession. And the tax cuts Canadians enjoyed during the best of economic times are now partially responsible for the overnight federal deficit of $50 billion that has Canadians wondering when we'll hit bottom.
What's more, the facts emerging from 2007's income data underscore a sad truth: even dramatic increases in economic growth have not fundamentally altered the distribution of income since Canadians emerged from the last recession.
Despite working more and earning more, relative positioning for those most hard hit by the last recession has not changed much. That matters because it's the richest of Canadians who set the prices in housing markets in this nation. They also make the decisions that affect where the rest of us work, how much we make, and what kinds of public supports we'll have.
There's also an important lesson about the poor in Canada. During the absolute height of Canada's golden economic era, the income gap between the richest 20% and the poorest 20% barely budged and the boom didn't wipe out poverty.
True, poverty rates have come down over the past decade. But almost 637,000 children (one in 10) were still living in poverty in 2007. That's below 1989 levels, when Parliament agreed it wasn't good enough for a nation as rich as ours and voted unanimously to try to eliminate child poverty by the year 2000. But it's not that much less. In 1989, 776,000 (or 11.7%) children lived in poverty.
After a decade of one of the strongest periods of economic growth in Canada's history, poverty never came close to being eliminated.
The rate of child poverty will soar over the next few years as Canada moves through the economic storm and its aftermath.
So it is rather sobering to note that in 2007, during the best of times, one in five Canadians experienced a bout of poverty and it took the majority of them a couple of years to emerge from it.
Before the recession hit, three million Canadians were living below the low-income cutoff. Many more will join them, since Canada's federal government refuses to put into place the types of income supports that can help victims of this recession weather an economic crisis.
The 2007 income data raises another important question: Today it takes two income earners for middle-class families to make it. If that is the best the market can deliver in the heyday of Canada's economic history, what awaits Canadians post-recession?
Almost 60% of the already 1.5 million unemployed get no help from Employment Insurance. Hundreds of thousands more Canadians stand to lose their jobs in the coming months. Canadians across the country will be struggling to make ends meet, with little protection against a quick and sharp descent into poverty.
As record numbers of jobs are lost, keep in mind yet another sobering fact: it took seven years for the number of full-time jobs to reach pre-recession levels in Canada's last recession --1991-92 -- and even longer for those jobs to open up to the poor.
The climb out of the current recession could be just as steep.

This blog was co-written by Trish Hennessy and Armine Yalnizyan.

 

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