Economics professor offers grossly misleading analysis of inequality in Canada

Dalhousie economics professor Lars Osberg’s The Scandalous Rise of Inequality in Canada was published just in time to be eligible for the always hotly-contested title of worst Canadian economics book of the year.

Osberg’s central theme is that inequality in Canada has been steadily increasing and this poses a threat to economic growth, financial stability, social mobility, limiting climate change and even democracy—at times, it seems every imaginable problem is blamed on inequality. This makes it even more important to get the facts about inequality right.

The most misleading chapter in the book concerns top-income earners. Osberg claims that “the income share of the top 1 per cent… is the aspect of inequality that has changed the most in recent years.” However, the chapter on inequality at the top of the income distribution exclusively features data for its increase in the United States, driven by the outrageous success of technology firms such as Facebook, Apple, Alphabet, Microsoft and Nvidia. Nowhere is the data for Canada cited, but in fact the 1 per cent’s share of income in Canada has fallen since 2007, which probably explains why Osberg avoided it.

The real problem with Canada’s high-income earners over the last two decades is not that they’re gobbling up more income at the expense of everyone else, but that we do not have enough of them. Nor do the top 1 per cent in Canada earn nearly as much as in the U.S. Pretending that incomes in Canada are as skewed as in the U.S. is another example of importing narratives without examining whether they are applicable here. This might be forgivable for the average person, but it’s scandalous and disingenuous for a professor specializing in income distribution.

Raising taxes on the richest 1 per cent has a “populist” appeal. However, former finance minister Bill Morneau wrote in his memoire Where To From Here: A Path to Canadian Prosperity that he came to “regret supporting the idea of a tax increase on the 1 percent” because “it began a narrative that made it difficult to have a constructive dialogue with the people prepared to invest in research and development to benefit the country… our proposal’s biggest impact was to reduce business confidence in us.” Before becoming the Trudeau government’s current finance minister, Chrystia Freeland acknowledged that “many of the ultra-high net-worth individuals flourishing in today’s global economy are admirable entrepreneurs, and we would all be poorer without them.”

Another practical consideration for Morneau was that “Canada’s personal income tax rates are not competitive with the U.S. where highly skilled labour is concerned.” Finally, Morneau acknowledged that taxing the rich in Canada will not raise much money, because “the number of taxpayers affected will be quite small… the math just doesn’t work.” I calculate that confiscating all of the income the 1 per cent earn above $200,000 would fund total government spending in Canada for a paltry 44.2 days.

Besides misrepresenting the importance of Canada’s 1 per cent, Osberg twice makes the patently false claim in his book that “income from capital… is roughly half of GDP in Canada.” Just last week, Statistics Canada’s estimated labour income’s share of GDP was 51.3 per cent while corporate profits garnered 26.0 per cent (including profits reaped by government-owned businesses through their monopolies on utilities, gambling and alcohol sales). Another 12.6 per cent of GDP was mixed income earned by farmers and small businesses, which StatsCan cannot disentangle between labour and capital. The final 10.2 per cent of GDP went to government taxes on production and imports, which clearly is not a return on capital. I would expect undergraduate economic students to have a better grasp of the distribution of GDP than Osberg demonstrates.

Among the many evils generated by inequality, Osberg cites democracy as “threatened by the increasing concentration of wealth and economic power in Canada.” Osberg must believe Justin Trudeau’s decade-long tenure as prime minister reflects the choice of our economic elites. If so, they have much to answer for; besides steadily-degrading Canada’s economic performance and international standing, Trudeau attacked these same elites by raising income taxes on upper incomes, increasing the capital gains tax, and undercutting the fortunes of the oil and gas industry on which much wealth relies. If our economic elite really controls government, it seems they made an incredibly bad choice for prime minister.

Philip Cross

Senior Fellow, Fraser Institute

Related Topics:#FraserInstitute #PhilipCross InequalityInCanada LarsOsberg ScandalousRiseOfInequalityInCanada

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From the Canadian Energy Centre

$35-million Alberta challenge targets next-gen drilling opportunities

‘All transformative ideas are really eligible’

Forget the old image of a straight vertical oil and gas well.

In Western Canada, engineers now steer wells for kilometres underground with remarkable precision, tapping vast energy resources from a single spot on the surface.

The sector is continually evolving as operators pursue next-generation drilling technologies that lower costs while opening new opportunities and reducing environmental impacts.

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That’s why ERA is launching the Drilling Technology Challenge, which will invest up to $35 million to advance new drilling and subsurface technologies.

“The focus isn’t just on drilling, it’s about building our future economy, helping reduce emissions, creating new industries and making sure we remain a responsible leader in energy development for decades to come,” said ERA CEO Justin Riemer.

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“Alberta’s wealth comes from our natural resources, most of which are extracted through drilling and other subsurface technologies,” said Gurpreet Lail, CEO of Enserva, which represents energy service companies.

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The global war business scored record revenues in 2024 amid multiple protracted proxy conflicts across the world, according to a new industry analysis released on Monday.

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