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Module 10 The Role of Government Income Distribution in Canada Poverty In Canada
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Income Distribution in Canada WWW.statcan.ca contains current statistics on income distribution in Canada In 1998, the AVERAGE TOTAL INCOME for a two parent family with children was $70,043. In 1998, the AVERAGE TOTAL INCOME for a lone-parent family was $29,887. To gather these numbers, economists rank Canadian households by income and then categorize households into five groups based on their income levels.
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Income Distribution in Canada Each group represents 20% (one-fifth) of the total number of Canadian households. The fifth with the lowest incomes generally receive a small proportion of all households’ total pre-tax income, while the fifth with the highest incomes receives a much greater percent. This is the challenge that our government faces. They need to promote income equity and they try to attempt this by taxation policies and transfer payments.
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The Lorenz Curve The Lorenz curve summarizes how equally or unequally income is distributed Perfect Equality: All Households earn an identical amount Perfect Inequality: one group receives all the income, others receive none. The more “bowed” the curve, the more inequality that exists.
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Reasons for Income Inequality l Risk - Taking: For example, starting your own business. You could profit greatly or lose everything! l Ability: Some are able to pursue careers in high-paying areas; others can’t. Some abilities are also short in supply and thus earn more. l Wealth: Ownership of assets such as stocks, bonds, buildings, land. An individual can obtain wealth through savings and inheritance.
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The Poverty Line l The poverty line is the income level below which a household is classified as poor n In Canada, a household is considered to be poor if it spends more than 54.7% of its pre- tax income on food, clothing, and shelter. n The poverty line depends on the number of household nembers and the size of the community they live in. (see Statscan for current statistics on poverty levels)
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Poverty In Canada l Poverty is a situation in a person’s life when their income is inadequate to provide the necessities of life (food, shelter, clothing). l There are factors that influence poverty levels: s Gender and household type s age s employment s education s region
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Gender and Household Types l Single people tend to have higher incidents of poverty than married people or families. l Single females tend to live in poverty compared with single males -- single parent families are also highly affected.
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Age l Households with young or elderly mainwage earners are more heavily represented among the ranks of the poor than are other households.
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Employment l Many of the “working poor” work in primary industries, such as fishing, where wages are low and seasonal employment is common.
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Education l Highest poverty rates are in households where main wage earner does not have highschool degree.
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Region l The Maritimes and Quebec tend to have high levels of poverty. l This is now extending into other parts of the country. Ontario is home to 1/3 of Canada’s poor.
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Government Transfer Payments l Transfer payments are government payments to either households or other levels of government. l Transfer payments are the most important element of Canada’s well-being.
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Federal Transfer Payments l There are five main federal transfer payments to households n Old Age Security n Guaranteed Income Supplement n Child Tax Credit n Employment Insurance n Quebec and Canada Pension Plans
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Other Transfer Payments l Provincial and territorial governments finance some elements of Canada’s welfare society with the aid of the federal government n publicly provided health care n subsidized post-secondary education n welfare services (with municipalities)
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