1. Income Inequality and Investment: What Lies Ahead? Social Investment Organization Conference Vancouver, B.C. June 17, 2013 Armine Yalnizyan Senior Economist, CCPA

2. Overview of Comments Globalization and growth: the source of growth is the middle class The next 30 years won’t be like the last 30 years – Focus on attracting labour, not just attracting capital Income inequality trends in Canada and their impact on future growth of investment funds The challenge of slow growth for investors: short-term gains trigger long-term pains

3. Who’s buying? A growing middle class.....but not at home

4. Growth in Global FDI Inflows (Canada 18 th largest recipient)

5. Growing Number of People on the Move – 214 million in 2010

6. Canada – the UN in Action? Statistics Canada: “Canada accepts proportionately more immigrants and refugees than any other country.”

7. Almost 1 million people arrived in Canada in 2011. No national housing/transit plan.

8. FCM: “By 2015, 100 percent of Canada’s labour growth will come from new immigrants.” The Rise of the Temps

9. Labour’s Share of Income In Decline Good news? (higher profit share)

10. Within smaller labour share of GDP: Greater inequality, and rising income gap

11. 1/3 of all income gains going to top 1% - primary source of investment funds

12. Stuck in the middle: 35 years, no gains More educated, economy 2.5 times as big

13. Shrinking Middle Income Opportunities (affects consumption, savings, debt)

14. Growing Intergenerational Inequality, Shrinking Future Investor Base

15. A Temporary Recovery? Or The New Normal?

16. Inequality Bites Shorter spells of growth (more volatility), less growth (IMF) Less mobility/opportunity (Corak) Squandered potential, underdeveloped capacity (Conference Board of Canada) Trade-off between growing middle class elsewhere and shrinking existing middle class? (World Bank) Eroded legitimacy of system (Stiglitz, Freeland)

17. Short-term versus Long-term challenges Slow growth? Boost profit by lowering costs (lower wages) BUT If I can’t buy, you can’t sell  Inadequate aggregate demand, slower growth Lower wages means less saving, smaller base for investments down the road....or dramatically shifting geo-political realities

18. Recalibrate Investor Expectations? The Challenges Slow growth (global crisis then demographic shift) increases pressure to lower costs and/or grow market share elsewhere. Pressure on public finance – can only avoid becoming an economic backwater if invest in infrastructure to attract capital and labour Growing reliance on investment income with increasing retiree population. (Inflation potential?)