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The distribution of wealth in Canada : its existing pattern and changing trend Park, Jungwee 1987

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T H E DISTRIBUTION OF W E A L T H IN CANADA - ITS EXISTING P A T T E R N AND CHANGING TREND by J U N G W E E P A R K B . A . , Korea University, 1985 A THESIS S U B M I T T E D I N P A R T I A L F U L F I L M E N T OF T H E R E Q U I R E M E N T S F O R T H E D E G R E E O F M A S T E R O F A R T S in T H E F A C U L T Y OF G R A D U A T E STUDIES Department of Anthropology and Sociology We accept this thesis as conforming to the required standard T H E U N I V E R S I T Y OF BRITISH C O L U M B I A October 1987 © Jungwee Park, 1987 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department of A^ofM^p ZclJjp The University of British Columbia 1956 Main Mall Vancouver, Canada V6T 1Y3 Da,e At l«-. 'PI ABSTRACT The aim of this thesis is to investigate the existing pattern and changing trend of the distribution of wealth in today's Canada. In doing so I explore both theoretical accounts and empirical evidence. First, the theoretical perspectives of both classical (Marx, Durkheim, and Weber) and contemporary (Blumberg, Westergaard and Resler, Porter, and Clement) social thinkers were discussed. The objective of this review was to describe the sociological interpretations and explanations of the distribution of wealth. Second, existing evidence was reviewed and new data was gathered on the wealth distribution in Canada. The existing data came from Osberg, Hunter, Vaillancourt, Rashid, and Oja. New data concerning such issues as welfare state, income disparity, and important wealth components was examined to augment the previously existing data. The Canadian wealth distribution proved to be unequal and to have become slightly more unequal over time. The concluding chapter briefly reviews possible explanations for this set of findings. ii TABLE OF CONTENTS A B S T R A C T ii L IST OF T A B L E S : iv A C K N O W L E D G E M E N T vii I. I N T R O D U C T I O N 1 II. T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H 7 A . Classical Accounts of the Distribution of Wealth in Capitalist Societ}' 7 1. Kar l Marx 8 2. Emile Durkheim 13 3. Max Weber 17 B. Contemporary Accounts of the Distribution of Wealth in Industrialized Societj^: A Canadian Focus 22 1. Paul Blumberg 23 2. John Westergaard and Henrietta Resler 30 3. John Porter 35 4. Wallace Clement » 38 III. E M P I R I C A L E V I D E N C E OF T H E DISTRIBUTION OF W E A L T H 41 A . Current Evidence 43 1. Lars Osberg 44 2. Alfred A . Hunter 49 3. Francois Vaillancourt 58 4. Abdul Rashid 64 5. Gail Oja 70 B. New Evidence 77 1. New Trend in Canadian Income 78 2. Canadian Welfare State 81 3. Income Disparitj' 87 4. The Family Home 93 5. Stock Ownership 96 6. Automobiles 98 7. Other Household Belongings 101 IV. C O N C L U S I O N 108 B I B L I O G R A P H Y 113 iii LIST OF TABLES Table 2.1 Expenditures on Ba s i c N e c e s s i t i e s as a Percentage of Net Family Income Tenth, 1973-1974, United States 26 Table 2.2 C l a s s Divergence i n Home Buying: From Mass Market to Luxury Market i n 10 years, United States • 28 Table 2.3 Cl a s s Divergence: 1975 Domestic Auto Sales as a Percentage of 1974 Sa l e s , United S t a t e s 29 Table 2.4 Long-Term Trends i n D i s t r i b u t i o n of P r i v a t e P roperty, 1911-60 and 1961-1971, United Kingdom 32 Table 2.5 Co n c e n t r a t i o n of Main Types of P r i v a t e Property, 1954, United Kingdom 34 Table 3.1 Estimated Wealth Per Canadian A d u l t , 1980 45 Table 3.2 Income Shares of Canadians, 1951-1978 : 46 Table 3.3 I n t e r n a t i o n a l Income I n e q u a l i t y 48 Table 3.4 Cumulative D i s t r i b u t i o n of Wealth of F a m i l i e s and Unattached I n d i v i d u a l s , 1970 and 1977 50 Table 3.5 Estimates of the D i s t r i b u t i o n of Wealth i n Canada, the U.K. and the U.S.A. 51 Table 3.6 Earnings of Men and Women i n Canada i n Current and Constant (1981) D o l l a r s , S e l e c t e d Years 53 Table 3.7 Home-Value of F a m i l i e s and Unattached I n d i v i d u a l s by Income Groups In Current (1977) D o l l a r s , 1977 55 Table 3.8 Percentage of I n d i v i d u a l Dividend Income by Income Quint I l e 57 Table 3.9 Per Ca p i t a Income of Canadians, 1951-81, Current and Constant D o l l a r s 59 Table 3.10 Income I n e q u a l i t y i n Canada, 1951-81, Money Income, Q u i n t i l e Shares and G i n i C o e f f i c i e n t s -- 61 Table 3.11 G i n i C o e f f i c i e n t , Pre-tax Income, f o r Economic F a m i l i e s , OECD C o u n t r i e s 62 iv T a b l e 3.12 G i n i C o e f f i c i e n t , P r e - t a x I n c o m e , f o r F a m i l i e s a n d I n d i v i d u a l s , C a n a d a , U . K . a n d U . S . A 63 T a b l e 3.13 S e l e c t e d F i n a n c i a l C h a r a c t e r i s t i c s o f H i g h i n c o m e E c o n o m i c F a m i l i e s , S p r i n g 1977 65 T a b l e 3.14 i n c i d e n c e o f , a n d A v e r a g e Income f r o m , V a r i o u s S o u r c e s o f Income a n d C o m p o s i t i o n o f T o t a l I n c o m e , C e n s u s F a m i l i e s , 1980 67 T a b l e 3.15 D w e l l i n g C h a r a c t e r i s t i c o f C e n s u s F a m i l i e s , 1980 : 69 T a b l e 3.16 P e r c e n t a g e C o m p o s i t i o n o f W e a l t h o f F a m i l i e s a n d I n d i v i d u a l s , 1970, 1977, a n d 1984 71 T a b l e 3.17 D i s t r i b u t i o n o f W e a l t h o f A l l U n i t s , 1970, 1977, 1984 72 T a b l e 3.18 P e r c e n t a g e C o m p o s i t i o n o f W e a l t h o f F a m i l i e s a n d U n a t t a c h e d I n d i v i d u a l s • 74 T a b l e 3.19 D i s t r i b u t i o n o f W e a l t h C o m p o n e n t s b y W e a l t h Q u i n t i l e s , 1970, 1977, a n d 1984 76 T a b l e 3.20 A v e r a g e Income f o r A l l U n i t s , 1980-85 79 T a b l e 3.21 S h a r e s o f T o t a l Income b y Q u i n t i l e s , 1980-85 - 80 T a b l e 3.22 A v e r a g e Income A f t e r T a x f o r A l l U n i t s 82 T a b l e 3.23 S h a r e s o f Income A f t e r T a x b y Q u i n t i l e s 83 T a b l e 3.24 A v e r a g e Income a n d Q u i n t i l e D i s t r i b u t i o n B e f o r e T r a n s f e r P a y m e n t s f o r A l l U n i t s , 1981-85 85 T a b l e 3.25 G i n i C o e f f i c i e n t C a l c u l a t e d on D i f f e r e n t Income C o n c e p t s f o r A l l U n i t s 86 T a b l e 3.26 A v e r a g e Income o f S e l f - E m p l o y e d D o c t o r s , D e n t i s t s , L a w y e r s , a n d A l l T a x p a y e r s i n C a n a d a , 1951-84 88 T a b l e 3.27 A v e r a g e I n d i v i d u a l Wages & S a l a r i e s a n d A v e r a g e CEO S a l a r i e s o f C a n a d a , 1980-86 90 T a b l e 3.28 F e d e r a l M i n i m u m Wage R a t e s f o r E x p e r i e n c e d A d u l t W o r k e r s a n d Y o u n g W o r k e r s , 1975-86 92 v, Table 3.29 The Value of Dwelling by Q u i n t i l e s , 1978 and 1982 • : • 95 Table 3.30 Percentage of I n d i v i d u a l Dividend Income by Income Group i n Canada, 1980-84 97 Table 3.31 New-Registered U.S. Luxury and Non-Luxury Cars In Canada, 1983-84 99 Table 3.32 New-Registered Imported Luxury Cars In Canada, 1980-84 100 Table 3.33 Ownership of Automatic Dishwashers i n Canadian Household, 1980-84 102 Table 3.34 Ownership of A i r - C o n d i t i o n e r s ( c e n t r a l u n i t ) i n Canadian Household, 1980-84 103 Table 3.35 Ownership of Micro-Wave Ovens i n Canadian Household, 1982-84 104 Table 3.36 Average Income and Experience f o r A l l U n i t s , by Income Q u i n t i l e , 1969, 1978, and 1982 106 vi ACKNOWLEDGEMENT I am deeply indebted to the following instructors who have helped me make this thesis possible. First of all, I would like to thank Dr. Guppy who have provided me with helpful advices and thoughtful suggestions at every stage of my thesis. I also want to appreciate Dr. Chang for his insightful criticisms and warm encouragement. Gratitude must also be expressed to Dr. Johnson who kindly agreed to act as my supervisor and has supported me in many ways. vii I. INTRODUCTION Equality has been a major issue for both intellectuals and ordinary people of all eras. The construction of a world in which all people live equally has been a ideal for many social thinkers. Most of the Golden Ages, the Utopias, and the Paradises created in the imagination of social thinkers, from Plato on, have emphasized the principle of equality. By and large, equality has been considered intrinsically desirable and morally right. Equality has been thus a very powerful ideal, closely connected to the criteria of equity, fairness, and justice, and effort to achieve equality has often been used to judge the moral authority of a society. Equality, however, is realized in words only, not in deeds. Inequality, rather than equality, has been the reality. That is to say, equality is for many a deeply-held value about how society should be, whereas inequality is an accurate description of how society is. Social thinkers have devoted much effort to finding the origins, meanings, and possible remedies of social inequality. The arguments on inequality have varied one from another. One position is that inequality is a natural and inevitable feature of society, something that might be reduced but never abolished. A n alternate position is that inequality is an unnatural and imposed social arrangement, an injustice that can and should be eliminated through social change. Although scholars' opinions about inequality have been varied, it is obvious that social inequality has been a tenacious and overriding concern of intellectuals. 1 I N T R O D U C T I O N / 2 Few areas of sociology are as contentious as the study of social inequality. Sociologists have tried to understand the causes and effects of social inequality as a ubiquitous feature of the social world since the beginnings of sociology as a distinctive discipline. Moreover, many sociologists, including the founders of American sociology, have considered the study of inequality as an essential ingredient for understanding the workings of society. Sociologists have constantly asked such questions as, "why does inequality exist?", "what causes it?", and "can it be eliminated altogether?", or "do we have to accept it as a necessary element of social life?". The very beginning of sociology lies in the works of authors who first attempted to give sociological answers to these questions ~ in particular, the French philosophes, the Scottish moral philosophers and political economists, and the thinkers of the German enlightenment in the second half of the eighteenth century (Dahrendorf, 1972:92-3). On the whole, sociologists have tried to find the answers by examining structured differences between people that are built into patterns of recurrent social interactions, because social inequality, to sociologists, refers to any of the social dissimilarities that are consequential for people's social lives. That is, sociologists have focused upon socially structured inequality (see e.g., Grabb, 1984). Most sociologists believe that inequality is primarily a consequence of social arrangements rather than seeing it as inherent in the common characteristics of individuals; they focus not upon random inequality but upon structured inequality. In fact, they hold that structured inequality (stratification) affects every aspect of the life of every individual and household today. Social inequality occupies the crucial place in the organization of society. It is believed I N T R O D U C T I O N / 3 that the study of social inequality is one of the most fascinating and important areas of sociology. Most societies today have a pattern of social structure based almost entirely on economic relationships. The formation of inequality in a society depends largely upon the distribution of economic resources of the society. Wealth involves all kinds of results from all economic sources: earnings, inheritance, welfare, etc., rather than income only. Wealth is defined as the total amount of accumulated assets including anything that can be turned into cash for the benefit of the owner (for example, the owner's home, automobile, business, savings, investments, etc.). Hence, wealth is an important and valid indicator of a person's socio-economic position, regardless of class or status. A t the same time, its distribution, of necessity, is the most believable key to social inequality which has been a central matter to sociology. The more equally wealth is distributed, the less social inequality exists in a given society. Therefore it is valuable to research the distribution of wealth since it tells us a great deal about society itself as well as the extent of social inequality. In addition, the distribution of wealth is especially significant in capitalist society where private ownership of wealth is the prevailing vehicle to determine social ranking. I will deal with the distribution of wealth in this thesis. I will not only describe the existing distribution of wealth but also analyze its changing trend (toward more equal, inequal or stable distribution). In the 1960s, Lenski tried to account for changing inequality by means of a socio-historical perspective. His macroscopic approach is summarized in Figure 1.1. According to him, social I N T R O D U C T I O N / 4 F i g u r e 1.1 Degree of Social Inequality by Type of Society M a x i m a l Deg r ee o f s o c i a l i n e q u a l i t y M i n i m a l Hunting and Simple Advanced Agrarian Industrial gathering horticultural horticultural Sou rce : Lenski, 1966. inequality had tended to increase since primitive times. As F i g u r e 1.1 shows, the increasing tendency keeps going through hunting and gathering, simple horticultural, and advanced horticultural societies. Agrarian society, then, designates the apex of the curve. In agrarian society, as a matter of fact, a small number of individuals with power, such as the king and the nobility, enjoyed immense luxury, consuming in a single day goods and services sufficient to support large numbers of the common people for a year. A t the same time, a considerable portion of the population, like serfs, > was denied the basic necessities of life and was marked out by the social system for a speedy demise. Extreme inequalities of wealth existed in that social system (c.f., Lenski, 1966:210-219, 295). The trend of increasing social inequality, however, was reversed with the I N T R O D U C T I O N / 5 rise of advanced industrial societies. Lenski believed that the significant improvements in technology, the spread of democratic ideas, and the growth of public property, public ownership, and public enterprise would make it possible to redistribute both privilege and power to more and more citizens in the modern era (Lenski, 1966:308-317, 338-345, 428-430). While Lenski took into account all types of societies and their historically changing social inequalities, my thesis is focused upon only one industrial society (that of Canada) and the distribution of wealth in the last two decades within that society. While influenced by Lenski's approach, this thesis concerns a much more recent period and deals with a much more limited area. In short, the aim of the thesis is to investigate the distribution of wealth in Canada today. In order to investigate the distribution of wealth, I will begin, in the next chapter, to examine a variety of theoretical explanations on the distribution of wealth. Initially, I will review the classical works of Marx, Durkheim, and Weber as the three Founding Fathers of modern sociology to see what predictions might ensue from their theoretical orientations as to what would happen to emergent capitalist society: more equal or less equal distribution of wealth. Following that, I will deal with more contemporary theorists focusing particularly on Blumberg, Westergaard and Resler, Porter, and Clement. Through an examination of these theoretical accounts, I intend to emphasize their ideas about how the distribution of wealth will change in contemporary industrialized society. After the review of theoretical accounts on the wealth distribution both in I N T R O D U C T I O N / 6 capitalist and industrialized societies, I will turn to the distribution of wealth in Canada. For the purpose of understanding Canadian wealth distribution, I will employ a variety of empirical evidence in Chapter III. First, I will show the data that already exists in the current social science literature. The data include the findings of Osberg, Hunter, Vaillancourt, Rashid, and Oja. These data will offer us important empirical evidence to identify the distribution of wealth in contemporary Canada. I will then present more data as new and different evidence of the existing pattern and changing trend of the wealth distribution. Both currently published and new data can be used to compare the theoretical accounts of the distribution of wealth. The thesis will finally conclude with an examination of the linkage between the theoretical accounts and the empirical evidence. The concluding chapter will attempt to show which perspectives are plausible to explain the distribution of wealth in contemporary Canada, and thereby will examine what brings forth the wealth distribution of today's Canada and what it, in turn, generates. II. THEORETICAL ACCOUNTS OF THE DISTRIBUTION OF WEALTH The focal point of this thesis lies in the distribution of wealth. In this chapter, I approach the focal point by briefly reviewing both classical and contemporary theoretical accounts. I start with a discussion of the theoretical accounts of classical social thinkers who were interested in wealth inequality in the newly emerging capitalist society of the nineteenth century. Then, I discuss some theoretical views on the wealth distribution in today's advanced industrialized societies such as American, British, and Canadian societies. A. CLASSICAL ACCOUNTS OF THE DISTRIBUTION OF WEALTH IN CAPITALIST SOCIETY In this section, I will review the theoretical accounts of Marx, Durkheim, and Weber. They not only occupy the central positions in modern sociology as three Founding Fathers, but also focus mostly upon social inequality and wealth distribution in the nineteenth century. They were among the first social scientists interested in wealth inequality as a key aspect of social inequality, when confronted with the emerging capitalism of the century. I present their viewpoints of the newly emergent class structure of capitalism, new forms of social inequality, recipes for its alleviation, and the distribution of wealth. 7 T H E O R E T I C A L A C C O U N T S O F T H E D ISTRIBUTION O F W E A L T H / 8 1. Karl Marx Marx, the social thinker most responsible for bringing to the forefront of sociology the concept of class (c.f., Grabb, 1984:13), strives to explain the social inequality of all past and present societies - both pre-capitalist and capitalist ~ through the concept of class, and on this basis, to predict the future. Social inequality, for him, means class-based inequality, and dominant and subordinate classes, whatever they might be called, exist in each society (except for the earliest societies where neither surplus value nor private property occurred, but common ownership of land prevailed). In every historical era, two major classes are distinct from each other with respect to the ownership of means of production - slaves in tribal and ancient times, land in feudalism, and capital in capitalism. In a sense, two classes denote the propertied and the propertyless. In actual fact, private property spurs the development of class. Always class relations between the two classes are conflictual; the owning class (the minority) is exploitative and the working class (the majority) is alienated. The conflict between the classes becomes the most sharpened in capitalist society. That is, Marx argues that the conflicts in history are conflicts of economic classes corresponding to specific modes of production, such as slavery or feudalism or capitalism. The more advanced the mode of production, the more general or universal the conflict (Fried and Sanders, 1964). Capitalism presupposes the culmination of the class conflict. In capitalist society, the predominant class tension lies between capitalists and wage laborers. Capitalists represent owners of the means of social production and employers of wage labor. T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H / 9 They own the factories and machines which increasingly replace land as the primary means of production. On the other hand, wage laborers are a class of propertyless workers who have no means of production of their own, are reduced to selling their labor-power to the owners of capital in order to survive. Thus, the class relations in capitalism is those between the powerful and the powerless. The former could enjoy most of the economic wealth and political power while the latter is forced to toil only to survive. Although conceding that capitalism is the most successful and efficient system of economic organization in generating wealth, Marx points out its internal contradictions concerning the wealth distribution. The growth of industry in capitalist society promises wealth and abundance for all, but the new-found wealth, for him, is monopolized by one class, while the mass of working people are made poorer, not richer, by the advances in production. Members of the dominant class possess a disproportionately large share of the wealth. As well, the unfairly comfortable position of the capitalist vis a vis the worker in the market helps that asymmetrical distribution of wealth. To be more specific, first, surplus value, which is the difference between the value of the labor and resources, and the value of the product, must be noted. In Marx's view, surplus value, ironically enough, always goes to the capitalists as a profit, then becomes the source of the accumulation of the capitalists' wealth, though the workers are primarily responsible for generating it through their labor. In addition, for Marx, the capitalists tirelessly try to get bigger profit at the expense of the laborers. Labor-power has a value like all T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION O F W E A L T H / 10 marketable commodities in the capitalist economy, and this value is determined by the amount of socially necessary labor time needed for its production (c.f., Marx, 1967). This amount of labor time represents how much the capitalists have to pay the workers. However, according to Marx, the capitalists in power can require the workers to labor longer than socially necessary — through lengthening the working day, reducing wages, speeding up the process of production, rationalizing the social organization of work, and introducing new and more efficient machinery (Marx, 1967). Accordingly, surplus value as a source of the bourgeoisie's wealth increases. A t the same time, the workers who put in surplus labor time are exploited. Surplus value, Marx argues, brings a profit to the capitalists and exploitation to the proletariat. The division of labor plays an important role in the distribution of wealth. As capitalism evolves and develops, the simple division of labor between the owner and the worker becomes more and more elaborate. Goods can be produced more quickly and cheaply if all the tasks are divided into special jobs, each of which is done by a particular worker on a continual basis (Grabb, 1984:24). A detailed division of labor makes highly efficient production possible. However, this efficiency only benefits the few capitalists because workers are paid the same wages in spite of their greater production. Not only does the division of labor increase the profits of the capitalist, and thus the rate of exploitation of workers, but it also has negative effects on the worker's orientation to work. That is, the workers lose enjoyable and meaningful quality of labor, for they work for quite simple, partial and meaningless chores routinely and repetitively --in that situation, the workers become alienated from their own labor. The minute T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H / 11 division of labor makes the jobs of individual workers easy and simple, and creates a set of unskilled laborers as well. As a consequence, the workers become easily replaceable by large numbers of potential competitors in the market, then their market power against the capitalists weakens. The division of labor in capitalist society increases the power and wealth of the capitalist, and thus results in the more uneven wealth distribution. In addition, the capitalists introduce machines to workshops to augment surplus value. The use of increasingly sophisticated machinery not only dilutes the requiring skills or physical strength of jobs and thereby makes workers even more substitutable -- even children and women supersede men by low wages --but it also swells the ranks of the industrial reserve army of labor (see Marx, 1967; Braverman, 1974) and thus makes workers' bargaining power with capitalists attenuated. As workers' skills are levelled and as they become more and more replaceable, their power in the market erodes. The weakened market power of the worker helps wealth become more concentrated. Marx argues that capitalism itself is such an internally contradictory system of production that it cannot operate in a stable fashion and is prone to recurrent cycles of boom and bust. Depression or crisis takes place under conditions of overproduction resulting from the competition among capitalists in accumulating wealth. Overproduction is typically followed by higher unemployment, reduced demand, and slow economic growth (Marx, 1975). A common reaction to depression by the capitalist is to lay-off workers in order to reduce costs and save money. After each crisis, there comes a period in which the economy T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H / 12 stabilizes and the proletariat may once again find work - boom (Marx, 1975). Nevertheless, workers are hurt by periods of crisis and thereby the basic differences between themselves and the owners become ever more apparent. In short, the recurrent economic cycles of capitalism makes it easy for the capitalist to accumulate wealth. As capitalism goes through its periodic slumps, Marx predicts, the accumulation and the centralization of wealth takes place because the larger and wealthier capitalists become better able to consume or bankrupt the smaller and the poorer of their kind. This kind of concentration of capital goes together with the merging of already formed capitals (Hardach et al. 1978:38). That is, small capitalists increasingly are forced to sell their businesses or else go bankrupt and are taken over by larger ones. For instance, the decline of the petty bourgeoisie in economic crises means a concentration and centralization of ownership in the hands of an ever smaller pool of large-scale capitalists. In Manifesto of the Communist Party, Marx describes: The lower strata of middle class - the small tradespeople, shopkeepers, and retired tradesmen generally, the handicraftsmen and peasants -- all these sink gradually into the proletariat, partly because their diminutive capital does not suffice for the scale on which Modern Industry is carried on, and is swamped in the competition with the large capitalists, partly because their specialized skill is rendered worthless by new methods of production. Thus the proletariat is recruited from all classes of population (Marx and Engels, 1977:43-44). Therefore, Marx asserts that class polarization, the widening separation between bourgeoisie and proletariat, emerges in capitalist society. His concept of class polarization truely reflects the widening gap of wealth holding. T H E O R E T I C A L A C C O U N T S O F T H E DISTRIBUTION OF W E A L T H / 13 It seems that Marx essentially believes the rich get richer and the poor get poorer in capitalist society, not only because the surplus value is always expropriated by the capitalists, but also because the situation of wealth-holders (the bourgeoisie in Marx's term) becomes more and more powerful while non-holders (the proletariat) become increasingly disadvantaged. The maldistribution of wealth in capitalist society is aggravated over time. Meanwhile, the power to overthrow the system builds with the working class, and the capitalist society is replaced by a socialist society, transcending the contradictions of capitalism. It is within the very capitalist society that its demise is generated. Change, for Marx, is a necessary historical process of dialectical development. According to him, the wealth distribution in capitalist society is in the direction of the extreme inequality. Its solution cannot be found within the capitalist system. The opposition between the accumulation of wealth and the accumulation of poverty pushes towards the overthrow of the system: The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with and under it. Centralization of the means of production and socialization of labor at last reach a point where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated (Marx, 1967:929). 2. Emile Durkheim Durkheim's focus is on the cohesiveness or solidarity of a society (especially the modern capitalist society) rather than on conflict or struggle. Therefore his capitalist society is an integrated one in which wealth is supposed to be distributed fairly. His strong interest in integration as such makes his T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H / 14 theory the prototype of contemporary Structural Functionalism (e.g., Grabb, 1984). He does not unconditionally believe, however, the solidarity of capitalist society. He thinks a morality, a set of rules of norms guiding and governing human conduct is essential to the social solidarity. The morality of capitalist society, for him, is very different from that of predecessors. That is to say, the morality of modern capitalist society is more individualized and free compared to the rigid and religious morality in primitive society (see Giddens, 1972:1-9). It derives mainly from the expanding division of labor. According to Durkheim, modern capitalist society which experienced the division of labor is guided by new morality, and hence, the society is in integration rather than in conflict. Therefore the wealth in capitalist soceity also must be fairly distributed. Durkheim seems to portray too positively the image of the modern capitalist society under organic solidarity brought about by a functional interdependence in the division of labor. But it must be noted that he divides the division of labor into three kinds: normal, anomic, and forced. For him, the normal division of labor is moral and just, where each individual person's special aptitudes and natural talents are allowed to develop. Therefore his positive view of modern society is possible only on condition that the society is under the normal division of labor. The anomic and forced divisions of labor, being abnormal ones, result from insufficient morality and justice respectively. Namely only the normal division of labor guarantee his positive view of modern capitalist society. The anomic state, for him, represents a situation where the traditional T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H / 15 moral forms have been dissolved but have not yet been replaced by new moral prescriptions. Hence, the anomic division of labor happens when the division of economic funtions has temporarily outstripped the development of appropriate moral regulation. It is reflected both in the occurrence of industrial crises and in class conflict (c.f., Giddens, 1972:10). That is to say, under the anomic division of labor, mutual contributions and obligations between owners and workers are denied or overlooked and a lawless, unconstrained struggle ensues, because both groups normlessly search only for their interests. Thus, a sharper line is drawn between the two classes as Marx's class polarization means. In such a society, wealth inequality between the two groups is marked. On the other hand, the forced division of labor occurs when social relations are determined by the imposition of coercive power. Therefore, under the forced division of labor, people in power act out of self-interest or egoism, implementing rules that monopolize and protect their favored positions in a society and that contains others in roles that are unsuitable and unfair given their abilities and interests. There exists only an imperfect and troubled solidarity (Durkheim, 1964:376). This kind of division of labor can be abolished if the hereditary transmission of property is ended, i.e., if external inequalities, in his terms, — inequalities from outside forces such as inheritance of wealth, ascribed status, etc. - are eradicated. The existence of external inequalities exactly mean the source of the unequal wealth distribution. Durkheim thinks that external inequalities can and will become dissolved with the further development of the division of labor, while internal inequalities T H E O R E T I C A L A C C O U N T S O F T H E DISTRIBUTION O F W E A L T H / 16 of capacity and aptitude are ineradicable. As long as the division of labor contains anomic or forced elements, external inequalities cannot be eliminated. He believes, however, finally, the normal division of labor is accomplished in modern society, and also believes, the anomic and the forced divisions of labor are just transitional as well as deviant. Thus, he argues, the progressive decline of inequality of opportunity ('external inequality') is a definite historical tendency which accompanies the growth of the division of labor (Giddens, 1971:81). External inequality, in fact, has gradually been obliterated by the division of labor and its need for special individual talents in modern society. It is partly because special faculties required for filling important positions in modern capitalism make it increasingly difficult to obtain these positions solely through inherited class privilege (Durkheim, 1964:312). That is, he strongly believes that in primitive society, where solidarity is based primarily upon community of belief and sentiment, there is neither the means nor the need for the equalization of opportunity. By the individualizing effects of the division of labor, specific human faculties which previously remained latent, become increasingly capable of actualization, and thus create a pressure towards individual self-fulfilment (Giddens, 1971:81): We may thus say that the division of labor produces solidarity only if it is spontaneous and to the degree that it is spontaneous. But by spontaneity we must understand not simply the absence of express and overt violence, but of anything that might, even indirectly, shackle the free employment of the social force that each person carries in himself. This not only suppose that individuals are not relegated to particular functions by force, but also that no sort of obstacle whatsoever presents the from occupying in the social framework the position which records with their capacities (Durkheim, 1967:377). In addition, he expects that the state and occupational groups as moral agencies, T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION O F W E A L T H I 11 contribute to the construction of the society of equal opportunity. In short, for Durkheim, modern capitalist society should be equal and fair because of guaranteed equal opportunity. Thus, wealth could become the criterion of one's capacity in capitalist society. In modern capitalist society, inequality should not arise from any outside force such as ascribed status and inherited wealth but instead should reflect differences in individual merit. For Durkheim, it is in a modern capitalist society where external inequality would be eliminated -- equal opportunity would be realized ~ and only internal inequality would remain. Thus the society is politically just and economically fair. This fair starting line provided by equal opportunity positively affects the wealth distribution. That is, equal opportunity in accumulating wealth should contribute considerably to equal distribution of wealth. Moreover the remaining difference of wealth holding must be due to the difference of capacity. Therefore, Durkheim's thoughts on the distribution of wealth in modern capitalist society, in contrast to Marx's, might be optimistic. 3. Max Weber Weber's thoughts on inequality are usually regarded as a distinct alternative to, and a positive critique of Marx's (e.g., Grabb, 1984:67). In fact, he makes a number of modifications to the Marxist view. Thus, his explanation has a more complex, pluralistic nature. For example, he strongly denies the tendency of economic determinism (i.e., that the real and unique basis of social structure is economic) in Marxism, and replaces it with a pluralistic view in T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION O F W E A L T H / 18 which the non-economic sphere (politics, religion, law, etc) as well as the economic sphere is taken into account. His explanation of inequality in capitalist society depends upon the concept of power rather than just that of class. For Weber, the distribution of power determines the distribution of wealth. Weber thinks of society as an arena for numerous contests among social actors attempting to obtain and exert power. In other words, the contest or struggle for power is inherent in social action; one's power is determined, not only through one's control of market capacity discussed above, but also, through one's status honor and influences deriving from party association (see Weber, 1968). The three major bases for power are class, status, and party. Each of these represents a distinct aspect of power insofar as each constitutes a different basis for staking claims to material and symbolic rewards. Class denotes the extent of one's power in the economic order. It concerns the distribution of economic goods and services. Status groups are the groups sharing distinctive styles of life and are delineated within the social order. And parties, which consist of systematically organized voluntary associations such as political parties, pressure groups, unions, professional groups and the like, relate to one's social power in the political order. Therefore it can be said that those who are members of dominant classes, status groups and parties are able, on the whole, to have power (domination) over the remaining population. No doubt, those who have power hold larger shares of wealth also. These three bases overlap one another in some cases, but not in others. Weber sees the historical development of societies as a steady trend T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H / 19 toward a predominance of both rationalized social actions and rationalized social structures. Capitalist society, according to him, is advanced in terms of rationality. He also thinks that the tendency to rationalization culminates in the system of formal organization known as bureaucracy, which is characterized by its impersonality, hierarchy of rational-legal authority, written system of rules, clear division of labor, and career systems. Bureaucracy is a system of laws not of men, so that, it is technically more perfect than other methods of organization and is the most efficient. For him, bureaucracy and capitalism are characteristics of the contemporary modern society. In modern societies, power struggles gradually happen within bureaucracies with their formal structure of regular patterned domination. That is to say, bureaucracy has become a key arena in the power struggle. In the light of Weber's account, bureaucracy is generally looked upon as an immense source of power, potential or actual (c.f., Parkin, 1982). Accordingly, bureaucracy must be an important variable of the wealth distribution in modern capitalist society. To wit, those who occupy the higher positions of bureaucracy could own, accumulate and keep wealth easily. It provides the means by which social action is governed on a regular basis, through which a system of inequality is established and sustained. Bureaucracy, on the one hand, is the only organizational form capable of keeping modern complex societies operating, but on the other, it is a threat to human freedom or equality. According to Weber, it was a necessary evil: necessary because it is the only practical means for organizing human conduct in the present day, yet evil because it is an iron cage, that restricts individualism and threatens democracy (cf., Weber, 1958:181-183). T H E O R E T I C A L A C C O U N T S O F T H E DISTRIBUTION O F W E A L T H / 20 Weber appears worried by the threat posed by bureaucratic officials by whom the means of administration seem to be increasingly concentrated in state bureaucracies as well as economical organizations. Although the officials are supposed to act without prejudice or passion, applying the same rules to all irrespective of differences in social rank or condition, the trouble is that they do not always behave in the way they are supposed to. They have an understandable human tendency to try and accrue power for themselves, and to push their own private interests (Parkin, 1982:88). Moreover, for Weber, they have a telling advantage over others in that they hold close control over the means of information. That is, secrecy and monopoly of the files are their strong weapon for power. Bureaucratic officials are extending their power to political, economic and all other spheres. They not only hold wealth already but also possess advantageous conditions to make it. Bureaucracy, for Weber, forms such a steel-hard cage that individuals at the low levels in bureaucratic organizations inevitably lose the control of the work they do, which is determined by those in the higher echelons (Giddens and Held, 1982:11). That iron cage makes inequality an inherent feature of capitalist society. Accordingly, for him, future society would not see the removal of alienation and impersonality but see the enhancement of them. Weber remains pessimistic about the prospects for the wealth distribution of modern capitalist society. Furthermore, unlike Marx, he never has any hope about socialist society. Because his pessimism results from bureaucracy, socialist society which has more intensified bureaucratic organization can not alter any situation. According to Weber's thoughts on the distribution of wealth in capitalist society seem to be THEORETICAL ACCOUNTS OF THE DISTRIBUTION OF WEALTH / 21 very unfair. It is because in capitalist society, social inequality is firmly established in bureaucratic organizations, and that power (as a general concept including economic resources) is concentrated in the hands of few bureaucratic officials. That is the small number of bureaucrats would control most wealth of the society while the remaining population would be forced to obey within the bureaucratic iron cage: unfairly hierarchical structure. Although bureaucracy generates a number of healthy and wealthy salaried middle class who he believes, exist and continue to expand in modern society, they have very weak power. The ultimate cause of this is that they lack the means of administration. If they have the means of administration, they are not middle class any more; they would be the members of the upper class. After all, the expanded middle class does not seem to affect the wealth distribution. Even if bureaucracy is believed to be an inevitable organization in rationalized capitalist society, it is by its very nature, hierarchical rather than equal or democratic. Thus, those who occupy the higher position in that hierarchial ladder could have enormous advantages in both political and economic spheres. In sum, bureaucracy would bring extremely unequal wealth distribution as well as considerabley restrained individual freedom to the modern capitalist society. For Weber, it is due mainly to the higher bureaucrat's holding a disproportiontely large share of wealth and power. Bureaucratization in capitalist society implies that political organization as well as economic arrangement is controlled by only a few of the powerful. In its modern guise, bureaucracy can be seen in the form of corporations. Private corporations, with massive bureaucracies, have become central features of capitalist society. Although Weber does not address the issue, it is the ownership T H E O R E T I C A L A C C O U N T S O F T H E DISTRIBUTION O F W E A L T H / 22 of these new bureaucratic forms which is important to the wealth distribution. As I will present in the next section, these new bureaucratic elites' control of contemporary industrialized society is discussed by Porter and Clement. In this section, I have discussed classical accounts on the distribution of wealth in capitalist society. I have dealt with three Founding Fathers of sociology who are Marx, Durkheim, and Weber. A l l of them were keenly interested in the social inequality and the wealth distribution in newly emergent capitalism. Each of them, however, has a different view of those topics: Marx views capitalism as a benefit only to the capitalist: capitalist's expropriation of surplus value and one-sidedly advantageous position in capitalist market. Thus, the wealth distribution becomes more unequal. Durkheim draws a solidarity of capitalist society due to normal division of labor. He believes that external inequality is eliminated and thereby equal opportunity comes true in modern capitalist society. As a result, the wealth distribution is seen as fair. Weber focuses upon power and reveals that power is unevenly concertrated by the small numbers of bureaucratic officials in capitalist society. Thus, wealth is also unequally held by the higher bureaucrats. B. CONTEMPORARY ACCOUNTS OF THE DISTRIBUTION OF WEALTH IN INDUSTRIALIZED SOCIETY: A CANADIAN FOCUS In this section, I will present contemporary theoretical views on the wealth distribution in industrialized society. My presentation includes the accounts of Blumberg; Westergaard and Resler; Porter and Clement. They either directly T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H / 23 provide the picture of the wealth distribution or indirectly offer many suggestions on the distribution of wealth in advanced capitalist societies: American, British, and Canadian societies respectively. 1. Paul Blumberg For the purpose of explaining the wealth inequality in contemporary American society, we can depend on Blumberg's concise summation of social class theories describing three prominent post-war positions: class convergence, class stability, and class divergence. His main question is this: have the classes converged, stabilized, or diverged? The class convergence model assumes that while all strata are becoming more affluent, the lower strata are moving upward faster. It implies a narrowing of the gap between classes and as well reducing social inequality. Thus the wealth distribution becomes fairer. The convergence theorists hold that this narrowing of inequality is primarily due to major occupational and industrial changes, including the movement away from the production of goods into services, the expansion of white-collar jobs, and the shift in the basis of control away from property and toward capacity. Briefly, they portray the world in which all people are equally wealthy. Class stability, the second perspective Blumberg cites, argues that all strata have been advancing at the same rate, thus maintaining the pattern of inequality and the structure of the wealth distribution. That is, although agreeing T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H / 24 that the general standard of living has risen for all social classes, the adherents of this perspective see little or no reduction in the amount of relative inequality between classes, as shown in the distribution of income and housing, the * establishment of distinctive class subcultures, etc. In this view, the class structure has not changed, and the wealth inequality is stable over time as well. Contrary to the assumptions of both previous models, however, in the recent period the living standards of the American people considered as a whole have stagnated or even declined (1980:174). Blumberg argues that both the convergence and the stability perspectives cannot be tenable any more, and must now be supplanted by class divergence. In the class divergence view, which Blumberg favours, "the upper strata are generally holding their own while the lower strata decline, thus increasing actual inequality."(1980:175) He suggests that the main cause of class divergence is today's (especially in the 1970s) prevalent inflation and its highly differential effects upon social classes. For him, the wealth distribution becomes badly de-equalized in an inflationary situation. Blumberg finds a cause of the economic decline since the late 1960s largely in the incessantly rising level of inflation. Contemporary inflation derives from the cartelization of the earth's shrinking energy supplies, the rising demand for U.S. grain in a more populous and affluent world, and housing shortages generated in part by the increasing demand of a growing population in the context of shortages of desirable land (Blumberg, 1980:176). But he also emphasizes, in accord with Marx, the role of the concentration of economic power in the exacerbating inflationary trends. In fact, the American economy is THEORETICAL ACCOUNTS OF THE DISTRIBUTION OF WEALTH / 25 dominated by a few hundred corporate giants: the largest 200 manufacturing corporations (.001 percent of the total) control about 60 percent of all manufacturing assets and employ nearly two thirds of all manufacturing workers (Blumberg, 1980:176). Such few firms in an oligopolistic industry confront an enormous number of unorganized buyers and easily gain control over prices. In markets where oligopolies prevail, decreasing demand yields not lower prices but higher unemployment. To wit, during a recession, capitalists do not bring down the prices of products (conversely, they raise them in order to offset declining sales) but lay-off their workers. Therefore, high unemployment coexists with high inflation: stagflation. On the one hand, competition is displaced by concentration, while market prices are, on the other hand, replaced by administered prices. For Blumberg, the unequally concentrated wealth and power make chronic today's inflation which results in class divergence. Blumberg singles out the differential effects of contemporary inflation upon various classes. Those effects are the bases of the theory of class divergence. First of all, because necessities, which make up a greater share of household budgets of the poor than they do for those with higher incomes, have been hit harder by inflation than have other goods and services, inflation has had its effect on living standards especially for the lower class. As a matter of fact, low income families must spend more of their income on the faster rising cost of food, shelter, energy, medical care, etc., as shown in Table 2.1. As a result, they have less discretionary income and so that, their standard of living is reduced. The majority of people have trouble in purchasing basic necessities and even the middle class has difficulty in affording the purchase of a home. Table T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H / 26 Table 2.1 Expenditures on Basic Necessities as a Percentage of Net Family Income, by Income Tenth, 1973-1974, United States Expenditure as % of Net Food Energy Shelter Medical Care A l l Income Necessities Bottom 10% 107.6% 41.7 105.2 29.4 284% Second 10% 44.2% 17.7 37.0 12.7 111.6% Third 10% 32.8% 14.1 23.1 9.8 79.8% Fourth 10% 28.2% 12.2 19.0 7.9 67.3% Fifth 10% 26.1% 10.6 18.4 7.0 62.2% Sixth 10% 24.7% 10.5 16.6 6.2 58.0% Seventh 10% 22.2% 9.6 14.6 5.6 52.1% Eighth 10% 19.1% 8.2 11.4 4.3 42.9% Ninth 10% 17.6% 7.4 10.9 4.0 39.9% Highest 10% 15.5% 6.1 12.2 4.6 38.4% Source: Blumberg, 1980. THEORETICAL ACCOUNTS OF THE DISTRIBUTION OF WEALTH / 27 2.2 expresses class divergence in home buying. Those in the upper class do not have such difficulties ~ they have fared reasonably well through rapid inflation all, more-or-less maintaining their bundle of economic privileges. Inflation is not an equal debacle for all, but makes the gap between the lower and upper classes widen: class divergence. In short, the existing wealth inequality aggravates today's inflation and the inflation, in turn, generates even more unequal wealth distribution as identified in purchasing power. Other evidence of class divergence, for him, rests on the different class consumption patterns for non-necessities that inflation brings. That is, the upper class can be insensitive to the inflated costs of non-necessities (the rich still can buy luxury cars despite their highly inflated price thus, under inflation, Cadillacs or Lincolns are sold more, whereas sales of Chevrolets or Fords are reduced: see Table 2.3), while the lower class is very sensitive to them. In other words, the consumption pattern of the lower class is much more demand-elastic: the lower class' demand for goods is easily expanded or reduced by the change of the price of goods. In short, the inflationary situation prevents them from affording something that they could buy before. Thus the existing inequality between the living standards of the lower and upper classes is exacerbated. Uneven wealth distribution that inflation brings also affects consumption patterns, so that it yields inequality in the standard of life. According to Blumberg, contemporary inflation, which is a significant cause of the decline of American economy, results mainly from the concentrated economic structure, and its effect is class divergence. Class divergence means a T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H / 28 Table 2.2 Class Divergence in Home Buying: From Mass Market to Luxury Market in 10 Years, United States Income Group Top Quarter Middle Income Lower Third T O T A L Share of A l l New Houses Bought 1965-1966 1975-1976 31% 53 17 100% 58% 38 4 100% Source: Blumberg, 1980. THEORETICAL ACCOUNTS OF THE DISTRIBUTION OF WEALTH / 29 Table 2.3 Class Divergence: 1975 Domestic Auto Sales as a Percentage of 1974 Sales, United States 1975/1974 Model Year General Motors; Chevrolet -23.8 Cadillac +9.3 Ford Motor; Ford -28.6 Lincoln +8.4 All U.S. Luxury Cars +7.0 All U.S. Non-Luxury Cars -20.9 TOTAL DOMESTIC SALES -19.7 Source: Blumberg, 1980. T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H / 30 widening gap between the lower and upper classes in terms of not only economic resource holding, but also life-style. The concept of class divergence suggests a more unequal distibution of wealth. If Blumberg's class divergence can be the most versatile concept to explain contemporary capitalist society, wealth is being unfairly distributed in the society. In addition, unevenly distributed wealth in an inflationary situation results in inequality in purchasing power, consumption patterns, and quality of life. 2. John Westergaard and Henrietta Resler Westergaard and Resler analyze class inequality in a contemporary capitalist society (Britain) from a Marxist position. They argue that social inequality is rooted in the private ownership of capital in capitalist society. Possession of property is the crucial means of the accumulation of wealth. The accumulation of wealth requires incomes from property ownership as well as incomes from earnings. Property ownership is the most significant income source only for the upper class, while it is not for the lower class at all, for they own no private property. For example, six out of seven taxpayers have no investment income whatever, while 10 per cent of taxpayers share two-thirds of all such income. Within that, 1 per cent of taxpayers gain one-third of all unearned income. The great majority of population, in contrast, have to work to earn their living. Therefore, they suggest that the propertied classes are at a great advantage for wealth-holding in a capitalist society like Britain. Superficially, statistical evidence seems to show that there has been a T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION O F W E A L T H / 31 long-term trend toward a greater spread of property ownership, in other words, reduction in the degree of inequality. However, as seen from Table 2.4, it is nothing but the richest 1 percent's yielding to the next 2-5 or 6-10 percent. To be more specific, though the share of the richest 1 per cent has fallen from 69 per cent of total personal wealth in 1911-13 to 42 per cent in 1960, that of the next 2-5 per cent actually increased from 18 per cent of all wealth to 33 per cent of wealth, and the share of the next 6-10 per cent also grew from 5 per cent to 8 per cent in the same period. Also the richest 1 per cent's yielding, in their interpretation, becomes a tactic of the rich to safeguard their wealth against taxation - for example, some property of the richest is transferred to relatives, or others, some time before the death of the original owners in order not to be liable to death duty. In the U . K . , death duties can be avoided if wealth is passed to others through gifts at least seven years before the death of the donors. Thus, their kin can become richer earlier. Hence, the change in the statistics should be merely quantitative rather than qualitative. The unequal class structure in capitalist societies always remains the same, or worsens, and the system of property ownership remains very strongly concentrated at the top. In capitalist society, those who already have property can make and maintain their wealth via inheritance. In so far as inheritance continues, equality of opportunity cannot be achieved (while Marxist in orientation, this inheritance is one of Durkheim's chief worries about the continuity of external inequality). The competition of wealth-gathering with inheritance is compared to a race with different starting lines. The maintenance of inheritance reflects, for them, the THEORETICAL ACCOUNTS OF THE DISTRIBUTION OF WEALTH / 32 Table 2.4 Long-Term Trends in Distribution of Private Property, 1911-1960 and 1961-1971, United Kingdom Groups within Adult Population Estimated Proportion of Agregate Personal Wealth (aged 25+) 1911 1924 /13 /30 % % Richest 1% owned 69 62 Richest 5% owned 87 84 Richest 10% owned 92 91 Hence: Richest 1% owned 69 62 Next 2-5% owned 18 22 Next 6-10% owned 5 7 95% owned only 13 16 90% owned only 8 9 Source: Wetergaard and Resler, 1975. 1936 1954 1960 1961 1971 /38 % % % % % 56 43 42 32 26 79 71 75 55 47 88 79 83 n/a n/a 56 43 42 32 26 23 28 33 23 21 9 8 8 n/a n/a 21 29 25 45 53 12 21 17 n/a n/a THEORETICAL ACCOUNTS OF THE DISTRIBUTION OF WEALTH / 33 interests and influences of those who already have property, or are in a good position to acquire it. In fact, it continues to play a major role in keeping the state of property concentration. Also, according to them, such policies as the welfare state and taxation always fail to limit the role of inheritance ~ the welfare state does redistribute some income, but mostly within classes at different stages in the life cycle. And indirect taxes are highly regressive while direct taxes are slightly progressive. Since inheritance unequally gives a better condition or opportunity to those who already have a good one, it makes an unequal society even more unequal. The concentration of property ~ of private capital - also involves a conception of power: power to preserve or change the shape of the economy and society. Westergaard and Resler explain this by data presented in Table 2.5. They point out that power-related property such as the property of government and municipal securities or company stocks and shares is more highly concentrated by the rich relative to the property of cash and bank deposit or land, buildings, trade assets. In fact, share holding in private economic enterprises provides potential power over policy especially in capitalist economies where private enterprises dominate. Hence the rich owners have influential power over the social policies of governments, including taxation and social welfare systems. Accordingly, social policies do not play their part in reducing inequality. Private ownership, according to Westergaard and Resler, is in the hands of a tiny minority group with massive wealth and power, and this concentration is making capitalist society more unequal. They think that radical redistribution T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H / 34 Table 2.5 Concentration of Main Types of Private Property, 1954, United Kingdom A l l net Cash Land, Govt. Company Groups within private and bldgs, and stocks adult population capital bank trade municipal and deposits assets security shares % % % % % Richest 1% owned 43 23 28 42 81 Richest 5% owned 68 48 58 71 96 Richest 10% owned 79 64 74 83 98 S o u r c e : Wetergaard and Resler, 1975. T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H / 35 would require the dissolution of private property and thus the abolition of the capitalist mode of production itself. As long as private ownership continues, a precondition of capitalism exists and the unequal distribution of wealth cannot be remedied. Their standpoint of the distribution is very near to Marx's. 3. John Porter In the 1950s John Porter undertook a major study of Canadian society with a primary interest in understanding the shape of social inequality in the nation. The pervasive view that Canada is a uniformly middle class society without very rich or very poor groups and without established barriers to opportunity, Porter argues, is more a myth than a social fact. Indeed, no more than 10 per cent of Canadian families in 1959 earned the $8,000 Porter estimates as the minimum necessary for middle majority life style (1965:132). Analyzing an array of statistics, he also outlines the enormous concentration of wealth in Canada and the even greater concentration of economic power in a handful of institutions, directed by and profitting (in income, power, deference, and safety) only a small group. His explanation on the wealth distribution of Canada is analogous to Gabriel Kolko's accounts on those of the United States in the same decade. Kolko also argued the maldistribution of wealth mainly due to the enormous ownership by major corporations and the overwhelming concentration by the American economic elite; in 1955, the 200 largest nonfinancial corporations owned 43 per cent of all corporate wealth and 18.3 per cent of the national reproducible tangible assets. These corporate giants were controlled by some 2,500 men who were the owners and managers (Kolko, T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION O F W E A L T H / 36 1962). According to Porter, a complex society in the modern world is composed of various institutional systems, each of which is hierarchically organized. The hierarchy in each system depends upon power rather than property. Like Weber, he suggests that the structure of power reflects the structure of inequality. Therefore, power, which means the recognized right to make effective decisions on behalf of a group of people, is the independent variable of class structure. For him, the class system is twofold: those who have power to make the major decisions for the society, and those who do not have such power. Hence, power is often used to perpetuate a given structure of class by the former. His focal point rests on the holders of power, elites. In modern society, diverse interrelated systems of power exist and at the top of each hierarchical system, elites exist — for instance, political elites in political parties, economic elites in corporations, and military elites in the army. According to Porter, each elite not only has the task of directing a functional power system, but also is able to direct social change. The elites in different institutions co-operate as well as compete with one another. He adopts what might be called a plural elite model. Because elite decisions are taken either in co-operation or in conflict with each other, they enter into a scheme of social relationships, and thus acquire a degree of social homogeneity which the masses, non-elites do not have. Porter regards elites as more than statistical classes (1965:230). In fact, they share T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H / 37 common educational backgrounds, kinship links, present and former partnerships, common membership in clubs, trade associations, positions on advisory bodies, and philanthropic groups. A l l of these help to produce a social homogeneity of the elite. That is to say, career and social background eventually come to determine entry into an elite. In general, the increasing complexity of a society's internal system and the increasing complexity of its relation with other societies makes the elite highly co-ordinated one another. This co-ordination within the elite leads to an aggrandizement of power, the creation of a power elite or a ruling center. Therefore, he points out, although elite groups present arguments for changes which will improve their relative positions, they never make demands for changes in the foundations of the economic order, that is, for public ownership as a substitute for corporate and private ownership of the society's productive instruments (1965:212). Accordingly, social inequality increases for the elite use their power to preserve, promote, and protect their inerests, not the interests of the society as a whole. More than anything else, in Porter's view, economic power is strikingly concentrated in modern Canadian society. A relatively small number of large corporations dominate the Canadian economy. Again, the dominant corporations are linked together through a group of men; the economic elite. Thus, for him, the economic elite which occupies the major decision-making positions in the corporate institutions (Porter suggests 985 Canadian residents, holding directorships in 170 dominant corporations, banks, and insurance companies compose the economic elite) is composed of the most influential industrial and commercial leaders in Canada. Economic power is the basis of political power as many social T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION O F W E A L T H / 38 scientists have stressed -- such as Mills (1959), Miliband (1969), Anderson (1973). A n economic elite within a ruling class not only controls the economy but also influences government and the nature of a society. Therefore, Porter argues that 985 individuals dominate and control Canada. Furthermore, the elite is virtually so closed in terms of the family or social background, that its structure extends across generations. Canadian wealth, therefore, is concentrated in the elite and the consequent maldistribution of wealth and power is hard to change. 4. Wallace Clement Using more up-dated data, but similar procedures, Wallace Clement confirms Porter's explanation of Canadian society in terms of an elite theory. Clement argues the economic elite of 1972 is more exclusive in social origins, more upper class, more clearly knit by family ties than in 1952. Nor has there been any sizable entry into the board-rooms of the major corporations of Canadians who are not British in their ethnic origin. Social structures are slow to change (1975). He shows that the proportion of the Canadian economic elite recruited from the upper class increased, from 50 per cent in 1951 to 59 per cent in 1972; the proportion recruited from the middle class increased only slightly; and the proportion recruited from the working class decreased from 18 per cent in 1951 to 6 per cent in 1972. For him, the economic elite has become more closed. Similar to Porter, Clement defines the economic elite as people who fill positions on the boards of directors of dominant corporations at the top of the T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION O F W E A L T H / 39 economic system. He finds an economic elite of 946 people holding directorship in 113 dominant corporations in 1972, like Porter's 985 people holding directorship in 170 dominant corporations, banks, and life-insurance companies in 1951. However, Clement goes one step further and attempts to separate national and foreign sections of the economic elite. That is, he stresses foreign control over the Canadian economy by distinguishing three groups of the elite; the indigious Canadian elite, the comprador elite who serve as the agent of foreign owners, and the parastic elite, the foreign owners. He finds 62 per cent of the directors of firms of 25 million dollars in assets or more to be outside of Canada (Clement, 1974:25). Moreover, he anticipates that the invasion by foreign owners increases in the future. Clement confirms Porter's study on the powerful and the privileged in Canada by using more recent data. He argues that the Canadian economic elite has become more exclusive and difficult to join. In addition, he emphasizes that foreign owners (especially from the U.S.) occupy more portfolios of the elite. For him, this small number controls most of the wealth and power in Canada. Porter and Clement see that Canadian society is governed by an elite with power. Power is considerably concentrated by the tiny number in the economic elite — especially the corporate elite similar to Weber's bureaucratic official. Moreover elite circulation is very limited because of the strong exclusiveness of a co-ordinated elite. The distribution of wealth is already very unequal and becomes more unequal over time, due to the concentrated power by the elite and the limited opportunity to get into the elite. That is, the economic T H E O R E T I C A L A C C O U N T S OF T H E DISTRIBUTION OF W E A L T H / 40 elite hold a large share of wealth, make their share even larger by taking advantage of their power, and try to pass their profitable positions to their families or relatives. I have discussed some contemporary theoretical accounts of the distribution of wealth in industrialized society. On the whole, contemporary sociologists take pessimistic views of the wealth distribution; Blumberg argues that the differential impact of inflation on the lower class makes even more unequal the wealth distribution and points out that the unevenly distributed wealth finally brings the inequality of people's consumption pattern and life-style in industrialized society. Westergaard and Resler also advocate that the existence of private property and the permission of its inheritance make it impossible for the wealth distribution in industrialized society to become fair. Likewise, Canadian authors, Porter and Clement reveal that the economic power is concentrated by a small number of exclusive economic elites in an industrialized society: Canadian society - that concentration causes maldistribution of wealth. In following chapter, I will show a more concrete and vivid picture of today's Canadian wealth distribution not only by presenting current data but also by anayzing new statistics. In doing so, each theoretical account could be confirmed in the Canadian reality. ffl. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH In this chapter, I concern myself with the Canadian wealth distribution. Two kinds of empirical evidence follow. First, I show the current data reported by Canadian authors such as Osberg, Hunter, Vaillancourt, Rashid, and Oja. Then I present and analyze new data on the distribution of wealth in contemporary Canada which includes information on such wealth components as income, home ownership, stocks, and other belongings. Before presenting the data, several basic questions must be answered. To begin with, I have to make clear what is meant by wealth. Wealth is the stock of accumulated assets measured in dollars. Thus this stock of assets includes anything that can be turned into money for the benefit of the owner. That is, wealth includes residential homes, vacation homes, investments, businesses, cars, trucks, and recreational vehicles plus liquid financial assets (cash, deposits, Canada Savings Bonds, etc.) and non-liquid financial assets (stocks, RRSP's, and so on). Secondly, it is important to distinguish between income and wealth, since there is a tendency in daily conversation to use the two terms interchangeably. Wealth, as defined above, involves the fixed and accumulated stock of assets expressible as property while income is a flow of disposable (spendable) money such as wages and salaries. It is useful to conceive of wealth as a stock of owned assets, whereas income is a flow of money (Osberg, 1981). Therefore, on the one hand, income is an important way of accumulating wealth. On the other 41 E M P I R I C A L E V I D E N C E OF T H E DISTRIBUTION OF W E A L T H / 42 hand, wealth also generates income (e.g., investment income, rent, capital gains, etc.). Even if we took for granted three types of income: employment (wages and salaries), non-employment (receipts from investments, rents, interests, and dividends), and social income (social welfare benefits), income would tell us much of what we might like to know about the rate at which new wealth was flowing in, but it would not tell us anything in itself about wealth already in hand (Henretta and Campbell, 1978). What actually counts as income is rather difficult to define for the purposes of measurement. That is to say, should income include profits from gambling, settlements from insurance policies, government support for students in higher education, inheritances, all manner of gifts, bribes, income-in-kind and so on? Typically the above are not included in income data (Vaillancourt, 1985), chiefly because they are so difficult to measure in any systematic manner. Hence, wealth is a more inclusive concept than income. Nevertheless, social researchers tend to deal more frequently with measured income than wealth since the former is more easily quantifiable than the latter. In fact, wealth, mainly relying upon properties, is ever harder to measure than is in income. This is because the values of properties are sometimes very difficult to determine, especially for consumer durables and collectables, and it usually has to depend on book-value resulting from an owner's guess rather than market-value determined by the forces of supply and demand. For example, the exact value of art paintings or old stamps is very hard to determine without actually selling the item in question. Although wealth is hard to measure, the concept explicitly E M P I R I C A L E V I D E N C E OF T H E DISTRIBUTION O F W E A L T H / 43 tells us many more things about social reality than the narrower concept of income. The correlation between wealth and income is not perfect. Since income is an important component of wealth, and since wealth generates income, a strong positive correlation is not surprising. Nevertheless, for certain sub-groups in society, the correlation is not substantial. The elderly constitute a notable example. Many old people are asset rich but cash poor in that they own a home (wealth) but have little cash flow (income). Therefore, to examine the wealth distribution, the data presented here deal not only with income statistics but also with some information about other wealth components. Finally, in examining data on income and wealth, it is important to consider whether the proper unit of analysis is the individual or the family. When most families had only one major earner, it made little difference whether one consider the individual or the family. Now, however, with most families composed of multiple earners, it is important to examine both individual and family distributions of income and wealth. Therefore I analyze the data for all units, rather than for only the individual or the family, in the second part of the chapter. A. CURRENT EVIDENCE In this section, I consider previously published empirical evidence of the distribution of wealth in Canada. Knowledge of the wealth distribution comes EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 44 from examining data about the key components of wealth: the distribution of income, real estate, stock ownership, and so forth. The aim of this section is therefore to present an overview of existing Canadian data on the wealth distribution, reviewing especially any evidence of change. 1. Lars Osberg Osberg (1981) argues that wealth is very unequally distributed in Canada. He reports that the top 10 per cent of Canadian adults own 57.1 per cent of all wealth, but of that roughly a third (18.8 per cent) is owned by the top 1 per cent of adults and over two-thirds (42.9 per cent) by the top 5 per cent (see Table 3.1). He also pays attention to income distribution which considerably affects the wealth distribution. To measure the distribution of income, Osberg depends upon quintile data which is generated by arraying the whole population in order of income, from poorest to richest, and then dividing this ranking into five equal groups. Table 3.2 gives the share of different quintiles of Canadian family units in the total income of Canadian families for various years between 1951 and 1978. During that period, the share of the poorest 20 per cent has remained roughly constant at around 4 per cent of total income while the share of the richest 20 per cent of family units has remained roughly constant at around 42 per cent of total income (1981:10). If any perceptible change has occurred, there has been some tendency to a decline in the share of the poorest quintile. This relatively stable inequality over past 30 years should be something of a surprise EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 45 Table 3.1 Estimated Wealth Per Canadian Adult* -- 1980 Total Net Worth Number (Assets-Debts) Share Per Adult (1) (2) (3) (2)/(l) top 1% 165,000 $146,361M 18.8% $887,040 next 4% 661,000 $187,623M 24.1% $283,847 next 5% 826,000 $110,549M 14.2% $133,837 (total top (1,653,000) ($444,534M) (57.1%) ($268,925) 10%) next 10% 1,653,000 $126,120M 16.2% $76,297 (total top (3,306,000) ($570,654M) (73.3%) ($172,611) 20%) next 4 0% 6,612,000 $200,857M 25.8% $30,377 bottom 40% 6,612,000 $6,228M 0.8% $1,002 Totals 16,530,000 $778,519M 100.0% $47,097 *i.e., wealth per household/number of adults in household; M=million. Source: Osberg, 1981. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 46 Table 3.2 Income Shares of Canadians Year Lowest Second 1951 4.4 11.2 1957 4.2 11.9 1961 4.2 11.9 1965 4.4 11.8 1967 4.2 11.4 1971 3.6 10.6 1975 4.0 10.6 1976 4.3 10.7 1977 3.8 10.7 1978 4.1 10.4 (families and individuals) 1951-1978 Third Fourth Top 20% 18.3 23.3 42.8 18.0 24.5 41.4 18.3 24.5 41.1 18.0 24.5 41.4 17.8 24.6 42.0 17.6 24.9 43.3 17.6 25.1 42.6 17.4 24.7 42.9 17.9 25.6 42.0 17.6 25.2 42.7 Source: Osberg, 1981. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 47 because, during the same period, Canada experienced considerable economic growth, the average income more than doubled, and the labor-force participation of married women more than tripled. In addition, the welfare state, which came into existence during this time, has brought a considerable increase in government transfer payments. To see whether the degree of income inequality is a lot, or a little, Osberg presents international comparison data. Although these data are problematic due to the differences in statistical sources and existing social structures, Table 3.3 clearly shows that the Netherlands, Sweden, and Norway are the most equal of the OECD nations, while the most unequal are France and Spain (as measured by the Gini coefficient). Canada appears to rank approximately mid-way, not as unequal as the United States but more unequal than the United Kingdom (1981:24). Osberg argues that the Canadian industrial structure is, to a very large degree, dominated by a small number of rich families. Some foreign-owned and great Canadian family firms control the Canadian economy even though they are easily excluded from Canadian sample statistics. As one piece of evidence, he points out the restricted stock ownership. That is, in 1970, 87.7 per cent of Canadian family units reported owning no publicly traded stock at all, while only 3.2 per cent reported owning $5,000 or more. Stock ownership constitutes only approximately 9 per cent of the total assets of Canadian families (1981:36). Thus direct stock ownership is restricted to a few hands of the very rich. As a result, for most Canadians, tangible assets such as houses, other real estate, EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 48 Table 3.3 International Income Inequality ~ Post Tax Standardized Household Size Share of Income Recieved by Year Income Quintiles 1st 2nd 3rd 4th 5th Gini Australia 1966/67 4.8 12.2 17.8 24.1 40.9 .354 France 1970 4.2 9.7 16.2 22.8 47.1 .417 Germany 1973 6.5 10.3 14.9 21.9 46.3 .386 Japan 1969 5.1 12.4 16.8 21.7 41.9 .336 Neth. 1967 9.1 14.5 17.5 22.5 36.3 .264 Norway 1970 6.6 13.0 18.9 24.7 36.9 .301 Spain 1971 4.2 10.2 16.8 24.0 45.0 .397 Sweden 1972 7.3 14.1 19.0 24.7 35.0 .271 U.K. 1973 6.1 12.2 18.4 24.0 39.3 .327 U.S.A. 1972 4.9 10.9 17.5 24.6 42.1 .369 Canada 1972 5.2 12.0 18.0 24.2 40.5 .348 Average 6.0 12.0 17.5 23.5 41.0 Source: Osberg, 1981. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 49 automobiles, and consumer durables are the main form of wealth holdings. According to the data which Osberg presented, wealth is very unequally distributed (even more unequal than income). Income, as an important component of wealth, shows consistently unequal distribution since World War H, in spite of the development of Canadian economy. Stock ownership, also proves to be very restricted to the small number of the rich. 2. A l f r e d A . H u n t e r Hunter emphasizes the importance of the analysis of wealth rather than income only. According to his data on wealth, its distributional inequality looks more extreme than income inequality. Almost 95 per cent of all assets were held by the most wealthy 50 per cent, leaving about 5 per cent distributed among the least wealthy 50 per cent in 1970 and 1977 as Table 3.4 shows. In other words, the average value of assets held by the top 50 per cent of wealth holders is almost twenty times the average asset value held by the bottom 50 per cent. In contrast to Osberg's internationally comparative income data, Hunter presents details on the distribution of wealth which shows a more unequal distribution in Britain than in Canada or the United States (Table 3.5). Hunter believes that Canada is wealthy, and has been throughout the period since World War II. The Canadian economy has improved not only in relative terms, but it has improved in absolute terms as well. This improvement accompanies increases in the earnings of Canadians as shown in Table 3.6. In EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 50 Table 3.4 Cumulative Distribution of Wealth of Families and Unattached Individuals, 1970 and 1977 Percentage of Total Assets Held by: 1970 1977 most wealthy 10 per cent 53.3% 50.6% most wealthy 20 per cent 70.9 68.1 most wealthy 30 per cent 82.7 80.1 most wealthy 40 per cent 91.0 88.7 most wealthy 50 per cent 96.4 94.7 Source: Hunter, 1986. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 51 Table 3.5 Estimates of the Distribution of Wealth, in Canada, the U.K. and the U.S.A. 1969-70 Share of Top 1% 5% 10% Canada 19.6 43.4 58.0 U.K. 33.8 56.8 69.1 U.S.A. 25.1 43.7 53.0 Source: Hunter, 1986. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 52 current dollars, Canadians' incomes have shown about an eight-fold increase since 1951, although much of this has been due to inflation. Even allowing for inflation, however, average incomes more than doubled in this period, although most of the increase occurred prior to 1975, and men's real incomes actually dropped in the late 1970s ~ the first time this had happened in the post-war period (1986:61). Even if Table 3.6 is informative, it does not tell us anything in itself about income inequalities. Hunter demonstrates the large and persistent inequalities in the distribution of incomes, even though real incomes more than doubled in the period surveyed. The bottom quintile of families and unattached individuals never received more than 4.6 per cent of the total income, while the top quintile never received less than 41.4 per cent of the total family income over the period of 1951-81. He also argues that there has been a slight tendency for the top two quintiles to increase their hold upon the available income at the expense of the bottom three quintiles (1986:63). In 1951, the top two quintiles received 66.1 per cent of the total income. This decreased in 1961 to 65.9 per cent, rose in 1971 to 68.2 per cent, and then dropped to 67 per cent in 1981. Hunter claims the home is the uniquely important family possession. It is the major component of both assets and debts, and it makes up well over half the net worth of all families taken together (1986:75). Nevertheless the percentage of families living in owner-occupied dwellings has decreased, while the percentage living in rental accomodation has increased. In 1981, 62.1 per cent of EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 53 Table 3.6 Earnings of Men and Women in Canada in Current and Constant (1981) Dollars, Selected Years, 1951-81 Current Dollars Constant Dollars year men women men women 1951 $2,575 $1,061 $9,229 $3,803 1954 2,922 1,161 10,253 4,074 1957 3,381 1,441 11,308 4,819 1959 3,556 1,599 11,467 5,158 1961 3,869 1,692 12,244 5,354 1965 4,612 1,870 13,565 5,500 1967 5,322 2,454 14,581 6,723 1971 7,056 3,307 16,720 7,836 1973 8,402 3,887 17,651 8,166 1975 10,815 5,200 18,487 8,889 1977 12,690 6,442 18,689 9,487 1979 14,981 7,673 18,564 9,508 1981 18,159 9,653 18,159 9,653 Source: Hunter, 1986. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 54 all dwellings in the country were owner-occupied - down from 63.6 per cent in 1971, 66.2 per cent in 1966, and 67.6 per cent in 1956. Along with this has come a drop in the percentage of the single detached housing which most Canadians favor and a corresponding rise in the percentage of other kinds of dwelling units: single attached (e.g., town houses, maisonettes), apartments and mobile homes. In 1951, 66.7 per cent of all dwelling units in Canada were single detached. This decreased to 65.4 per cent in 1961, 59.4 per cent in 1971 and 57.1 per cent in 1981. Single attached units rose from 7 per cent to 10.1 per cent in this same period, while apartments and flats rose from 26 per cent to 30.1 per cent. What is occurring is a trend over time of decreasing owner-occupied, single detached housing and increasing rented, single attached units and apartments. This tendency is associated with rising housing prices. Today, the dream of owning a single detached home is just a dream for many middle- and (especially) lower-income Canadians (1986:75) - similar to Blumberg's diagnosis in home buying in American society. This tendency is, for Hunter, making the distribution of wealth more unequal. That is, to the extent that home ownership is decreasing, therefore, this suggests an increase in inequalities in wealth. In addition to inequality due to decreasing home ownership, for Hunter, an inequality among owners exists. As Table 3.7 shows, there is a very clear positive relationship between income group and equity in the home. To wit, the higher the income group, the higher the estimated home, equity. Hunter also believes that in an economic system such as Canada's, which EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 55 Table 3.7 Home-Value of Families and Unattached Individuals by Income Groups in Current (1977) Dollars, 1977 Income Group Home-Value under $3,000 $26,911 $3,000-$6,999 28,513 7,000-10,999 31,684 11,000-14,999 28,988 15,000-19,999 29,850 20,000-24,999 31,914 25,000-34,999 39,267 35,000 and over 59,350 Total 33,968 Source: Hunter, 1986. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 56 is dominated by family-owned firms and joint-stock corporations, participation in the ownership of private enterprise is an important source of income and form of wealth. Thus stock ownership is a significant wealth source. According to him, however, about one income recipient in fifteen received income from the ownership of stocks in 1980 ~ down from about one in ten in 1970. Table 3.8 shows the percentage of dividend income of individuals for each quintile in Canada since 1950. As these data show, dividend income is very unequally distributed - much more so than income generally, and more so even than total wealth. In fact, it is almost totally monopolized by the highest quintile. Even the dividend income of the second richest quintile is consistently below 10 per cent (5.6, 6.9, 8.8, 6.5%). The top 7,742 income recipients in Canada in 1980 shared among them $616,720,000 in dividend income ~ about as much as the lower four quintiles of income recipients taken together (1986:77). Over time, according to his data, the concentrating trend seems to have been in the direction of increasing inequality in the distribution of dividend income. In four years surveyed, the share of the highest quintile has been increasing, while the small share of the bottom three quintiles has even been decreasing. In 1980, the highest quintile held more than 90% whereas the lowest held less than 1%. According to the data Hunter provides, the distribution of wealth in Canada is moving in the direction of inequality. Annual income, housing ownership, home-value, and stock ownership, which are major components of wealth, are unequally distributed and the distributions have become more unequal over time. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 57 Table 3.8 Percentage of Individual Dividend Income by Income Quintile Quintile 1950 1960 1970 1980 lowest 5.1% 3.5% 2.1% 0.3% second 5.8 4.7 5.5 1.1 third 5.4 5.1 4.5 2.5 fourth 5.6 6.9 8.8 4.7 highest 78.1 79.8 79.1 91.4 Source: Hunter, 1986. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 58 3. Francois Vaillancourt In his research on the income distribution and economic security, Vaillancourt introduces varied sources of income data such as the National Accounts, the Survey of Consumer Finance, and the Census. As Table 3.9 shows, these three sources of data all indicate an increase of income between 1951 and 1981. The average real income of Canadians more than doubled over the period. According to him, various factors can explain this change. For example, changes in workers' schooling, in the capital stock per worker, and in technology are some of the determinants of increased labor productivity. This increase leads to higher real wages and thus higher real income ~ wages being the most important component of income in Canada (1985:4). To represent the degree of inequality, Vaillancourt draws upon quintile shares and the Gini coefficient, both of which are readily available for Canada since 1951 and are widely used. He uses data from the Survey of Consumer Finance. Even if SCF data are used extensively in the discussion of income distribution, it omits several types of income ~ capital gains or losses, gambling gains and losses, and income in-kind such as free meals or living accomodations. Also the SCF sample excludes residents of the Yukon and the North West Territories, members of households on Indian reserves, and inmates of institutions ~ for example, prisons and long-term-care hospitals (1985:7). This omission tends to decrease measured inequality. For instance, capital gains, which are excluded from SCF, are highly concentrated in the upper income brackets: in 1981, 61.2 per cent of capital gains was declared by individuals with an income above E M P I R I C A L E V I D E N C E O F T H E DISTRIBUTION OF W E A L T H / 59 Table 3.9 Per Capita Income of Canadians, 1951-81, Current and Constant Dollars Data Source/ 1981/ 1981/ Income Concept 1951 1961 1971 1981 1961 1951 * National Accounts/ G N P current 1,545 2,174 4,379 13,959 6.42 9.03 constant (1951$) 1,545 1,913 2,890 3,889 2.03 2.51 SCF/ money income current 989* 1,459* 2,891 9,636 6.60 9.74 constant (1951$) 989* 1,284* 1,908 2,685 2.09 2.71 Census/ money income current - - 2,705** 8,542** constant (1951$) - - 1,785 2,380 * non-agricultural population only. " income for the year preceding the census (1970 and 1980). Source: Vaillancourt, 1985. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 60 $50,000 (1985:59). Table 3.10 presents the distribution of money income in Canada which includes transfers and is not corrected for taxes paid between 1951 and 1981. It indicates the existence of a 4 - 40 rule: 4 per cent of income to the lowest group, 40 to the highest (1985:11). Although there were a number of changes in demographic factors and in labor force participation rates, the 4 - 4 0 rule has consistently existed and these changing factors taken together seem to have cancelled out. This rule looks insensitive even to the major cyclical variables, such as inflation and unemployment. Vaillancourt also contrasts the distribution of money income in Canada with the distribution in other industrialized nations. Such comparisons are difficult since there are differences in the type of units surveyed, in the coverage of a given type of unit, and in the definition of income. However, Table 3.11 shows, in a manner similar to Osberg's data, that among OECD countries, Canada appears to rank approximately mid-way in terms of the inequality of the distribution of income. Table 3.12 provides the other internationally comparative data among Canada, the United Kingdom, and the United States. The data indicates overall inequality of income is greatest in the United States and least in the United Kingdom, with Canada in between. The differences, however, are quite small and perhaps insignificant (1985:15). In sum, Vaillancourt's data makes clear that the mean real income of Canadians has more than doubled since World War II and in 1980 compared EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 61 Table 3.10 Income Inequality in Canada, 1951-81, Money Income, Quintile Shares and Gini Coefficients, A l l Units Quintile Shares first second third fourth fifth Gini year (lowest) (highest) coefficient 1951* 4.4 11.3 18.3 23.3 42.8 0.390 1961* 4.2 11.9 18.3 24.5 41.1 0.368 1971 3.6 10.6 17.6 24.9 43.3 0.400 1981 4.6 10.9 17.6 25.2 41.8 0.377 *non-farm units only. Source: Vaillancourt, 1985. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 62 Table 3.11 Gini Coefficient, Pre-tax Income, for Economic Families, OECD Countries Economic Families Country Year Rank Gini Canada 1969 5 0.382 Australia 1966/67 10 0.313 France 1970 1 0.416 Germany 1973 3 0.396 Japan 1969 9 0.335 Netherlands 1967 4 0.385 Norway 1970 6 0.354 Sweden 1972 7 0.346 U.K. 1973 8 0.344 U.S.A. 1972 2 0.404 Source: Vaillancourt, 1985. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 63 Table 3.12 Gini Coefficient, Pre-tax Income, for Families and Individuals, Canada, the U.K. and the U.S.A. Families Individuals country year rank Gini year rank Gini Canada 1975 2 0.379 1974 2 0.472 U.K. 1975 3 0.355 1972-73 3 0.462 U.S.A. 1975 1 0.423 1974 1 0.501 Source: Vaillancourt, 1985. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 64 quite favorably with the income of residents of other industrialized countries, and that the distribution of income, nevertheless, remained relatively stable in Canada between 1951 and 1981. This may seem surprising but can be explained by the interplay of various forces, such as the increase in the number of unattached individuals and the number of working women (1985:57). 4. Abdul Rashid Rashid deals with income as a major constituent factor of wealth. The income data he reports is based upon the 1981 Census of Canada. He is particularly interested in one end of income spectrum; the top one per cent of all families. It is valuable to examine the top 1 per cent families because that group is easily omitted in sample surveys in spite of the considerable amount of wealth held by that group. This group must be very rich. In fact, the top one per cent of all census families recieved an income of $93,200 or more in 1980; their average income was $143,061,. over five times the national average of $26,748 (1986:15). He shows that there is a very strong positive relationship between income and wealth. The top 2.17 per cent of families (those having an income of $50,000 or more) received not only 9 per cent of the aggregate income of all families, they also owned about 28 per cent of all financial assets and 22 per cent of the aggregate business equity in 1977 as shown in Table 3.13. In this group, about 3 out of 5 families had a business/professional interest, while 3 out of 4 families with an income of $75,000 or over reported such interests E M P I R I C A L E V I D E N C E OF T H E DISTRIBUTION O F W E A L T H / 65 Table 3.13 Selected Financial Characteristics of High Income Economic Families, Spring 1977 Family Income Family Income A l l Characteristic $50,000 + $75,000 + Families Average Dollars income 80,132 119,294 19,010 financial assets 163,463 369,797 12,439 equity in busi./farm/prof. 135,890 262,617 13,413 net worth 413,848 796,066 56,122 Per Cent all families 2.17 0.73 100.0 aggregate income 9.1 4.6 100.0 aggregate financ. assets 28.5 21.7 100.0 aggregate busi./farm/prof. 22.0 14.3 100.0 aggregate net worth 16.0 10.4 100.0 incidence of busi./farm/prof. 61.3 72.5 16.4 Source: Rashid, 1986. E M P I R I C A L E V I D E N C E O F T H E DISTRI B U T I O N O F W E A L T H / 66 (1986:45). The distribution of profits is highly skewed in that very a large proportion of all profits go to a few very large corporations. According to him, it is generally the families with very high incomes who hold large portfolios of securities in these large corporations. Therefore the distribution of investment income should be checked, compared to all other families, the top 1 per cent families have i) much higher incidence of, ii) higher average income from, iii) higher composition of, and iv) higher percentage shares, of investment income (see Table 3.14). That is, in 1980, 41.1 per cent of all families reported that they gained investment income, while 79.8 per cent of the top 1 per cent families did; the average income from investment of the top percentile is as much as $41,046 whereas that of all families is $4,155. By Rashid's data, investment income composed 6.4 per cent of all family income, but it composed 22.9 per cent of the top family income; and the top percentile held 19.17 per cent of all investment income in 1980. Furthermore, there is a tendency that investment income as a component of total income had increased substantially over time. In 1970, investment income composed 4.1 per cent of all family income and 14.0 per cent of the top 1 per cent family income while the counterparts in 1980 were 6.4 per cent and 22.9 per cent respectively (1986:80). Rashid's data also demonstrates the extreme inequality in housing between the top percentile income families and other families. As Table 3.15 presents, E M P I R I C A L E V I D E N C E OF T H E DISTRIBUTION OF W E A L T H / 67 Table 3.14 Incidence of, and Average Income from, Various Sources of Income and Composition of Total Income, Census Families, 1980 Incid. Aver. Income Compo. source all top 1% all top 1% all top 1% families families families families families families % % $ $ % % wage & sal. 84.6 88.7 24,520 79,660 77.6 49.4 n-farm sf-employ. 9.3 36.7 14,701 80,914 5.1 20.7 farm sf-employ. 4.8 10.6 8,737 58,787 1.6 4.4 invest, income 41.1 79.8 4,155 41,046 6.4 22.9 other income - 15,766 26,486 9.3 2.6 Source: Rashid, 1986. E M P I R I C A L E V I D E N C E OF T H E DISTRIBUTION O F W E A L T H / 68 compared to about 65 per cent of all families, 86 per cent of the high income families owned their homes -- single detached. An average estimated value of the top percentile family home is about $208,000 in 1981 while the average for the typical family home is $76,000. The difference of average annual mortgage payment between two groups is also striking. Although Rashid examines such characteristics of the top 1 per cent families as region, occupation, education, number of income recipients, etc., he, however, emphasizes the contribution of working wives. In 1980, working wives earned 20.6 per cent of all family income and 15.3 per cent of the rich families by means of earning on average $8,528 and $26,801 respectively. He also notes that the increasing participation of wives in the v/ork force between 1970 and 1980 was more pronounced among the well-to-do. In 1970, only 36 per cent of the wives in the highest income families worked, compared with 44 per cent in all families. But in 1980, 59 per cent wives in the top percentile families worked, compared with 56 per cent of all families. In short, Rashid's data tells us that the top 1 per cent of income families control a considerable amount of income, especially from investments; they are also living in large and expensive homes; and working wives in their families contribute to earning high income. E M P I R I C A L E V I D E N C E OF T H E DISTRIBUTION OF W E A L T H / 69 T a b l e 3 . 1 5 Dwelling Characteristic of Census Families, 1980 A l l Families Top 1% Families Single Detached Dwelling % 65.4 85.6 Value of Dwelling $ 75,810 207,863 Annual Mortgage $ 4,719 7,673 S o u r c e : Rashid, 1986. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 70 5. G a i l Oja Oja reports wealth data relying upon sample surveys of households undertaken occasionally by Statistics Canada. The 3 published household surveys were taken in 1970, 1977, and 1984. Her data focuses upon drawing conclusions about the degree of inequality present in the wealth distribution and how it has changed from 1970 to 1984. First of all, the growth in wealth is impressive. As Table 3.16 shows, mean wealth per family and unattached individual was estimated in 1984 at $104,222 and $38,146 respectively. For all units, this averaged to $85,344 --4.7 times the $18,189 1970 average - measured in current dollars. During the same period the Consumer Price Index rose by a factor of 2.98, so we are dealing here with real growth that is not negligible (1987:7). She emphasizes that average wealth in real terms continued to grow; average wealth in constant dollars(1984) was $44,363, $68,149, and $85,344 in the three successive periods. By examining median wealth and the Gini coefficient, Oja shows the changing trend of wealth inequality. That is, her data displays increasing median wealth but a decreasing Gini coefficient over time, which implies a possible reduction in wealth inequality. As shown in Table 3.16, median wealth increased from $7,575 in 1970 to $39,876 in 1984. The Gini coefficient has declined from 0.716 to 0.686 for all family units in the same period as reported in Table 3.17 - from 0.681 to 0.641 for EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 71 Table 3.16 Percentage Composition of Wealth of Families and Unattached Individuals, 1970, 1977, and 1984 1970 1977 1984 $ $ $ Average wealth current $ 18,189 46,273 85,344 Average wealth constant(1984) $ 44,363 68,149 85,344 Median wealth 7,575 21,754 39,876 Source: Oja, 1987. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 72 Table 3.17 Distribution of Wealth of All Units 1970, 1977, 1984 Decile 1970 1977 1984 Poorest -1.0 -0.6 -0.4 2 0.0 0.1 0.1 3 0.3 0.5 0.6 4 1.3 1.6 1.8 5 3.0 3.5 3.6 6 5.4 5.9 5.7 7 8.3 8.6 8.2 8 11.8 12.1 11.6 9 17.6 17.6 17.5 Richest 53.3 50.7 51.3 Source: Oja, 1987. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 73 families and from 0.811 to 0.782 for unattached individuals. Wealth distribution has somewhat changed towards equality, and the change in the period between 1970 and 1977 looks more remarkable than that in the period between 1977 and 1984. The change between 1977 and 1984 seems to be a continuation in the equalizing trend. However Table 3.17 also shows that in the three years, the poorest wealth decile was always negative sum of wealth. The richest owned more than 50 per cent. Therefore, the distribution of wealth still looks very unequal - much more unequal than income ~ despite a slight mitigating trend over time. Compared to the great growth in wealth, the distribution of wealth has not experienced any profound change. There seems to have been very little redistribution via a trickle-down effect. Wealth composition over the same period of time had changed somewhat with non-liquid assets becoming more important and home-ownership starting to show signs of levelling off or even declining - according to Table 3.18 (1987:21). Estimated market value of home in 1984 was 45.3 per cent of total wealth instead of 49.8 per cent in 1977 and 46.9 per cent in 1970. Still, however, equity in owner-occupied homes remains the most important component of wealth (both assets and debts) for Canadian families. Increases in non-liquid financial assets are due mainly to the growth in RRSP's. Generally, the composition of wealth seems to be stable over time. Among the three periods, percentage differences of the wealth composition are not clear. On the whole, real assets (e.g., homes, cars) are far more equally distributed than financial assets and equity in business as shown in Table 3.19. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 74 T a b l e 3.18 Percentage Composition of Wealth of Families and Unattached Individuals Assets 1970 1977 1984 equity in business 20.4 19.3 21.3 estimated market value of home* 46.9 49.8 45.3 equity in other real estate 6.4 6.5 5.8 cars 4.0 4.3 4.6 other vehicles n/a n/a 0.9 financial assets liquid assets 14.7 12.9 13.3 other financial assets 7.6 7.2 8.6 total assets 100.0 100.0 100.0 Debts mortgage debt on home* 10.1 10.9 8.7 consumer debt 3.6 3.4 2.9 other personal debt 1.3 0.8 0.9 total debt 15.0 15.2 12.5 wealth 85.0 84.8 87.5 * includes vacation homes, n/a - not available. Source: Oja, 1987. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 75 The richest quintile has held about 50 per cent of total equity in the home while it has held 80-90 per cent in such wealth components as business equity or financial assets. Except for cars, all wealth components are very unequally distributed. Over the fourteen year period (1970-84) the pattern of the wealth distribution is found to have remained quite stable rather than changeable. The percentage structure of the wealth distribution in each year looks very similar to other years. However, the stability is on the high level of inequality. In the three years, the richest wealth quintile held about 79 per cent of total wealth (see Table 3.19). In short, according to Oja's data, in spite of a near doubling of average wealth in real terms over the 14 year period, the patterns of both composition and distribution of wealth are observed to be stable. The wealth distribution among Canadian families and unattached individuals has become somewhat more equal, but as Oja reported, the change is only minor. On balance, as discussed above, the data concerning wealth as reported by several Canadian authors, shows wealth to be very unequally distributed. To be specific, despite a more than doubling of average Canadian incomes, income distribution has been unequally stable; the value of home, the most important wealth component, also has been unevenly distributed and de-equalized over time, due mainly to increasing housing costs and decreasing home ownership; and income from stock ownership has been extremely restricted to a very small fragment of the super rich in recent decades. Over time, the pattern of the distribution of wealth has not shown any significant change, even though some EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 76 Table 3.19 Distribution of Wealth Components by Wealth Quintiles, 1970, 1977, and 1984 Component 1Q 2Q 3Q 4Q 5Q Total % % % % % % 1970 equity in business -0.1 0.2 1.8 5.0 93.1 100.0 equity in home 0.2 1.2 12.6 31.8 54.2 100.0 equity in other real estate 0.4 0.5 3.8 11.2 84.0 100.0 cars 8.1 16.0 19.6 22.8 33.5 100.0 net financial assets -7.1 1.2 6.6 15.4 83.9 100.0 total wealth -1.0 1.6 8.4 20.1 70.8 100.0 1977 equity in business 0.1 0.3 2.1 4.6 92.9 100.0 equity in home -0.1 1.8 13.3 32.2 52.8 100.0 equity in other real estate 0.3 1.0 6.3 15.0 77.5 100.0 cars 6.4 17.3 20.1 23.2 33.0 100.0 net financial assets -4.6 1.8 7.8 15.8 79.3 100.0 total wealth -0.6 2.2 9.4 20.7 68.3 100.0 1984 equity in business 0.3 0.3 1.5 4.0 94.0 100.0 equity in home 0.1 2.0 14.0 30.0 53.9 100.0 equity in other real estate 0.1 1.3 8.2 16.1 74.4 100.0 vehicles 4.0 15.0 19.0 23.7 38.3 100.0 net financial assets -3.5 2.2 7.3 19.3 74.7 100.0 total wealth -0.3 2.4 9.3 19.8 68.9 100.0 Source: Oja, 1987. E M P I R I C A L E V I D E N C E O F T H E DISTRIBUTION OF W E A L T H / 77 authors say there is a tiny equalizing (or de-equalizing) trend of distributions in some wealth components. This disagreement is due mainly to methodological differences such as different definitions of concepts, different sample size, and different data source. In sum, the published data on the distribution of wealth in Canada reveals that wealth is very lopsidedly allocated ~ the extent of the wealth inequality is considerably greater than that of income inequality. That is, the wealth distribution in Canada appears to have maintained its stable pattern and remained very unequal. In following section, I examine the distribution of wealth in Canada by means of new empirical evidence. B. NEW EVIDENCE In this section, I deal with new and different data on the distribution of wealth in Canada. To draw a vivid picture of today's wealth distribution, I not only renew several data patterns shown in the previous section but I also present some data not covered in the previous section. Thus the present section offers new and different evidence on the distribution of wealth in contemporary Canada whereas the previous section aimed to review the existing literature of empirical accounts of the wealth distribution. I update, in this section, the data of income and income distribution in Canada which significantly affect wealth distribution. I also present post-tax income data and pre-transfer income data to see the effect of government policies on the income redistribution: to see how adequately taxation and transfer payment policies function to redistribute income. I provide the data concerning E M P I R I C A L E V I D E N C E OF T H E DISTRIBUTION O F W E A L T H / 78 income disparity between occupations by comparing average incomes of all individuals with those of such highly paid occupations as chief executive officers, lawyers, doctors, and dentists. Then, I concern myself with the representative wealth components. That is, the home, stock ownership, and automobiles are considered. In addition, I investigate some expensive household belongings (air conditioners, microwave ovens, and dish-washers) to examine the wealth inequality appearing in modern Canada. 1. New Trend i n Canadian Income As discovered before, Canadian income, one of the most important determinants of wealth, had continuously increased since the Second World War. The average real income of Canadians had more than doubled in the period between 1951 and 1981. However, this trend seems not to have persisted in the 1980's. As Table 3.20 provides, the Canadian average income (in current dollars) increased, but this was mainly due to inflationary effect. In fact, average income in constant dollars (1985) tended to decrease between 1980 and 1985. This new tendency was specially marked between 1981 and 1984. That is, compared to $32,615 in 1981, the average real income was only $31,205 in 1984. This fact is likely to result from the recession occurring between the late 1970s and the early 1980s. The distribution of income, nevertheless, appears to have remained stable. As shown in Table 3.21, the 4 - 40 rule was unbroken. Except for the tiny augmentation of the first quintile (0.6 per cent), income shares by quintiles had EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 79 Table 3.20 Average Income for A l l Units, 1980-85 Current Constant (1985 $) 1980 22,708 32,494 1981 25,641 32,615 1982 27,746 31,852 1983 29,113 31,597 1984 30,002 31,205 1985 31,959 31,959 Source: Statistics Canada (1985), CAT. 13-207. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 80 Table 3.21 Shares of Total Income by Quintiles, 1980-85 i Q 2Q 3Q 4Q 5Q Total 1980 4.1% 10.5 17.7 25.3 42.4 100.0 1981 4.6% 10.9 17.6 25.2 41.8 100.0 1982 4.5% 10.7 17.3 25.0 42.5 100.0 1983 4.4% 10.3 17.1 25.0 43.2 100.0 1984 4.5% 10.3 17.1 25.0 43.0 100.0 1985 4.7% 10.4 17.0 25.0 43.0 100.0 Source: Statistics Canada (1985), CAT. 13-207. E M P I R I C A L E V I D E N C E OF T H E DISTRIBUTION OF W E A L T H / 81 not changed in the first half of 1980s. The richest quintile, without fail, owned more than 40 per cent of total income (43 per cent in 1985). Income distribution in 1980s was as unequal as before, regardless of average income decrease in 1980s due to the recession. In short, the Canadian income distribution maintains its 4 - 4 0 rule in recent years even if the economic recession brought a decrease in real income. 2. Canadian Welfare State Table 3.22 and 3.23 present the data about income after tax. Just like income before tax, income after tax, generally, was declining from the end of the last decade (see Table 3.22). Average families and unattached individuals got $26,985 in 1979, while receiving $26,780 in 1985 (in 1985 constant dollars). This decrement too is presumably due to the recession. As shown in Table 3.23, the quintile distribution of income after tax does not look very different from that of income before tax. Even if the poorest quintile slightly increased their share of total income, the richest quintile still controlled more than 40 per cent of total income even after taxation in the last fifteen years. Over the first half of the 1980s, the post tax income shares of the poorest quintile were only 0.7 per cent larger than their income share before tax (see Table 3.23). The taxation system is actually regressive at the lower end of the income scale, and neither particularly regressive nor progressive through remainder of it (Hunter, 1986:65). In short, the Canadian taxation system in the recent two decades practically did not play any significant role in redistributing income. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 82 Table 3.22 Average Income After Tax for A l l Units, Selected Years 1973 1975 1977 1979 1981 1983 1985 Current 9,076 11,786 14,334 17,123 21,718 24,489 26,780 Constant 24,255 25,603 26,858 26,985 27,625 26,578 26,780 (1985 $) Source: Statistics Canada (1985), CAT. 13-210. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 83 Table 3.23 Shares of Income After Tax by Quintiles, Selected Years IQ 2Q 3Q 4Q 5Q Total 1971 4.2% 11.5 18.2 25.0 41.1 100.0 1973 4.4% 11.6 18.2 25.1 40.8 100.0 1975 4.6% 11.5 18.2 25.1 40.6 100.0 1977 4.4% 11.6 18.4 25.5 40.2 100.0 1979 4.8% 11.5 18.1 25.2 40.3 100.0 1981 5.3% 11.8 18.0 24.9 40.0 100.0 1983 5.1% 11.3 17.7 24.9 41.0 100.0 1984 5.2% 11.4 17.7 24.8 40.8 100.0 1985 5.4% 11.4 17.6 24.8 40.8 100.0 Source: Statistics Canada (1985), CAT. 13-210. E M P I R I C A L E V I D E N C E OF T H E DISTRIBUTION O F W E A L T H / 84 Table 3.24 refers to income data before transfer payments. From the table, we can find that average income before transfers increased overtime, but its quintile distribution is very much unequal. By subtracting income before transfers from average income (Table 3.20), we can also find that the amount of transfer payments increased in the recent years — from $2,305 in 1981 to $3,715 in 1985. However, the increased amount of transfers is not likely to change unequal income distribution. Comparison between Table 3.20 and 3.24 reveals that the richest quintile can control more than 40% of total income both before and after mounted government transfers, and the poorest quintile benefited just a little bit by transfer payments (less than 4 per cent increases). The transfer payments seem at most to have a only small redistribution effect with regard to wealth. This is because most beneficiaries of transfer payments (71.4%) are those who are above low income cut-off (Vaillancourt, 1985:33). In fact, even if they do form a significant component of the incomes of those who receive no salary or wage, they are of little benefit to those who are employed, regardless of their wage or salary level. That is, the employed poor are excluded from transfer payments, while the unemployed rich are enjoying them. Table 3.25 summarizes Canadian welfare state, by presenting Gini coefficients of pre-transfers income, total income and post-tax income. Differences in Gini coefficients of pre-transfers income and total income means the redistributive effect of transfers while differences in Gini coeffients of total income and post-tax income means the redistributive effect of tax. Accordingly, the bigger both differences are the greater the effects of the welfare state. As shown in Table 3.25, the income redistribution effect of transfers are getting stronger EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 85 Table 3.24 Average Income and Quintile Distribution Before Transfer Payments for A l l Units, 1981-1985 Average($) Quintile Distribution(%) 1981 23,336 1.4 9.6 17.8 26.4 44.9 1982 24,727 1.1 8.9 17.3 26.4 46.3 1983 25,798 0.9 8.2 17.0 26.5 47.5 1984 26,422 0.9 8.1 17.1 26.5 47.4 1985 28,244 1.0 8.3 17.0 26.5 47.3 Source: Statistics Canada (1981-5), CAT. 13-210. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 86 Table 3.25 Gini Coefficient Calculated on Different Income Concepts for A l l Units, Selected Years Pre-Transf. Total Income Post-Tax (1) (2) (3) (D-(2) (2)-(3) 1971 0.477 0.400 0.371 0.047 0.029 1973 0.445 0.392 0.368 0.053 0.024 1975 0.451 0.392 0.364 0.059 0.028 1977 0.445 0.388 0.362 0.057 0.026 1979 0.444 0.387 0.359 0.057 0.028 1981 0.439 0.377 0.351 0.062 0.026 1982 0.457 0.384 0.355 0.073 0.029 1983 0.473 0.394 0.363 0.079 0.031 1984 0.473 0.390 0.360 0.083 0.030 1985 0.470 0.389 0.358 0.081 0.031 Source: Statistics Canada (1985), CAT. 13-210. E M P I R I C A L E V I D E N C E OF T H E DISTRIBUTION OF W E A L T H / 87 while that of tax very slowly increasing. These levels of increment, however, could not bring income equality (even post-tax income is very unequally distributed shown in Table 3.23). In general, the tax-transfer system in Canada had too little impact to alter income inequality. In other words, Canadian government is not successfully taking a role of income redistribution. In fact, it is very hard to see the government as an independent institution representing the majority of population today. It is because political parties are financed by particular interest groups such as large corporations, and because the majority of political offices are held by upper-middle and upper class representatives (c.f., Marchchak, 1981). A recent empirical research tells us that the percentage of parliamentarians coming from the top two SES categories (owners, self-employed professionals, professionals, and middle managers) has grown from 77.3 per cent to 87.9 per cent between 1965 and 1984 (Guppy et al, 1987). After all, the government intends to maintain or change income structure for the benefit of the rich rather than the poor. 3. Income Dispar i ty Along with the general trend of income growth and income distribution, we must note income inequality between different occupations. The data regarding annual incomes of several occupations in recent years provides more visible evidence of the changing distribution of income nowadays. Table 3.26 gives information of average net incomes of doctors, dentists, lawyers (typical high income earners) and all taxpayers. These high income EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 88 Table 3.26 Average Income of Self-Employed Doctors, Dentists, Lawyers, and A l l Taxpayers in Canada, 1951-84 Year Doctors Dentists Lawyers All Taxpayers 1951 $9,975 $6,287 $10,214 $3,149 1961 17,006 14,692 15,718 4,348 1971 39,555 27,862 25,828 7,237 1980 62,273 55,328 45,921 13,716 1981 66,722 60,139 53,123 15,415 1982 75,175 66,151 57,882 16,825 1983 89,124 76,690 61,457 17,333 1984 95,797 74,665 65,167 18,240 1984/1951 9.60 11.88 6.38 5.79 1984/1980 1.54 1.35 1.42 1.33 Source: Revenue Canada, 1982-86. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 89 earners held much greater income than all taxpayers. In fact, doctors earned 5.3 times, dentists earned 4.1 times, and lawyers 3.6 times as much as incomes of all taxpayers in 1984. The average income of each occupation had grown from 1951 to 1984. It is, however, found that the growth rate of incomes of doctors, dentists, and lawyers was much greater than that of all taxpayers in the same period. To be precise, percentage changes between 1951 and 1984 are +860, + 1088, and +538 for doctors, dentists, and lawyers respectively while percentage change for all taxpayers is +479 in the same period. During 1980s, doctors, dentists, and lawyers gained +54, +35, and +42 per cent of growth respectively, compared to +33 per cent increase for all taxpayers. Earners of those occupations gain much more income than average earners, and that income difference becomes marked over time. We can see an even more extreme case by comparing average salaries of Chief Executive Officers (CEO, the top active executive responsible for the operation of the company) and average individual wages and salaries. As given in Table 3.27, the income inequality between CEOs and average earners has been intensified over time; CEOs earn 6.3 times as much as average earners in 1980 and the former earn 7.2 times as much as the latter in 1984. In other words, wages and salaries of the majority of individual earners increased by 30 per cent while salaries of CEOs increased by 49 per cent. Moreover, the period between 1980 and 1986, the salary increment of CEOs was 72 per cent (53 per cent between 1981 and 1986). This rate of increment is surprising because at the similar period (1981-86), total wages and salaries of Canada increased at 35 per cent (from 178,318.1 million dollars to 241,265.1 million dollars) and total EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 90 Table 3.27 Average Individual Wages & Salaries* and Average CEO Salaries** of Canada, 1980-86 Year Ave. Ind. CEO CEO/Ind. 1980 10,040 62,493 6.3 1981 11,129 71,000 6.4 1982 11,927 80,230 6.7 1983 12,307 86,167 7.0 1984 13,070 93,491 7.2 1985 n/a 100,877 n/a 1986 n/a 108,544 n/a 1984/1980 1.30 1.49 1986/1980 n/a 1.53 Source: *Derived from Revenue Canada, 1982-86. **Derived from Sobeco, 1986. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 91 labor income ~ wages and salaries plus payments by employers for the future benefits of employees, such as pension-plan contributions and unemployment-insurance and workmen's-compensation premiums ~ increased at 36 per cent (from 196,002 million dollars to 267,277 million dollars), as reported by Statistics Canada (1986:9-12). Additionally, CEOs can obtain great profit from bonuses, perks, stock options, and so on. Although CEOs receive very high salaries, salaries do not tell the entire story; one must also consider bonuses and stock options in calculating the total compensation package (Anisef and Baichman, 1984:113). As a matter of fact, average total compensation of CEOs was $128,564 while average base salary was $108,544 in 1986 (Sobeco, 1986). If one were to include CEOs' bonuses, perks, stock options, etc., the gap of incomes (between CEOs and average earners, let alone CEOs and the poor or the unemployed) becomes much more pronounced. On the opposite side, the augmentation of minimum wage rates have been very slow and tenuous. Table 3.28 shows federal minimum wage rates for experienced workers and young workers, from 1975 until today. For twelve years (1975-86), in spite of great inflation, the minimum wage rate has grown at as small as 54 per cent for adults and 38 per cent for youths. At the period between 1981 and 1986, when total wages and salaries showed a 35 per cent increase; when the total labor income showed a 36 per cent increase; when CEO's salaries 53 per cent increase; the minimum wage rates crept up by only 14 per cent for adults and showed absolutely no increase at all for youths. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / Table 3.28 Federal Minimum Wage Rates for Experienced Adult Workers and Young Workers (under 17), 1975-86 Adult Workers Young Workers rate effective date rate $2.60 Jul. 23 1975 $2.35 2.90 Apr. 1 1976 2.65 3.25 Dec. 1 1980 3.00 3.50 May 1 1981 3.25 4.00 May 1986 3.25 Source: Labor Canada, 1976-86. E M P I R I C A L E V I D E N C E OF T H E DISTRIBUTION OF W E A L T H / 93 Briefly, the great income inequality between occupations becomes even greater over time. That is, compared to average earners, the well-to-do, such as doctors, dentists, lawyers, and especially CEOs, enjoyed high rates of income increase. Furthermore the increasing rate of minimum wage is almost invisible. Such facts tell us, after all, that the income structure is very unequal and is tending to become more unfair despite superficial of continuance of 4 - 40 rule. This superficial stability of income distribution is seen as the result of increased labor force participation. This unequal trend of income, an important determining factor of wealth, also affects the distribution of wealth; toward the more skewed distribution. 4. The Family Home As confirmed before, the family home has consistently been overwhelmingly important in wealth holding regardless of time. The family home is a particularly important wealth component to the middle and the lower classes rather than the upper class. As a matter of fact, for many Canadians, owning a home is the only way to possess any enduring wealth. As Hunter argued, however, it becomes difficult for the middle and the lower classes to own homes. According to the data Statistics Canada reported, the percentage of home-owned households dropped to 63.2 per cent in 1984 from 57.6, 66.2, and 63.6 per cent in the years of 1956, 1966, and 1972 respectively. As well, the percentage of single detached home decreased to 56.5 per cent in 1984, compared to 66.7, 65.4, 59.4, 57.1 per cent in 1951, 1961, 1971, and 1981, while that of apartment increased from 26 per cent in 1951 to 32.3 per cent in 1984 (Statistics Canada, E M P I R I C A L E V I D E N C E OF T H E DISTRIBUTION OF W E A L T H / 94 1986). These facts testify that it is not as available as before for Canadian families to own their home, which used to be the main wealth component. The distribution of family home value is quite unequal as existing data showed in the previous section. This trend of unequal distribution in home-value can be confirmed by different kind of data. The figures in Table 3.29 are calculated from the Family Expenditure Survey data for 1978 and 1982. Home-value means the current expected price of one's occupied home. In both years, the lowest home-value quintile owned no homes. In 1982, the second quintile has no home, while the highest quintile families have, on average, a home-value at $117,037. Because of highly inflated housing cost, not only the home-value of the lower class families but also that of the middle class families (the third quintile), as Blumberg singled out, decreased over time. The fourth quintile families, however, had more share of total home-value and the richest families had almost same amount of home-value (more than 50 per cent) in 1982. Family Expenditure data exhibits that first, it becomes more difficult for the lower and the middle class to own a family home over time, second, that the home-value is very unequally distributed (more than total income); third, that there is a tendency for inequality to become more intensified as time goes by. To sum up, home-ownership has recently become more difficult and home-value has become more unequally distributed over time. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 95 Table 3.29 The Value of Dwelling by Quintiles,* 1978 and 1982 1978 1982 Quintile Mean $ Comp. % Mean $ Comp. % 1 0 0.0 0 0.0 2 10,499 1.4 0 0.0 3 31,666 21.6 32,067 16.0 4 48674 24.9 60,880 32.5 5 78,901 52.1 117,037 51.5 Total 32,144 100.0 40,769 100.0 *home-value quintile. Source: Derived from Statistics Canada, 1978 and 1982. E M P I R I C A L E V I D E N C E OF T H E DISTRIBUTION OF W E A L T H / 96 5. Stock Ownersh ip As mentioned before, stock ownership is a very important source of wealth in such an advanced capitalist country as Canada. But the distribution of stock ownership is more unequally distributed than any of the other components of wealth. In fact, stock ownership is believed to be concentrated in the hands of a small number of rich families. The data of the Toronto Stock Exchange's Canadian Shareowners study shows that in 1984, 11 per cent of Canadians owned shares in publicly-traded corporations. This incidence of owning shares in Canada is one half the New York Stock Exchange estimate of the share ownership in the United States (TSE, 1984:31). The level of stock ownership, however, substantially increased over time; the proportion of the adult population owning stocks increased to 17.5 per cent in 1986 (TSE, 1986). This rising rate, nevertheless, remained below 26 per cent in U.S. , 21 per cent in Sweden, and 35 per cent in Hong Kong. Despite the substantial rise of stock market participation, the more significant fact is that four adult Canadians in five own no capital, at least no publicly traded corporations. This means that Canada is still far from a capitalism of the masses. In the 1980s, the percentage distribution of dividend income is also in the direction of equality. By and large, the highest quintile loses some of their shares while the rest gain, as shown in Table 3.30. Nevertheless, the distribution seems extremely unequal; in 5 years (1980-84), while the top quintile EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 97 Table 3.30 Percentage of Individual Dividend Income by Income Group in Canada, 1980-84 Quintile 1 2 3 4 5 Total Top 1% 1980 0.2 1.0 2.4 5.5 90.8 100.0 51.4 1981 0.2 0.9 2.5 6.3 90.0 100.0 44.3 1982 0.2 0.8 2.2 5.6 91.2 100.0 44.6 1983 0.1 0.8 2.4 6.1 90.6 100.0 43.9 1984 0.2 1.2 3.2 7.5 87.9 100.0 44.0 Source: Derived from Revenue Canada, 1982-86. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 98 controlled about 90 per cent, the top percentile controlled about 45 per cent of all stocks. To sum up, even if the level of the stock market participation rises, and individual dividend income distribution shows only a slight change toward equality, most people are still excluded from stock ownership and a few of the super rich control most of income from stock ownership. This strongly contributes to the unequal distribution of wealth. 6. Automobiles As Oja reported, automobiles are the most equally distributed wealth components for Canadian families. Inequality, however, exists within the ownership of the automobiles; the rich are assumed to own luxury cars and others are assumed to own non-luxury cars. Therefore one measure of the changing distribution of wealth examines the trend in the sale of luxury and non-luxury automobiles. That is, if luxury cars were sold more than non-luxury cars, particularly in the early 1980s in which real income decreased, then the distribution of wealth became more unequal. As presented in Table 3.31, such U.S. luxury cars as Lincoln, Corvette, and Cadillac were sold much more in 1984 than in 1983. Percentage change is as large as +30.7. At the same period, the percentage change of all U.S. non-luxury car sales is +2.8, which is lower than total percentage change, +3.2. Likewise, the number of new-registered imported luxury cars increased in 1980s EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 99 Table 3.31 New-Registered U.S. Luxury and Non-Luxury Cars in Canada, 1983-84 1983 1984 1984/1983 Lincoln 3,177 4,588 + 44.4% Corvette 827 1,011 + 22.2 Cadillac 4,681 5,754 + 22.9 All U.S. Luxury 8,685 11,353 + 30.7 Al l U.S. Non-Luxury 608,443 625,362 + 2.8 Total 617,118 636,715 3.2 Source: Derived from MVMA, 1986. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 100 \ Table 3.32 New-Registered Imported Luxury Cars in Canada, 1980-84 1984/ 1984/ 1980 1981 1982 1983 1984 1980 1981 Jaguar 290 n/a n/a 590 856 2.95 Mercedes-Benz 2,021 2,467 2,339 2,664 2,749 1.36 1.11 BMW 2,286 2,617 2,738 3,136 3,157 1.38 1.21 Audi/Porche/VW 24,024 n/a n/a 23,860 27,453 1.14 -Total Imports 185,479 237,860 216,563 213,328 214,084 1.15 0.90 Source: Derived from MVMA, 1984 and 1986. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 101 as Table 3.32 shows. According to Statistics Canada (1986:2), annual sales of new motor vehicles showed +4 per cent increment between 1980 and 1984 (932,060 in 1980, 971,210 in 1984). At the same period, the increment rate of imported luxury car sale was much greater. In 1984, Jaguar was sold three times as much as in 1980. As well sales of other imported luxury cars grows faster than total imported cars at the same period. Compared to 1981, total imported car sale dropped 90 per cent but Mercedez-Benz and BMW sale mounted to 110-120 per cent in 1984. As discussed above, in the early 1980s, in which economic recession occurred and real income decreased, luxury cars were being sold much more frequently than non-luxury ones. This fact reflects the change of the wealth distribution toward inequality. 7. Other Household Belongings All the same to the ownership of automobiles, the ownership of such expensive household belongings as automatic dishwashers, air-conditioners (central unit), and micro-wave ovens are also good measures of the changing distribution of wealth. That is to say, if the sale of such expensive household belongings grew in the recent years of economic recession, that would be the evidence of de-equalizing wealth distribution. As Table 3.33, 3.34, and 3.35 provide, the number of household owning of those belongings increased. Compared to 28.6 per cent and 5.3 per cent in 1980, 35.2 per cent and 7.5 per cent of Canadian families owned automatic dishwashers and air conditioners respectively. Likewise, EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 102 Table 3.33 Ownership of Automatic Dishwashers in Canadian Household, 1980-84 1980 1981 1982 1983 1984 Total hse. 7,787 8,026 8,254 8,460 8,857 Owning hse. 2,228 2,509 2,747 2,882 3,116 Owning % 28.6 31.3 33.3 34.1 35.2 Source: Statistics Canada (1984-86), CAT. 63-224. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 103 Table 3.34 Ownership of Air-Conditioners (central unit) in Canadian Household, 1980-84 1980 1981 1982 1983 1984 Total hse. 7,787 8,026 8,254 8,460 8,857 Owning hse. 411 459 503 596 663 Owning % 5.3 5.7 6.1 7.0 7.5 Source: Statistics Canada (1984-86), CAT. 63-224. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 104 Table 3.35 Ownership of Micro-Wave Ovens in Canadian Household, 1982-84 1982 1983 1984 Total hse. 8,254 8,460 8,857 Owning hse. 843 1,055 1,430 Owning % 10.2 12.5 16.1 Source: Statistics Canada (1986), CAT. 63-224. EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 105 the owning percentage of micro-wave ovens increased from 10.2 per cent in 1982 to 16.1 per cent in 1984. This fact not only means that, in some sense, the wealth distribution became more unequal but also means that unequally distributed wealth strongly affects people's purchasing power, thereby, influences on the life styles and the quality of their lives. Likewise, inequality exists in every part of expenditure. According to the family expenditure data in 1982, the richest quintile spent, on average, $867.1 for health care and $2616.2 for recreation while the poorest quintile spent $218.4 and $311.1 respectively. Even if the rich much more consume than the poor, the net incomes (total income -total expenditure) of theirs, ironically enough, always bring surplus value whereas the poor constanly consume more than they earn, despite their weak consumption (Canada, 1978 and 1982). Table 3.36 shows average income and expenditure (current consumption + taxes) in 1969, 1978, and 1982. In the three years, only the fifth quintile held the large amount of net income - as much as $8,200 in 1982. However, the poor quintiles have consistently gained no net income, piled debts. Therefore, the wealthy have become more wealthy while the poor have got poorer in today's Canada. In this section, I have examined new trends and confirmed old tendencies of the wealth distribution by means of providing new data and updating existing data. In the recent years, the Canadian income distribution is, in general, stable in spite of an absolute decrease in real income. Income inequality among different occupations became pronounced. Nevertheless, the redistributive effect of transfer payments and taxation looks insignificant. Home-value is slightly changing toward inequality whereas stock ownership is more slightly going to equality. In EMPIRICAL EVIDENCE OF THE DISTRIBUTION OF WEALTH / 106 Table 3.36 Average Income and Expenditure for A l l Units, by Income Quintile, 1969, 1978, and 1982 1Q 2Q 3Q 4Q 5Q Total 1969 (1) (2) (D-(2) 2116.1 2848.0 -731.9 4907.3 5470.1 -562.8 7330.2 7758.1 -427.9 9835.7 9963.9 -128.2 16207.0 15079.0 + 1128 8079.2 8223.8 -144.6 1978 (1) (2) (D-(2) 5688.1 6505.0 -816.9 12057.2 12723.7 -666.5 17821.9 17774.4 + 47.5 24094.3 22929.0 + 1165.3 38251.0 33707.5 + 4543.5 19582.6 18727.8 + 854.8 1982 (1) (2) (D-(2) 8118.0 8998.3 -880.3 16944.6 17328.3 -383.7 25728.8 24877.8 + 851.0 35686.4 33357.3 + 2329.1 58961.0 50749.9 + 8211.1 29087.8 27062.3 + 2025.5 (1) ; average income (2) ; average expenditure Source: Statistics Canada (1978, 1982), CAT. 63-007. E M P I R I C A L E V I D E N C E OF T H E DISTRIBUTION O F W E A L T H / 107 any case, these wealth components are, no doubt, very unequally distributed. Even in the early 1980s, the recessional period, the purchasing power of the rich has strengthened. As a result, the sales of luxury cars and other expensive household belongings grew. This fact reflects the unequal distribution of wealth. On balance, this section offered a preponderance of evidence toward a more skewed wealth distribution in today's Canada. The reason why the data of general income distrubution and wealth distribution look stable, despite such evidence of de-equalizing wealth distribution, lies largely in the increase of average working population in the recent years. IV. CONCLUSION This thesis has concerned itself with the distribution of wealth in Canada. The aim of the thesis has been to investigate the pattern and the trend in the distribution of wealth in Canada. In doing so, I have, in the first half of the thesis, discussed theoretical accounts of the wealth distribution. Following this, I have presented and analyzed empirical evidence of the wealth distribution in Canada. Confronted by the surging forces of capitalism in the nineteenth century, such classical social thinkers as Marx, Durkheim, and Weber raised questions about social inequality and the wealth distribution. According to Marx, capitalism, by its very nature, unfairly profits the capitalist; capitalism provides the bourgeoisie with all of surplus value and a powerful position in labor market. As a result, the unequal wealth distribution in capitalist society gets worse until the proletariat lead a revolution to replace capitalism with a socialist society. Durkheim believed equal opportunity would evolve in modern capitalist societies, not by an anomic or forced division of labor, but by the development of a normal division of labor. He also thought that equal opportunity guaranteed a more just distribution in future society. In contrast, believing that bureaucracy grows as capitalism develops, Weber worried about the concentration of power in the hands of top-level bureaucratic officials, which curb individual wealth and freedom. Concerning the wealth distribution in industrialized society, as a whole, 108 C O N C L U S I O N / 109 contemporary sociologists are more pessimistic, emphasizing the dark side of the wealth distribution. In general, they foresee a more uneven distribution of wealth in the future of industrialized society. Blumberg argues that the differential impact of inflation on the lower class vis a vis the upper class makes the distribution of wealth even more unequal. Furthermore, the unequally distributed wealth causes unequal consumption patterns and life-styles in industrialized society. Westergaard and Resler believe that the existence of private property freeze the asymmetrical pattern of the wealth distribution in industrialized society, making any more equitable arrangement possible only if private property is eliminated. Porter and Clement focus on the more concentrated economic power of a small economic elite in Canada. This concentration of power and the limits to get into it results in a maldistribution of wealth in Canadian society. By and large, the current empirical evidence on the Canadian wealth distribution, reported by Canadian authors such as Osberg, Hunter, Vaillancourt, Rashid, and Oja, shows that wealth is unevenly distributed in Canada. In spite of growing wealth, its distribution appears to have maintained its stable pattern and has remained unequal ~ the extent of the wealth inequality is considerably greater than that of income inequality. Every wealth component — income, home-value, and stock-ownership -is lopsidedly distributed. New data gathered to supplement the previously published findings suggests that wealth may becoming increasingly concentrated in the hands of a few select people. That is, the government policies maintain or change the income structure for the benefit of the rich rather than the poor. Income disparity between occupations becomes more pronounced. For example, CEOs enjoy higher rates of salary increase as CONCLUSION / 110 compared to the minimum wage where change is almost invisible. Inequalities in home-value and stock-ownership look still great. Also, increasing sales of expensive automobiles and other house belongings even in an economic recession reveal more unequal distribution of wealth in contemporary Canada. In other words, the inequality of wealth brings unequal purchasing powers and differential life-styles. In terms of the Canadian wealth distribution, it is hard to say which theoretical account is the most plausible. Rather, each theoretical account has a certain validity for understanding a part of the distribution of wealth in Canada. Marx's account is useful to explain the unequal perhaps increasingly disparate wealth distribution mainly due to the nature of capitalist system itself which guarantees unfairly strong power of the capitalist in the market. Likewise, Westergaard and Resler's argument of private property and inheritance, through which the wealth holders could keep their wealth and transfer it to the next generation, also helps to explain the fact that the wealth distribution gets even worse today. Weber's point concerning the concentration of power by bureaucratic officials is a very important key to explaining Canadian inequalities and the wealth distribution. One piece of evidence can be found in the fact that contemporary Canadian managerial class such as CEO increasingly get strong power and large wealth in Canadian economy. Also the concept of class divergence as outlined by Blumberg is consistent with the enlarging gap of income and purchasing power in the recent recession period in Canada (see Table 3.36). As such, to explain Canadian wealth distribution, it is necessary to consider various theoretical accounts rather than to rely on only one perspective. C O N C L U S I O N / 111 Nevertheless, Durkheimian optimistic view of the wealth distribution resulting from equal opportunity does not look reliable to explain today's wealth distribution. Durkheim's dream of a society integrated by a normal division of labor, where external inequalities abated, has not materialized yet. Finally it is important to consider why the wealth distribution is so unequal and appears to have become even more unequal in today's Canada. The answer is first found in that government transfer payments and taxation systems have too little impact on the redistribution of wealth, as discussed in Chapter III (see Table 3.25). The welfare state has not acted to redistribute money from the rich to the poor. It is mainly because political parties are financed by the super large corporations and most political offices are held by the upper class (Marchak, 1981). A second answer is found in the widening income disparity between the upper and the lower classes. This was discussed in Chapter III too. It takes money to make money. Compared to income increase of average earners, that of the well-to-do, such as doctors, dentists, lawyers, and CEOs, flies up much faster. The widening gap of income as an important source of wealth results in the more unequal distribution of wealth. Also unequal and de-equalized wealth distribution partly results from the inheritance system as Westergaard and Resler pointed out in Chapter II. The existence of inheritence means an unequal starting line in the wealth-holding race. In other words, it means external inequality, which Durkheim believed, would be eliminated in modern capitalist society still remains. The riches can be passed through the generations of a family and the well-to-do have a head start in the acqusitions race. CONCLUSION / 112 The question can be answered, finally, by the fact that money begets money -- wealth begets wealth. That is, those who are wealthy can control their wealth for the purpose of making the wealth bigger by savings, investments, or any other ways of making big money while the poor always use up all their money and have no wealth to control. Even if the rich much more consume than the poor, the net incomes (total income - total expenditure) of the rich, ironically enough, always bring surplus value to themselves whereas the poor constantly consume more than they earn, despite their weak consumption (see Table 3.36). The wealthy can afford to hire tax lawyers and financial managers, while the poor continue to stand in food bank lines. The maldistribution of wealth resulting from the above reasons, in turn, affects people's social life. It affects people's purchasing power. Therefore, different consumption patterns and different life styles result. In the end, it brings unequally differential quality of life. As well, these differences will pass to the next generation and the differences will be, then, more pronounced. This is a cycle of poverty or cycle of wealth into which people are born. On balance, the unequal pattern of existing wealth distribution and the de-equalized trend of changing wealth distribution in today's Canada ultimately results from the fact that the Canadian society is a capitalist society in which the wealthy can do anything to enlarge and maintain their wealth; from saving to lobbying. 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