Prospering Together

ountries and recently the Conference Board of Canada announced that income inequality in Canada is rising faster than the United States. In terms of poverty, Canada ranks 14th out of 19 peer countries for overall poverty and 15th for child poverty. Child poverty is most prevalent among single mothers, Aboriginals, new immigrants, racial minorities, and single people. Poverty and inequality are often talked about in moral or philosophical terms, but we believe that they are also relevant to Canada’s competitiveness in a knowledge-based economy, in which the talents and skills of people are the most important resource. Our task force project will explore policy recommendations aimed at increasing Canada’s human capital potential whether that is in early childhood, or much later in work life. Research shows that family income is a major determinant of early childhood development, which is considered the most crucial period for building human capital. Therefore, if our competitors have fewer children in poverty, they may be in a better position to mobilize the talents of their workforces in the future. Based on international standards, Canada risks squandering the potential of approximately 1 million children, which is something we simply cannot afford, given global competition and our aging population. Research shows that children in countries with lower income inequality have higher math and literacy scores. In addition, social inequality has been shown to turn negative stereotypes about the learning abilities of disadvantaged groups into self-fulfilling prophecies. Income inequality also leads to economic segregation, which means that disadvantaged children have fewer classmates from “good homes” and less interaction with positive role models. Evidence from Europe suggests that businesses in more equal countries tend to invest more heavily in research and development and have more high-value patents. Furthermore, if high incomes are associated with occupations that do not generate broad economic returns, we could end up with a misallocation of human resources, with too few people pursuing fields such as science and engineering, which are obviously vital in the knowledge-based economy. Finally, inequality risks politically alienating the majority of the population, which may lead to a backlash against policies that promote economic growth and the knowledge-based economy. We believe that it is in Canada’s national economic interest to lower its rates of inequality and poverty, in order to enhance human capital development and foster competitiveness in the knowledge-based economy. Given Canada’s strong economic position compared to its peers and low interest rates, this is an opportune time for Canada to invest heavily in its people – an investment that will pay dividends for years to come. Policies that we are interested in exploring include early learning and childcare, mentoring programs for at-risk high school students, training and retraining for low-skilled workers, income support for parents with children and workers whose jobs have become obsolete, and financial incentives to encourage people to choose fields that will make Canada globally competitive in the knowledge-based economy.

*This project has been undertaken pursuant to an Action Canada fellowship. Action Canada Foundation, doing business as Action Canada, is a registered charity with a mandate to build leadership for Canada’s future. Neither the contents nor the conclusions of this publication have been endorsed or approved by Action Canada Foundation, Action Canada or the Government of Canada.*