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High Productivity, Low Wages in US Could Expand Income Inequality in Canada

© Sputnik / Sergey SubbotinPanoramic view of Montreal, Canada
Panoramic view of Montreal, Canada - Sputnik International
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Canadian GDP witnessed a 0.1 percent fall in August after no growth was registered in July and goods production also declined in the country.

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MOSCOW, November 25 (Sputnik) — High productivity and low wages in the United States could lead to greater income inequality in Canada, a report by TD Economics has warned.

"A particular challenge for Canada is the fact that its major trading partner and competitor for talent, the United States, allows much higher income inequality… The outlook for continued modest economic growth could create pressures… Canada stands at a cross roads as it is being buffeted by these pressures that could raise income inequality and reduce social mobility," the report, published on Monday, said.

Despite the discouraging forecasts, the report says there is still scope for the Canadian government to turn the clock back and avoid potential social discrepancies.

"Although Canadians take pride in the country's more equitable outcomes, Canada does less income redistribution than many think. Canada's ranking on income equality falls from 9th place in the OECD [Organization for Economic Co-operation and Development] on the basis of market income to 19th place on the basis of after-tax and transfer income," the paper stressed.

"We will probably never reach U.S.-type inequality because Canadians would never accept it, but I think there are pressures that could push us in that direction," TD Economics' Chief Economist Craig Alexander was quoted by The Toronto Star as saying on Monday.

"I worry that governments don't think about income inequality considerations when they're designing policy. They design policy to achieve particular public policy or political goals and income inequality is an unintended byproduct," Alexander added.

According to Canada's national statistical agency, the population of the country is estimated to be just over 35.5 million as of July 1, 2014, with the unemployment rate standing at 6.5 percent.

Meanwhile, the country's Gross Domestic Product (GDP) witnessed a 0.1 percent fall in August after no growth was registered in July. Goods production also declined in Canada. August's decrease, which was propelled by the extraction and manufacturing of oil and gas, was one percent.

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