The Agenda with Steve Paikin (Audio) - Is Canada Underreporting Wealth Inequality?

Episode Date: April 25, 2024

Does Canada underreport the severity of wealth inequality? That's the conclusion of a new report that says our official statistics severely underestimate how rich the richest Canadians are. To discuss its findings, we're joined by the report's author Dan Skilleter, director of policy at the nonprofit outfit Social Capital Partners. He was once a senior economic advisor to former premier Kathleen Wynne.See omnystudio.com/listener for privacy information.

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That's the conclusion of a new report that says our official statistics severely underestimate how rich the richest Canadians are. To discuss its findings, we're joined by the report's author, Dan Skilleter. He is Director of Policy at the non-profit outfit Social Capital Partners. And he was once a senior economic advisor to former Premier Kathleen Wynne. And Dan, first time on the program. So we're happy to have you with us. Pleased to be here. Thanks for joining us. Wealth inequality versus income inequality. What's the difference? Well, and you've probably heard a lot more about income inequality because that's

seemingly what we tend to measure here in Canada. When we're talking about income, we're really talking about on an annualized basis, how much money an individual is bringing in. And for most Canadians, that is in the form of wages. So it's measured, if you've ever filed a T4, chances are that is what we really mean when we're talking about income. When we're talking about wealth,

it's a measurement that does change year to year. However, it's really an aggregate measurement of how many assets a family has. We don't measure wealth with individuals in Canada. We measure it by family. And so that's not just about the amount of money in a bank account. That is the entire kind of portfolio of assets that a family, especially a wealthy family, might have. So we're talking real estate. we're talking stocks and bonds, we're potentially talking about luxury vehicles and even an art collection. All of that together in aggregate would represent

an individual's, or rather a family's, wealth in Canada. Why do you think it's important to make the distinction? Well, they're both, I don't want to underplay income and income inequality. I think that they're both important measures. But I do think that our fixation on income is leaving out part of the picture. I think with wealth, it can matter a lot more for an individual's life in terms of how it impacts you. You could be a relatively high income individual. There's certainly a correlation between accumulating wealth and having a high income, but that's not always the case. So, for instance, wealth can accumulate over many generations. In fact, it does. Income can also downplay an individual's or family's wealth by virtue of their ability to store income within corporations so that they're not actually recording things as individual income,

but they're able to keep wealth within corporations, accumulating gains on those as well. So as we try to understand the disparity between either wealth and or income in our society, which do you think is more important to keep our eye on? I would say wealth. I think it's been underplayed, so I think that it deserves more attention. But I'd also say that it's the case that internationally, and Canada's no exception here,

wealth inequality tends to be a lot more severe than income inequality. So for that reason, I think it's also important to take a closer look at it. Severe meaning the gap is bigger? The gap is bigger. And by that, and in terms of the types of statistics that my report goes into, we're really trying to measure it by the share of wealth that the richest 1% or 0.1% of Canadian families have

out of the entire pool of wealth that exists within Canada. We will actually, we've got some numbers on this, which we'll get to in a second. But before we do that, I want to, I want to pluck a quote out of your report here. This is from Dan's billionaire blind spot. Sheldon, if you would top of page two, let's bring this quote up. Although Canadians increasingly feel that inequality is a problem and is getting worse, a ubiquitously Canadian instinct often kicks in when the issue of wealth inequality is raised. Whatever our problems, we are doing better than our neighbors in the United States. But is that true? Okay, let's ask the question. What does

your report tell you about how we're doing vis-a-vis the U.S.? Well, we're actually not too far off. And I wanted to highlight the U.S. for that particular reason, that I think that most Canadians, you know, when we're trying to compare ourselves or when we're trying to evaluate how we are doing in Canada, we're often quick to point to the U.S. and say things could be a lot worse, especially with economic inequality. We think we're more equitable in this country than they are down there. And the folks who focus on income, I think they absolutely have a case. There's some of your

viewers might be familiar with a term called the Gini Index or the Gini Coefficient, which measures the relative inequality within a society or a country. And when you're comparing those, Canada looks quite a bit better than the U.S. But what I found was when you're measuring the difference in wealth inequality between Canada and the U.S., and I think you might have those statistics ready to go, that especially when you're looking at the wealthiest families, we're talking the top 0.1% of families, the wealth disparity in terms of how much they own of Canada versus the U.S.'s billionaires, how much they own of the U.S. We're talking, you know...

Don't give it away. Here we go. You ready? Okay, Sheldon, let's do it again now. Here we go. This is exactly what Dan is just talking about, wealth concentration in the U.S. versus Canada. In the U.S., he's discovered the wealthiest 0.1% own about 16% of total wealth. 0.1%, in other words, tenth of a percent, own 16% of the wealth. In Canada,

the wealthiest 10th of a percent own about 12% of total wealth in the country. Yes, it is less. We are more equitable, but it's similar. However, and we put this on the record as well, according to Statistics Canada, the wealthiest 0.1% of Canadians own approximately 4% of total wealth, and that is notably lower than the 12%, Dan, that you are reporting. So can you help us understand why there is a discrepancy between what you are saying, 12, and what StatsCan is saying, 4? Yep. It's a very big discrepancy, and you might be wondering, how? How did that come about? And the big finding that I have is that we simply do not ask the wealthiest Canadians to participate in our surveys to provide the data that we need.

So to back up, I think it's important to understand how we even get wealth data in the first place. How is StatsCan even trying to determine this? With income, I think it's important to understand how we even get wealth data in the first place, how is StatsCan even trying to determine this? With income, I think it's relatively straightforward. People would understand you file your income taxes. They have the data at their fingertips on an annual basis. With wealth, it's not so simple. There's actually a survey that's different than the census. It's called the Survey of Financial Security. And they send it out about once every three to six years. They send it to about 20,000 families and what they do try to do is say, you know, if we just randomly send out 20,000 surveys to families, we're not, we're gonna miss some of the rich families. We think a lot of the wealth is hidden at

the top of the distribution so that that wouldn't work out very well. So they do something where they attempt to oversample or send more surveys to wealthier families, which is totally admirable. It's what other countries do in their wealth surveys as well. The problem is they don't go far enough. They don't do a good enough job. And so as a result, they aren't capturing the wealthiest families. And a statistic that I have in my report that I found personally shocking and made me want to produce this report and publish it, is that the most recent wealth survey that we have data for, which is 2019, suggests that the wealthiest family in Canada has a net worth of only $30 million. What? Say that again?

$30 million. The wealthiest that again? $30 million. The wealthiest family in Canada? The wealthiest family. Well, that's clearly not true. Clearly not true. And we have at our fingertips on a, I think, annual basis, things like the Forbes billionaire list, which will show with, you know,

they're not 100% accurate in terms of their valuations, but they certainly show that Canada has a very strong performance in the international world of billionaire families who have tens of billions of dollars of assets. Now, because none of them take the survey, or to our knowledge, even are sent the survey, we are missing out on all of that wealth. And that accounts for the dramatic difference

between what my report says which is that the top 0.1 on you know approximately 12 percent of all canadian wealth versus what the statistics canada's official data says which would say about three to four percent so this is the billionaire's blind spot that is precisely right that's that's the blind spot is there anything stats can can do about i guess in your view, making their numbers more representative of what's actually happening on the ground? They absolutely can. And in my report, I make three recommendations. But the most important one, the keystone recommendation, would be you've got to survey those billionaires. How do you get to them, Dan?

Luckily, so like I said before, Statistics Canada has already done a good job in setting up the, let's call it the plumbing or the infrastructure of how they do these surveys. They don't randomly send them out to begin with. They use income tax data that they have of families to determine who they think is wealthy and who they think is, you know, middle income, who's low income, so that they can target richer families to send the survey to. But the way they target it right now is they say, we're going to target the top 5% of families in terms of wealth. That's about 500,000 families. And on the low end, they would have a net worth of about $2.5 million. Don't get me wrong, that's

a decent chunk of change, and it's wealthy, but it's a far cry of about $2.5 million. Don't get me wrong, that's a decent chunk of change and it's wealthy, but it's a far cry from targeting billionaires. So what I would suggest is for the next survey, which I think they'll be starting soon, they should recalibrate how they're doing this and they should target families in the top 0.001%. They should go out of their way to make sure that surveys are getting in the mailboxes of billionaires. The follow-up question we should ask here is, why do you want this information? And my inference that I draw is, you want this information because you want to know who you can tax harder. Is that right? That would be one of the reasons we might want to do that.

But I would say that one of the main impetuses for this report was that it was trying to shine a light on something that we just don't even know much about. Like I said, we think that inequality is at a certain level in Canada. It's certainly better than the U.S. And we don't even look at wealth inequality, in part because the data is so hard to access. We only get a glimpse at it every three to six years, and we happen to know that it is quite inaccurate.

So I think that the discussion that we should be having about what is fair, what is a strong economy, what does it look like to have an economy where there's a strong middle class, that we're not just seeing the top richest families continue to prosper. I think none of that can really happen if we're not having a discussion with the real facts at our fingertips. Okay, that's one recommendation. You want to hit us with another one? The other two are simpler. The second one would be, once you have the survey

in a place where it's going to give you some accurate data, don't just put it out every three to six years. I'd say that's a big gap in the data, and that's one of the reasons why it's hard to keep track of the changing trends. Let's do it a little bit more frequently, maybe every other year. Every other year. Okay. Yeah.

It requires interviews with families. It's a big operation to run the survey, but I certainly think we can do better than every three to six years. And then the last recommendation is related to that, which is, if you go on Statistics Canada website, which I spend a lot of time on, and you try to unpack the data and the tables and the charts that they make available to the public, you can find some really good, easy-to-use ones on income. You do not find that with wealth. So there's a lot of things they could easily do to take the data that they would hopefully in the future have and be able to display it so that policy wonks like myself or anyone could go out there and do the number crunching that they need to.

We like having policy wonks on this show. So you're in a fine tradition. Great. Thank you. That's Dan Skilleter. He's Director of Policy at the nonprofit Social Capital Partners. Dan, thanks so much for this. Thanks. The Agenda with Steve Paikin is made possible through generous philanthropic contributions from viewers like you. Thank you for supporting TVO's journalism.