No time to lose:

Canada's federal government has committed to working towards achieving the goals set out in the 2030 Agenda for Sustainable Development both at home and abroad.¹ Yet the scale and scope of investments to date continue to fall considerably short of SDG targets. Implementing the 2030 Agenda requires concrete action and political leadership that challenges fundamental economic inequalities and the short-term thinking that threatens the environment and future generations. The policy and program alternatives outlined below in the areas of taxation, public services, and the environment better position us to tackle these challenges head on.

Tackling Canada’s Social Deficit

Federal budget cuts following the 2008-09 recession scaled back federal programs at a significant cost to provinces, local communities, and private households. The impacts included a measurable withdrawal of public services and support programs as well as record levels of subnational government and household debt.

Provincial governments, which bear the responsibility for delivering education, social and health services, collectively now hold a higher level of debt than does the federal government.² Households, for their part, shoulder more debt than any other sector of the Canadian economy – at 100.1% of GDP in the last quarter of 2018.³ (For comparison, the household debt-to-GDP ratio was 54% in 1990.)

By 2015, the federal government was the smallest it had been since before the Second World War—despite profound social and economic inequalities in Canada and the global challenges that slow growth and our changing climate present. Federal program spending as a share of the economy stood at 13.0% of GDP and its debt-to-GDP ratio was 31%, the lowest in the G7.⁴

Without question there was room to invest. Without question there was a need to invest.

Since then, the current Liberal government has made several important moves to rebuild Canada’s social infrastructure and to honour its international commitments to the SDGs. But these actions do not get us nearly close enough to the goal of more equally shared prosperity nor do they reflect the government’s capacity to act – despite the relative strength of the Canadian economy since 2016.

If the federal government has had limited impact on generating sustained economic growth and reducing inequality, it is because its plans are simply too small for the task. Federal program spending in 2017-18 was 14.5% of GDP—an increase of 1.6 percent points from 2015, but still shy of postwar levels—and slated to fall to 13.8% by 2013-24.⁵

On the other side of the ledger, federal revenues are also near all-time lows relative to GDP. Again, the current government has taken some positive steps, cancelling some of the previous Conserva­tive government’s most egregious tax breaks, closing some loopholes, and adding another top tax bracket of 33% on incomes over $200,000. But its revenues as a share of GDP, at 14.5%, are still $40 billion lower than the 50-year average of 16.4%.⁶

Inequality, Wealth and Wages

Canada’s economy reflects the global trend towards growing concentration of wealth and income among those at the top – and the stagnation of incomes among everyone else. Inequality in Canada may be less extreme than in the U.S., but it grew at a faster rate here between 1997 and the onset of the last recession, during a time of robust growth and job creation. The richest one percent of earners in Canada accounted for 32% of all income gains between 1997 and 2007.⁷

Since the 2008-09 recession, the market income share of Canada’s top one percent has fallen off (from 15.3% in 2007 to 14.2% in 2015),⁸ as has their share of wealth.⁹ However, the richest one percent of families still hold 17% of the country’s net wealth¹⁰ and the market incomes of top earners continue to outpace others.¹¹

Over this same time period, the bottom half of Canada’s earners actually saw their market incomes shrink by 18% when adjusted for inflation, a reflection of both an increasingly polarized labour market and rising wage inequality.¹²

Income inequality in Canada is highly racialized and gendered. Levels of income and employment are consistently lower for women, Indigenous peoples, racialized groups, new immigrants, and persons with disabilities.

Canada’s gender pay gap, for example, is one of the highest in the OECD, ranking 30th out of 36 countries, behind all European countries and the United States.¹³ Full-time female employees still only earn 82 cents for every dollar that full-time male employees earn.¹⁴

The gaps are larger again among racialized, immigrant and Indigenous workers. In 2016, Indigenous women earned an average 75% of what Indigenous men did, and 57% of what non-Indigenous men earned. Racialized women earned 77 cents for every dollar that racialized men earned and 59 cents for every dollar that non-racialized men earned. And, immigrant women earned 74% percent of what immigrant men earned and 67% of what non-immigrant men did.¹⁵

 Only government transfers — in the form of seniors’ benefits, employment insurance, child benefits and the like — have saved the bottom half from being materially worse off today than a generation ago. But they are not as effective as they were in the 1980s and early 1990s in offsetting income disparities.¹⁶ “The combination of greatly increased concentration of income at the top and reduced chances of getting there for the rest signals a society that is substantially less equitable, inclusive and fair than it was three decades ago.”¹⁷

Implementing the 2030 Agenda for Sustainable Development will require several important policy changes, especially in the areas of taxation, public services, and the environment, along with closing the equality gaps

Fiscal Strength through Progressive Taxation

Progressive tax reform can increase government revenues and help reverse damaging inequalities while strengthening the economy. Closing expensive tax loopholes that benefit mainly Canada’s wealthiest income earners, including the stock option deduction¹⁸ and preferential taxation of capital gains, would generate an additional $18 billion in revenues a year. Likewise, an inheritance tax on estates valued at more than $5 million, similar to the estate tax in the U.S. and many other OECD countries, would generate upwards of $2 billion a year.¹⁹

Canada’s new price on carbon is an important albeit modest means for meeting Canada’s medium-term GHG emission reduction targets and international obligations under the Paris Agreement. But a higher carbon price floor is needed in order to reach our 2030 GHG target. Revenues generated through this charge—and the cancellation of fossil fuel industry subsidies—could be used to offset the impact of the higher tax on lower-income households and support investments in renewable energy, energy efficiency, public transit, and transition measures for the most affected workers and communities.

Public Service Delivery: Health; Child Care; and Housing

Investments in public services create jobs and make real-life improvements for all Canadians. Yet as a country, Canada is not investing enough in areas like health care, child care, seniors care, or affordable housing. Nor is the government doing enough to support workers in precarious jobs or those facing job instability and economic insecurity.

Health Care

Early efforts to tackle the stresses on Canada’s public health care system were dashed when the government abandoned negotiations towards a new Health Accord with the provinces and territories and pushed through a series of bilateral funding deals wholly inadequate to meeting the future needs. The federal government’s offer to increase provincial health transfers annually by nominal GDP or 3%—whichever is higher—has created a shortfall of $31 billion in lost health services. For the worst-hit provinces, the gap ranges from $3.4 to $13.6 billion.²⁰

In the absence of meaningful federal investment, provinces are cutting services, pursuing greater privatization, and downloading responsibilities to families, all of which undercut equitable access to quality care. Meanwhile local health agencies struggle to respond to the exponential rise in opioid-related deaths. Higher levels of federal funding are needed to put public health care on a stable footing and to facilitate the expansion of needed mental health services, dental care, and home care.

Approximately 3.5 million Canadians lack even basic drug coverage, and around one in four Canadians fail to take needed medication as prescribed due to high costs.²¹ The government’s Advisory Council on the Implementation of National Pharmacare is releasing its recommendations for a national program in June.²² The jury is out on whether the government will opt for a single payer pharmacare system that has the potential to improve health care for all or a fill-in-the-gaps system that protects Canada’s profitable private insurance market and continues ensuring that Canadians will continue to pay the highest prices on earth for prescription medications.²³

Child Care

Canada spends an estimated 0.5% of GDP annually on child care—half what most comparable countries spend—and much of this spending is concentrated in one province, Quebec.²⁴ The lack of affordable, high quality child care is a huge barrier to healthy child development and women’s economic equality.

In 2017, the federal government announced an investment of $7.5 billion over 11 years and subsequently negotiated agreements with all provinces and territories to enhance their child care systems. The agreements claim to adhere to the principles of accessibility, affordability, quality, flexibility and inclusivity, but these principles are not operationalized.

These efforts have produced mixed results. Some groups—such as infants, children with disabilities, new immigrants, rural communities, and parents working or studying part-time or nonstandard hours—continue to be poorly served. To make real progress, the federal government must assert a leadership role and rely on the best available evidence in building a comprehensive system of child care for all.

Housing

Shelter is a basic need, yet for too many Canadians, it is a scramble every night to secure a place to rest. Many more are at risk of homelessness because of the very high cost of shelter, meagre stock of affordable of housing, inadequate incomes, and family violence and illness. The federal government’s long-overdue National Housing Strategy, announced in 2017, promises $11.2 billion over 11 years to cut chronic homelessness in half, remove 530,000 families from housing need, and invest in the construction of up to 100,000 new affordable homes.²⁵

The National Housing Strategy includes several different funding programs to support the creation of new affordable housing in the private market and the expansion and preservation of existing social housing and coops targeting different groups in need. A Canada Housing Benefit with the Strategy will provide an average of $2,500 per year to eligible low-income households to assist with rental payments.

It takes time to plan, finance, and build housing, but the glacial pace of new construction is troubling. Much of the federal money that was announced is contingent on cost-sharing with the provinces and territories, the level of government directly responsible for housing. At the end of 2018, only three bilateral agreements had been concluded—and people in critical housing need continue to wait.

Closing the Gap: Indigenous Peoples

Indigenous peoples are three times as likely to live in housing that is in need of major repairs (a problem that is particularly acute for the Inuit population in the far north of Canada)²⁶ and over 50 First Nations communities live without safe drinking water.²⁷ Indigenous people experience higher than average rates of incarceration²⁸ as well as significantly higher rates of violent victimization.²⁹

Redressing past wrongs and establishing an equitable and just relationship with First Nations, Métis and Inuit people is fundamental to meaningful reconciliation as set out in the 2015 Truth and Reconciliation Commission.³⁰ Funding for health and social services, education and employment, physical infrastructure, and support for core governance capacity are critical to addressing the deep roots of persistent poverty and marginalization.

The federal government has significantly increased funding since 2015, from $11.0 billion to over $15 billion in 2017-18, effectively lifting the historical 2% cap on funding for Indigenous services. It will continue to take many years and concerted effort to extinguish the discriminatory gap in funding and build a strong foundation for future prosperity and self determination.

Canada’s new Poverty Reduction Strategy

The federal government took several important steps in the first years of its mandate to tackle poverty, notably by reforming and enhancing Canada’s child benefit system, boosting benefit levels for poor single seniors, and introducing a new Canada Workers Benefits – measures that taken together have lifted almost half a million people out of poverty.³¹ 

As welcome as these new policies have been, the task of adequately tackling poverty and inequality remains far from complete. This past year, the government released a poverty-fighting plan called Opportunity for All, which for the first time sets a target for reducing poverty in Canada, defines an official poverty line, and establishes a framework and process for reporting publicly on progress. ³² Unfortunately, the strategy does not include any new investments in the programs needed to achieve its goals, leaving low-income Canadians waiting.

Canada can afford to be a leader in meeting the vision and goals set out in the 2030 Agenda for Sustainable Development – at home and abroad. With a stronger, more equitable fiscal foundation, Canada will be in much better condition to weather economic, social and environmental challenges in the coming decades, while investments in our public services and infrastructure will ensure that all benefit from shared prosperity for generations to come.

This blog was adapted from an article published on Social Watch in collaboration with CCPA. You can find it here.