Social Policy Trends: The Growing Gap in Purchasing Power

This social policy trend examines the growing gap in purchasing power between Canadian households. From 1976 to 1997, Canada’s tax and transfer system maintained a relatively constant gap in the purchasing power of high versus lower income households, but the gap has widened since then.

Data shows that the gap in purchasing power between high income households and middle-lower income households has grown faster and larger since 1997. 

The authors note that a person living in a household with low income should have equal opportunity to maintain good health and obtain an education as a person in a household with high income. Unequal access to opportunities is often seen as unfair and may additionally limit productivity and economic growth. For these reasons, some economists suggest that when there is a growing gap in purchasing power between households at the top and those in the middle and bottom of the income distribution, it is important to ensure access to education and healthcare for all individuals, regardless of income. This suggestion raises interesting questions regarding the appropriate divide between public and private payment for these goods and services.