The Broadbent Blog


And what if there was a Sweden on the Saint-Lawrence?

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Comparing inequality between societies is useful, if only to remind us that inequality is not like gravity: there is no “law of inequality”. Political choices matter. True, worsening inequality trends across the OECD countries indicate important structural forces are at work in labour markets and in making it harder for governments to redistribute wealth. But significant variation persists between countries, meaning that we are not fated to become ever more deeply unequal.

In Canada, progressive thinkers often point to Sweden as a model to follow, but there is a fantasyland quality to this: the economics, politics and culture of this country are unknown to most Canadians, but Canadians instinctively grasp that it is a very different place. But Canadians could bear to reflect on divergent inequality trends at home, and particularly the ability of Quebec to largely buck the trend to increasing inequality seen in the rest of the country. To what extent has Quebec become a little “Sweden on the St. Lawrence”? What policy choices have pushed it in that direction? And can the rest of Canada follow suit?

Inequality Trends

In the labour market, trends in Quebec have been similar to those in Canada as a whole. In terms of incomes before tax, families in the bottom 70% of the income distribution registered a 6% loss in their share of total income between 1976-79 and 2003-2006, while the top 10% increased their share by 5%. While earnings inequality, as measured by the Gini coefficient, has remained below the Canadian average since the early 1980s, in the past two decades it has moved in lockstep with the Canadian trend, edging up from .33 in 1992 to .36 in the early 2000s and then levelling off.

While the labour market has dealt Quebecers a similar hand to Canadians, they have played it so as to achieve more equal results. After taxes and transfers, inequality as measured by the Gini coefficient has crept up slightly in Quebec, from .28 in the late 1980s to about .30 since 2000. However, while Quebec’s inequality was close to the Canadian and Ontario averages in the 1970s and 1980s, it is now .02 to .03 below the Gini found elsewhere in Canada.

And while our focus here is on inequality, it is also worth underlining that Quebec has had the most success in reducing its poverty rate since the mid-1990s, again becoming uncoupled from the Canadian trend. As Alain Noël points out, Quebec has moved from being at or above the Canadian average, to now being consistently well below.

This result was produced by a provincial government using the limited set of powers available under the constitution. And it did so even as federal policy in some areas, such as income taxation and unemployment insurance, was pushing in the direction of increased inequality. The decision to have its own income tax system clearly provides the Quebec government with more flexible tools to design a redistributive tax/transfer system, but these same tools are available to the federal government, and all of the provinces retain the ability to set tax rates and tax brackets as well as tax credits.

To talk of Sweden on the Saint-Lawrence is obviously to mislead. While Quebec’s social policy and redistributive performance is beginning to diverge in noticeable ways from the Canadian norm, it remains closer to that norm than to the Swedish (or Scandinavian) one.  But for our purposes, that is maybe just as well: it is a province that faced similar social and economic challenges to the other provinces, but made some different choices over the past twenty years, choices that are holding the line on inequality while reducing poverty.

Policy Choices

Three sets of factors seem to be contributing to this outcome: holding back the tide at the high end; pushing income into lower-income families with children; and developing services that respond to new social risks.

At the high end, Quebec is helped by the fact that salaries for the top earners did not rise nearly as quickly as elsewhere in North America. The top 1% of earners took home 11.2% of all wage income in Canada (18% in the U.S.), but among francophone Quebecers, the figure was only 6.5%. But Quebec still does more to tax the top-end, setting a top tax bracket at a slightly higher rate than in neighbouring jurisdictions (26% versus 22-24% elsewhere).

The second set of policies involve lifting up the bottom end of the income distribution by pushing money into families through child benefits and tax credits to parents in low-wage work. Depending on the family configuration and the level of earned income, Quebec child policies provide two to three times the benefit of the Ontario Child Benefit to lower income Quebecers.

These transfers are designed to reach well up into the middle of the income distribution, such that families at the middle of the income distribution in fact receive slightly more in transfers than they pay in taxes. This is not an unimportant political consideration in terms of maintaining public support for a higher tax trajectory.

This high-end, low-end one-two punch means that the Quebec tax and transfer system is far more redistributive than those of other provinces. Indeed, it reduced Quebec’s Gini coefficient by 0.143, versus 0.109 in Ontario, or by roughly and extra third. And again, one must remember that this reflects provincial policies, as both provinces share the tax and transfer mechanisms that fall within federal jurisdiction.

The final set of policies does not show up as straightforwardly in the inequality numbers but has a dynamic role to play. Quebec has been ahead of the curve in Canada in trying to develop policies that respond to new social risks, such as the care deficit for young children and the elderly, and in-work poverty. Here we could think of such policies as: the $7/day universal early childhood education and care programme; more generous, inclusive and flexible parental leaves; or the public pharmaceutical insurance plan. These policies have a variety of dynamic effects that lift the social wage for those at the bottom end of the income distribution, increase labour force participation (particularly among women), and reduce the drag of poverty on people’s ability to maintain their health. Since they provide security and benefit to a broad middle class, they also create a constituency supportive of a higher tax trajectory.

Could this happen elsewhere?

These sorts of policies do not fall from the sky: they require political champions. While the colour of the party matters, with the Parti Quebecois being somewhat more favourable to these measures than the Liberals, it took pressure and organization to get the PQ to act, and to prevent the Liberals from rolling the policies back.

Unions have long played a role in producing equality, both by influencing labour markets and wages, and by helping to define the parameters of political debate. In this context, the fact that Quebec’s labour movement has managed to maintain the membership of about 40% of the provincial population (versus 28% in Ontario) is not insignificant. There is some hidden weakness here: this success is in part due to the strong union presence in construction, a sector that has boomed in the past fifteen years, cancelling out unionized job losses in manufacturing and primary industries, and it also hides the inability to make much headway in either public sector or private sector collective bargaining. Still, it does provide the labour movement with continued legitimacy as a major social actor, forces the political parties to develop strategies that take account of union interests, and provides monetary and organizational resources to the campaigns of other equality seeking movements. 

It is these movements that had the greater direct impact, particularly in the period of the late 1990s when the new transfers and policies for working families were put into place. For the family policies, a network of actors from the women’s movement, the family movement and child development experts managed to sell their programme, finding enough common cause with neo-liberals around the goal of increased labour market participation. And it was an antipoverty movement with relays into the women’s movement, faith organizations, and low-income workers groups, that managed to build a cross-partisan consensus on developing initiatives to end poverty.

Conclusion

Could this be repeated in other provinces? There is obviously a strength to social movements in Quebec that comes from their involvement in the Quebec national project of the past half century, that gives them ongoing legitimacy in policy-making and in broader social debates about Quebec’s future. While a number of neo-liberal governments in the rest of the country cut their links with representative groups in the 1990s, in Quebec there was still a seat at the policy table. This has also produced a structure of public opinion that is largely more favourable to redistribution and to collective solutions to poverty and inequality. These factors are hard to invent out of thin air.

That said, every province has its own path to putting together movement pressures with political parties and with sympathetic bureaucrats to advance an equality agenda. The Quebec case does show that it is possible to make a significant difference on the provincial scale, which should perhaps push movements to make progress on the provincial front first, rather than trying to cobble together pressure on the federal government.

Perhaps more importantly, the specific policies and strategies adopted in Quebec are largely absent from the vocabulary of political actors in the rest of the country. Policies have been tried and shown to work. Their effects both on individuals directly affected, but also on big picture indicators like taxation, employment, inequality and poverty, have started to be catalogued. These examples should be up the sleeve of every social policy activist in Canada as solutions within the grasp of a provincial government. Movements for equality do themselves no favour when they leave this knowledge on the shelf on the assumption that Quebec is somehow as foreign as Sweden.

Peter Graefe is Associate Professor of Political Science at McMaster University.

Photo: Michael Vesia. Used under a Creative Commons BY-NC-SA 2.0 licence.