Author: Vincent Geloso

En 1951, l’administration municipale de Montréal a décidé de nationaliser le transport en commun et d’opérer le réseau d’autobus et tramways. Auparavant, les opérations étaient assurées en partie par la Montréal Tramways Company. Depuis, les coûts ajustés pour l’inflation par voyageur n’ont pas cessé d’augmenter.

Mais avant 1951, quelle était la performance des compagnies privées? Selon les Annuaires Statistiques du Québec, le nombre de voyages a augmenté de 81% entre la période 1935-1939 et 1950. Et pourtant, en ajustant pour l’inflation, les coûts par voyage ont diminué sensiblement par 0,76%.

Si la planification du transport en commun ainsi que l’opération de ce service était demeuré dans les mains du privé, est-ce que cette tendance se serait poursuivie. Une question valide que peu se demandent lorsqu’ils parlent d’améliorer le service de la STM.

On dit que les Québécois sont aujourd’hui les plus taxés au Canada et en Amérique du Nord. Qu’en était t’il en 1960? Il est difficile d’avoir accès aux paiements individuels d’impôts, mais il existe des statistiques agrégées qui nous sont utiles. Voici l’imposition effective moyen des Montréalais, des Québécois et des citoyens de Hull (comment est-ce que je les appelle???) relativement aux autres villes canadiennes.

En 1960, les Québécois payaient moins de taxes et impôts qu’ailleurs au Canada. Il n y a que les Montréalais qui en payaient plus que les citoyens d’Halifax.

Est-ce que la Révolution Tranquille a permis aux Québécois de s’enrichir? Les Québécois s’enrichissaient à l’époque, alors ca doit être vrai. En effet, la croissance économique au Québec était plus rapide au cours des années 1960 qu’au cours des années 1940 et 1950. Néanmoins, elle s’est accélerée en Ontario aussi et en Nouvelle-Écosse aussi…

Ce n’est pas révolutionnaire si tout le monde le fait en même temps, ca s’appelle être dans l’ère du temps. Vous ne me croyez pas? Ok! Regardons l’ensemble des indicateurs de revenu personnel au Québec entre 1945 et 1975. En somme, observons ce qui se passait pendant la Grande Noirceur et la Révolution Tranquille. Dites-moi si vous voyez une brisure dans la tendance?

Voyez-vous une brisure? Vraiment là, parce que je me demande si je suis aveugle. Après tout, la Révolution Tranquille est supposément la période de libération économique des Québécois! N’est-ce-pas?

Soyons clairs, la Révolution Tranquille n’a rien de révolutionnaire. Certes, un Québécois en 1975 avait une meilleure qualité qu’en 1960 et si je devais choisir entre naître en 1960 et 1975, je prendrai 1975 parce que j’aurai grandi avec davantage de moyens. Mais si j’étais un Québécois en 1960 et que je me souciais de rattraper économique l’Ontario et égaler le niveau de vie de ses habitants, je serai indifférent entre 1960 et 1975 (en ce qui concerne le rhytme de rattrapage et non pas le niveau).

Note: Pourquoi j’utilise des dollars de Toronto de 1960$ Parce que les indices de prix provinciaux n’existent pas avant 1979 et j’ai des indices de ville – crées avec des paniers plus petits que ceux de l’IPC – que je me sers pour estimer l’inflation. Néanmoins, la littérature économique relate souvent les difficultés techniques des séries utilisants un indice inter temporel seulement lorsque les prix sont composés avec de petits paniers (voir Emery et Levitt, 2003 dans Canadian Journal of Economics). Il faut donc les attacher à une région aussi. C’est pour cela que vous verrez les comparaisons que je fais par section de temps. Tout avant 1975 utilisera les indices de prix urbains crées par les économistes Emery et Levitt dans CJE en 2003 et les Statistiques Historiques du Canada pour Montréal. Après 1975, je me servirai des indices de prix de Statistiques Canada qui seront seulement comparés dans le temps et non pas par région. Notez que pour la période avant 1975, si j’utilisais un indice non-régional, mon argument serait plus fort parce qu’il accentue les tendances observées. Alors, mon estimation est plus conservatrice ici.

Mon ami Martin Coiteux a publié récemment un graphique sur la part de l’économie  et de la population du Québec au sein du Canada entre 1960 et 2010.  Néanmoins, Martin innove en illustrant la part du Québec dans les revenus fédéraux – quelque chose que je n’avais pas vu encore mais dont je me doutais.

Toutefois, l’histoire de Martin est incomplète puisqu’on a un indice de PIB qui remonte jusqu’à 1926 pour le Québec et le Canada. En remontant aussi loin, on voit qu’à une époque, le Québec ne déclinait pas, il rattrapait sensiblement ou du moins, il ne perdait pas de terrain. Ce que je remarque de ce premier graphique c’est que le Québec a (depuis 1926) toujours contribué moins à l’économie canadienne que son poids démographique l’aurait suggéré.

Mais ce graphique ne m’en dit pas assez pour que je sois satisfait. Pour être satisfait, je propose qu’on regarde l’écart entre la contribution du Québec à l’économie canadienne et sa contribution à la population canadienne. Allons y en regardant trois périodes particulièrement intéressantes: la Grande Noirceur (1945-1960), la Révolution Tranquille (1960-1976) et l’après Révolution Tranquille (1976-2009). Voici ces graphiques avec les courbes de tendance de l’époque.

Alors voici ce que je vois:

1. entre 1945 et 1960, le Québec maintient sensiblement sa part et il y a des chances que si la tendance s’était continuée, le Québec aurait pu fermer l’écart;
2. le déclin s’installe pendant la Révolution Tranquille
3. Par la suite, l’écart est stabilisée

I have recently submitted an entry for a Fraser Institute contest, below you will see my submission:

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The rise of “good” inequalities

Vincent Geloso

The author is a PhD candidate in Economic History at the London School of Economics

A commonly held view asserts that it is impossible for free markets to foster a greater amount of equality amongst men. To the general public, it seems hard to fathom that profiteering bred by free markets might lead to anything less than a growing gap between the rich and poor. The empirical evidence seems to support the view that the gap between rich and poor has grown in the past decades. For example, the share of total income that comes from the richest 0.1% of the Canadian population rose from below 2% in 1980 to above 5% in 2000.[1] A similar but more pronounced trend has been observed in the United States where that share rose from slightly above 2% to over 7% in 2000.[2] At first sight, the gap between rich and poor does seem to widen.

However, we should not assume that a growing gap is a problem in itself. The real questions that we should ask ourselves are whether or not workers stay in the same income group and how choices made by individuals affect their incomes.

Poor from cradle to grave?

First of all, if we wish to know if economic condition is permanent, the best tool economists can use is longitudinal data – tracking individuals over time. Using such data, it is estimated that somewhere between 42.3% and 57.6% of Americans in the poorest quintile of the population in 1996 had risen to a higher quintile by 2005.[3] A similar upward mobility has been observed over the period from 1987 to 1996.  Over the sixteen years period lasting from 1975 to 1991, over 80% of those who were in the poorest quintile in 1975 had risen by more than one quintile in 1991.[4]  In Canada, it is estimated that 43% of those in the poorest quintile in 2005 had moved up to a higher quintile by 2010.[5] Overall, this indicates a high level of upward mobility.

What about living standards? Measuring income adjusted for living costs is a tricky business. However, many economists have observed that when they compute prices for goods and services bought at discount outlets where poorer individuals tend to shop, real incomes are more accurately measured while a large part of the gap between rich and poor disappears[6]. The use of such data has allowed economists to realize that the poverty figure for the United States is half that of the official figures.[7] Moreover, the average real wages of the poorest continue to rise and poorer households now possess amenities like dishwashers, televisions and the internet in similar proportions to richer households.[8]

All of this is consistent with the observation made by economists that the share of the earnings gap that is explained by circumstances – being born in a particular family or area – stood at only 18% in 2001, a figure that has declined since 1968.[9] The remaining share is explained by factors that each individual can control, namely schooling and labour supply decisions. In other words, effort and personal choices are the dominant factors in determining income and wages.

Choices matter

How can we reconcile these observations with the growing gap in earnings? In the opening article of the American Economic Review of 1999, economist Finis Welch proposed that income inequality was – in a free economy – to be welcomed.[10] The disparities between wages and earnings of different individuals lead to “increased opportunities for specialization and increased opportunities to mesh skills and activities”.[11] Wages convey information about which skills, goods and services are needed by consumers and businesses. In other words, they inform individuals about the possibilities for self-accomplishment.

It is with such a viewpoint in mind that we should look at the rise of the demand for knowledge and skills that occurred in the 1980s. This rise in demand led to higher returns from schooling which benefitted those who had already acquired their education and widening the gap between them and those who acquired less schooling.[12]

However, the prospect of greater earnings from schooling pushed young individuals to opt in greater numbers to pursue a college degree or technical degree.[13] Since wages and earnings respond to foregone present income in order to invest in enhanced future prospects, the longer years spent on school benches could provide observers with the illusion that the earnings gap is growing. In fact, it is estimated that once we account for changes in returns to schooling and in university participation, an important part of the earnings gap disappears.[14] Were it not for the gap that emerged in the 1980s because of higher returns from education, fewer individuals would now be interested in pursuing higher education.

The earnings gap is also the reflection of labour supply decisions. All workers face a trade-off between leisure and work. Many workers will establish an income target for themselves to sustain their living standards and they will not work after they have reached that target. Once they have reached that target, they believe that the value of their free time is worth more than the extra income they would gain. In other words, most individuals work in order to live, not the other way around.

On the other hand, some individuals prefer to work longer hours. Many of them can be found in the richest amongst us: business executives, attorneys and bankers – to name just a few. These individuals understand that long hours are a condition for the higher incomes they covet. Hence, they will put in longer hours at the office and accept more responsibilities in their quests for personal achievement. Considering the accelerating trend towards performance pay that has been observed in recent decades, financially ambitious workers would have tended to head towards jobs that were more likely to allow them to reach their goals.[15]  The gap in earnings reflects how workers chose to use the opportunities presented to them given each worker’s individual preferences.

Conclusion

The existence of a growing gap between rich and poor does not mean that workers are left worst off. In fact, it is the reflection of different choices in schooling and labour supply according to individual preferences. We should be rejoicing at the fact that many workers feel that they do not need to work too long before enjoying fully the fruits of their labour. We should also encourage those who wish to labour longer and harder to accomplish themselves in a different manner. Rather that bemoaning the rise in earnings gap, we should remove all barriers to the unregulated acquisition of skills and education for workers who see openings in the market. As long as workers are left free and are not hindered in their abilities to make decisions regarding which paths best advance their desire for individual self-accomplishment, there is no need to worry about a growing earnings gap.