Income Inequality as a Canadian Cohort Ages: An Analysis of the Later Life Course
AbstractAt each stage of the life course, people experience different economic situations. Retired people, for example, draw the majority of their incomes from the pension system rather than the labour market. Using Survey of Consumer Finances cross-sectional data from 1973 to 1996, this paper examines Canadian trends in income inequality over the middle and later stages of the life course of a synthetic cohort born between 1922 and 1926. Three hypotheses regarding changes in the level of income inequality during later life are tested: income is 1) distributed more equally; 2) distributed about the same; or 3) distributed less equally, in the retirement years than in the working years. Using Gini coefficients, the findings show that income inequality decreases within a cohort as it grows old; that is, the Canadian retirement income system smooths out (levels) the distribution of income in later life. The observed decrease in inequality corresponds with a decrease in income from earnings and an increase in dependency on state benefits. The progressive nature of public pension programs in Canada increases the relative income share and the average income of the poorest seniors. Moreover, Canada exhibits a more equal distribution of income in old age compared to countries with similar old-age welfare systems, such as the United States. Any reform toward privatization of the retirement income system in Canada will jeopardize the ability of the state to reshape income inequalities in later life.
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Bibliographic InfoPaper provided by McMaster University in its series Social and Economic Dimensions of an Aging Population Research Papers with number 10.
Length: 26 pages
Date of creation: Nov 1999
Date of revision:
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income inequality; cohort; public pension;
Find related papers by JEL classification:
- J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
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