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Income Inequality as a Canadian Cohort Ages: An Analysis of the Later Life Course

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  • Steven G. Prus
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    Abstract

    At 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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    File URL: http://socserv.mcmaster.ca/sedap/p/sedap10.PDF
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    Bibliographic Info

    Paper provided by McMaster University in its series Social and Economic Dimensions of an Aging Population Research Papers with number 10.

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    Length: 26 pages
    Date of creation: Nov 1999
    Date of revision:
    Handle: RePEc:mcm:sedapp:10

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    Keywords: income inequality; cohort; public pension;

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    References

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    1. Lars Osberg, 1998. "Economic Insecurity," Discussion Papers 0088, University of New South Wales, Social Policy Research Centre.
    2. Mustard, Cameron A. & Derksen, Shelley & Berthelot, Jean-marie & Wolfson, Michael & Roos, Leslie L., 1997. "Age-specific education and income gradients in morbidity and mortality in a Canadian province," Social Science & Medicine, Elsevier, vol. 45(3), pages 383-397, August.
    3. Jenkins, S., 1988. "The Measurement Of Economic Inequality," Papers 170, Australian National University - Department of Economics.
    4. Browning, Martin & Deaton, Angus & Irish, Margaret, 1985. "A Profitable Approach to Labor Supply and Commodity Demands over the Life-Cycle," Econometrica, Econometric Society, vol. 53(3), pages 503-43, May.
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    Cited by:
    1. Lynn McDonald & A. Leslie Robb, 2003. "The Economic Legacy of Divorced and Separated Women in Old Age," Quantitative Studies in Economics and Population Research Reports 384, McMaster University.

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