Consumption Inequality in Canada: Is the Gap Growing?

Much has been written about economic inequality in recent years. Most of the academic studies and news stories deal with income inequality. Income inequality, of course, looks at differences in “potential” living standards. Income, especially after-tax or disposable income, measures the capability of a family or individual to afford a particular standard of living—if they spend all of that income.

However, there is a case to be made that consumption inequality is at least as important and interesting as income inequality. Consumption better reflects people’s actual living standards because it represents, for the most part, the choices that people make about the goods that bring them enjoyment. Consumption is tied to income, of course, but not completely. People can expand their consumption choices by borrowing and they can consume less than their income by saving.

This paper argues that, in many ways, consumption is a preferred indicator for the measurement of economic inequality. Examining the consumption inequality shows that while income inequality has increased modestly within Canada (by about 11 percent) over the 40 year period, consumption inequality is only 3 percent higher than it was in 1969

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