BC Incomes: Headlines and Facts

Topic Box from the 2008 Eighth Annual Benchmark Report

In its release of the 2006 Census, Statistics Canada painted a bleak picture of incomes and earnings in the province of British Columbia over the past 25 years; even over the past five years as the provincial economy expanded, the numbers looked bad. This "bad news" story was widely reported throughout the province but it did not reflect on why median incomes had changed.

Statistics Canada asserted that, once adjusted for inflation, between 1980 and 2005 individuals working full time, full year, in the province of BC saw their median earnings fall by 11.3 percent (the 1981 and 2006 Census reports income changes between 1980 and 2005). Even over the most recent Census period (reporting 2000 and 2005 incomes), earnings for those who worked full time, full year fell by 3.4 percent — a period considered by most to be a prosperous time in the province.

So did we all grow a little poorer between 2000 and 2005? Not really. When we look at why the changes occurred, we see a much more positive picture of changing earnings and employment in the province. But before we consider the why, a comment needs to be made about how the provincial totals were developed.

Inflation adjustments made by Statistics Canada to provide data in constant dollars (2005) were made using the same national Consumer Price Index (CPI) deflator for all provinces and regions throughout Canada. The inflation adjustment made by Statistics Canada overestimates the income declines that were observed in the province because BC had lower inflation than the national average between 2000 and 2005.

Using the BC specific inflation rate to adjust BC incomes shows that full time, full year incomes actually fell by 2.0 percent rather than the 3.4 percent reported by Statistics Canada (see figure). While still a decline, adjusting the income data for the Abbotsford and Victoria Census Metropolitan Areas (CMAs) by their respective inflation rates resulted in full time, full year incomes growing in these communities between 2000 and 2005 rather than the declines reported by Statistics Canada (-0.6 and -0.7 percent respectively).

Even with the appropriate inflation adjustment, median incomes for full time, full year workers in the province and the Vancouver CMA declined. However, there is good news hidden in these changes.

Relatively strong provincial economic performance between 2000 and 2005 — where the unemployment rate fell from 8.5 to 6.0 percent — changed the structure of employment in BC and contributed to declines in median earnings.

Between 2000 and 2005, while full time employment for all age groups grew by ten percent, full time employment for those aged 15 to 24 grew by more than double this rate (21 percent). With a median income that is only 50 percent of that for all age groups ($22,074 versus $50,855), more rapid growth in the younger employment cohorts would again lead to a fall in median incomes for the province's full time, full year workers. The good news hidden here is that our youngest cohort of workers (15 to 24 year olds) — those who will be in the labour force for at least the next three decades — saw their median incomes increase faster than all age groups, growing by 14 percent between 2000 and 2005.

Full time full year employment is the norm over one's working life. However, part time employment is an important component of a healthy economy as it accommodates most students who work through their school years — which can now easily last into the early 30s — as well as working parents and retirees who have decided to keep a part time foot in the labour market. Between 2001 and 2006, part time employment in BC grew by 16 percent and full time grew by nine percent. With a median income that is understandably lower than that for full time ($12,111 versus $42,230), adding part time jobs for students, working parents or retirees at a more rapid rate than full time positions would again have the logical impact of pulling down median incomes for all employees. Again, good news hidden within the bad.

Another consideration of where compositional changes have had a significant impact is the comparison of incomes for recent immigrants and Canadian born populations. In addition to the bleak picture for BC workers, the Census also painted a picture of a significantly widening disparity between earnings of recent immigrants and Canadian born workers over the past 25 years. Statistics Canada's data show that in 1980 a recent immigrant could expect to earn 85 cents for every dollar earned by a Canadian born person. By 2005 this gap had grown, with a recent immigrant earning only 63 cents for each dollar earned by a Canadian born person.

Before concluding that things have gotten worse for immigrants, consider that in 1980 the typical recent immigrant was in their twenties, as was the typical Canadian citizen (the peak of the baby boomer generation), making the comparison appropriate, as both were in the same stage of their working careers. Shift forward to 2005 and, while recent immigrants are still typically in their twenties, the typical Canadian had grown a little older and a little greyer over this period. Now in their mid-forties, they were in the peak earning stage of their careers, with significantly higher incomes than two decades ago when they were in their mid 20s.

Compositional changes in these two populations over the past two decades make it impractical to compare their earnings, and impossible to draw conclusions about the relative well-being of each group. Reasonable comparisons would be the income of a 25 year old recent immigrant and that of a 25 year old Canadian born person, or a 45 year old recent immigrant and a 45 year old boomer.

So, contrary to the headlines, the 2000 to 2005 period was a good time to be employed in BC as a wide range of employment opportunities were created. Adding all these jobs changed the composition of employment and earnings, which, for the province of BC, resulted in a fall in median earnings. While the statistics were correct, considering why they were so paints not a bleak but a bright picture for BC over the past five years.

Finally, it is important to note that all of the headlines focused on the incomes of individuals, with little mention of the situation for households. As we typically live, earn and spend in households, it is also important to know how households were doing. Between 2000 and 2005 household income growth in British Columbia actually beat inflation, with inflation adjusted median household incomes increasing by 1.8 percent, not far off the 2.3 percent increase seen Canada wide over the same period.

In navigating into a period of increasing economic uncertainty, the most important conclusions to be drawn from the Census data, and the headlines that followed, are that changes in measures of central tendency, be they the mean, the median or the mode, may tell us what is happening, but they tell us little about why those changes are occurring. In an increasingly diverse society in terms of the people, the places and the types of work activity, we must look much more carefully at the data if we are going to have meaningful discussions about the changing dimensions of our communities.

Source: Urban Futures