Gini of disposable income, G7 countries from 1975 to 2018
What is this metric and why is it important?
The Gini coefficient, or Gini index, is a common measure of economic inequality that captures, in a single number ranging from 0 to 1, the extent of inequality in a jurisdiction’s distribution of income. The higher the number, the more unequal the distribution.
How is Canada doing?
- At 0.406, Canada’s Gini before tax is lower than the OECD average of 0.414—placing it 13th overall with countries ranked from least to most inequality.
- Canada’s Gini coefficient for disposable income—that is, after taxes and transfers have been factored in—is 0.314, which places us 20th in the OECD. This implies that Canada’s redistributive activities are not as robust as those of other countries.
- Ontario has the highest income inequality among provinces, although variation in Gini among provinces is very low.
- Inequality has been declining in Canada over the past decade, but remains close to the high levels of inequality that emerged in the 1990s, largely due to a sharp rise in income among the top 10% of earners in that decade.
Metric discussion
The Gini coefficient measures the inequality of any distribution. The measure is based on the cumulative distribution curve, with the Gini being the ratio between the area under the curve and area if the curve was a 45 degree line (perfect equality). Gini can be calculated before or after taxes and for different age groups. A Gini of 0 means perfectly equal distribution—i.e., everyone has the exact same income. A Gini of 1 means perfectly unequal distribution—i.e., one person has all of the income.
Limitations
Gini gives a single number to express the inequality in a distribution, but gives little detail on who is experiencing higher levels of inequality. For that, one needs to look at income realities for specific groups of people.
