Media Clipping — Thurs, Sept.4th, 2008 The Globe and Mail

Wealth gap grows in Atlantic provinces

The wealth gap is widening in Atlantic Canada, and one-quarter of households would not be able to pay off their debts if they sold every asset they owned, according to a report released yesterday.

The findings, which were compiled by the research group GPI Atlantic, indicate that the poorest residents of the four eastern provinces are worse off than they were a decade ago.

The region is also sliding compared to the rest of the country, the report notes. There is a higher percentage of people in Atlantic Canada with negative assets than anywhere else in Canada, and poor people here tend to be deeper in debt. Consumer bankruptcies are also more common here.

“I don't think we're talking just about the last decade, it's a long-term trend,” Ron Colman, co-author of the report, said in an interview. “It's a trend of wealth moving out of the region.”

The report comes only days before Prime Minister Stephen Harper is expected to call an election, a vote that will come amid increasingly precarious economic times for many Canadians.

The group says the timing of its report is coincidental, but warns that, beyond the effects on individual Canadians, social upheaval could result if such a wealth gap is allowed to persist and grow.

“Nearly two-and-a-half thousand years ago, for example, Aristotle warned that ‘revolutions arise from inequalities,'” the report notes.

“...Federal and provincial policymakers must begin to address the growing financial distress of the poorest Canadians. The 2005 riots in France are a poignant reminder of the potential consequences of marginalizing the poorest households.”

These problems are particularly acute in Atlantic Canada, which has continued to lag as the nation's prosperity grows.

“I think there's a genuine threat to social cohesion,” Mr. Colman said.

“The wider gap you have between the rich provinces and the poor provinces, the greater threat to the social fabric.”

GPI Atlantic notes that the share of the national wealth accounted for by residents of this region slid during the 1990s to 4.4 per cent from 5.4 per cent. That roughly matches the relative decline in the area's proportion of the national population, as reported by Statistics Canada.

But it also means that the region has had a consistently lower proportion of the national wealth than its share of the population, which in the latest census was around 7.2 per cent.

“That doesn't mean there isn't still plenty of wealth in Atlantic Canada,” Kimberley Tran, the other author of the report, noted in a statement. “The distribution of that wealth is just very uneven.”

About 11,000 millionaires and a handful of billionaires live in the area, including members of the Irving and Sobey families, as well as Harrison McCain.

In total, the most recent figures show that the richest 10 per cent of Atlantic households own about half the region's wealth while the poorest 40 per cent collectively own slightly more than 3.5 per cent, the report notes.

“Tens of thousands of Atlantic Canadians are suffering from severe financial stress,” Ms. Tran said.

“They don't have assets to draw on to weather unexpected crises like job loss, sickness, or loss of an earning partner; and they can't deal with unforeseen and sudden cash requirements for home repairs, car repairs, medications or other needs that demand urgent attention.”

While wealthier households have the equity to secure low-interest credit and can leverage their assets, the report notes, poor households trying to make ends meet rely on credit cards and payday loans “that plunge them even deeper into debt.”

The Nova Scotia government sought to tackle this issue during the summer. In late July, the province's Utility and Review Board prohibited payday loan companies from charging more than $31 dollars on $100, including all expenses and interest.

Copyright © 2008, The Globe and Mail