Name: Kevonnie Whyte

Course: Political Science 260

Date: April 2, 2015
T.A: Alexandra Robertson

Assignment Four: Income inequality in the Canadian Context

Income inequality can be defined as the extent to which income is distributed unevenly in
a country. It is a growing concern within the Canadian context as, according to recent statistics
published by the Conference Board of Canada, Income inequality has been increasing over the
past 20 years with the richest group of Canadians having increased their share of total national
income between 1993 and 2008 (Burt & Ai, 2012). This paper argues that the rise in income
inequality since the 1980s in Canada can be partially attributed to an increase in immigration
levels and more strongly attributed to the change in trading patterns between Canada and the rest
of the world. I will support my thesis by first detailing the causal mechanisms through which the
independent variables, immigration and the change in trading patterns, affect income inequality.
Afterwards, I will utilize evidence to test the observable implications resulting from each causal
mechanism. Through this process, I hope to demonstrate the extent to which each independent
variable has impacted the increase in income inequality in Canada since the 1980s.
Canada is known to be a multicultural society whose demographic makeup has been
conditioned by immigrants and their descendants. To date, the most recent figures from Statistics
Canada, in an article titled Immigration, Low Income and Income Inequality in Canada: Whats
New in the 2000s? indicates that immigrants make up 20.6% of Canada's total population
(Picout & Hou, 2014). In fact, Canadian immigration rates have been steadily increasing since
the 1980s (5.1 million immigrants since the 1980s), with one of the highest admission of
immigrants since the 1980s occurring in 2005 and 2006 (Picout & Hou, 2014). However, Moore
and Pacey in their text, Changing Income Inequality and Immigration in Canada, 1980-1995,
(2003) state that recent immigrants to Canada are paid significantly less than other groups, even
when age, sex and education levels are taken into account. They attribute this phenomenon to the
fact that recent immigrants experience significant problems in obtaining Canadian accreditation
for their overseas qualifications. As such, immigrants are often forced to acquire low skilled, low
paying jobs for some period whilst they obtain Canadian accreditations to be qualified for higher
paying jobs. Furthermore, it also takes a considerable amount of time for immigrants to adjust to
the Canadian employment context. Typically, immigrants have to be able to master the
idiosyncratic cultural nuances of the Canadian professional context in order to obtain promotions
to higher income jobs. The result of these processes is that the large influx of recent immigrants
who often obtain lower wages compared to non-migrants could be potentially fueling the
increase in income inequality in Canada.
If this causal mechanism were true, one would expect to see the rise in immigration levels
occur at the same time as the rise in income inequality in Canada. The evidence appears to be in
favour of this observable implication. Data from Statistics Canada 1 (Picot & Hou, 2014) and the
Canadian Conference Board2 (Burt & Ai, 2012) indicate that the period of the mid 1980s
onwards has shown a relatively steady increase in both income inequality and immigration
levels. Furthermore, a close analysis will demonstrate that a sharp increase in immigration levels
1 Appendix A
2 Appendix B
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started in 1985 which was followed by a sharp increase in income inequality in 1989. The
increase in the independent variable (immigration), which precedes the increase in the dependent
variable (income inequality), presents, but does not confirm, a strong case for causal relationship.
However, even though the two variables (immigration and income inequality) appear to
be correlated, the evidence does not attribute the rise in income inequality solely to the increased
levels of immigration. Moore and Pacey (2003) state that if they controlled for immigration, i.e,
if recent immigrants were excluded, inequality would still be increasing in Canada, but at a
slower rate. As such, an examination of the counterfactual concludes that the increase in income
inequality can only be partially attributed to increases in immigration levels. Moore and Pacey
(2003) give some insight as to why the impact of the independent variable is only partial. The
authors state that the disparity between the incomes of recent immigrants and non-immigrants
can be attributed to the short term adjustment period faced by most immigrants who seek to
obtain high paying jobs in Canada and not a fundamental (long term) difference in these
individuals (Moore & Pacey, 2003). This view is supported by the fact that immigrants who have
lived in Canada longer have noticeably lower levels of income inequality than recent immigrants.
For example, by 1996, males who had immigrated in the last 5 years earned approximately 60%
of the average non-immigrant wage, while those who arrived between 6-11 years earlier earned
just under 80% of the average non-immigrant wage (Moore & Pacey, 2003). As such, increased
immigration levels only have a short term, non-sustainable effect on income inequality in
Canada.
The age of globalization and the massive expansion in international trade over the past 20
years has had an impact on the trading patterns of developing and developed countries. These
developments can largely be attributed to the World Trade Organization (WTO) which lowered
trade barriers and opened new international markets. In keeping with the theory of comparative
advantage, capital rich developed countries tend to maximize on this asset and specialize in more
high-skill-intensive goods. On the other hand, labour rich developing countries tend to specialize
in low-skill-intensive goods. As such, with the implementation of lowered trade barriers and
larger markets, developed countries tend to export more high skill-intensive goods and import
more low-skill-intensive goods. Therefore, a demand for high-skilled workers is created in
developed countries, such as Canada, while jobs in low-skilled industries are lost in these
economies. An issue titled For Richer for Poorer by The Economist (2012) echoes this
argument, noting that globalization has pushed up demand for the brainy and well-educated at
the same time as the integration of some 1.5 billion emerging-country workers into the global
market economy . . . hit the rich worlds less educated folk with unaccustomed competition. The
result is that individuals who have higher levels of educational attainment and skills training
progressively earned higher incomes than individuals who have lower levels of educational
attainment and skills training leading to an increase in income inequality between the two
groups.
If my hypothesis were true, one would expect to see that individuals in Canada during
this time period that have higher levels of skills training would earn more than individuals with
comparatively lower levels of skills training. Furthermore we would also expect to see this gap
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widen when comparing figures from the 1980s to 2000s. The evidence appears to support my
hypothesis. Fortin, Green, Thomas & Milligan (2012) in their text Canadian Inequality: Recent
Developments and Policy Options, report that in 1980 men with a university Bachelor's degree
earned 32% more than those with a high school diploma (after controlling for differences in work
experience). By the 2000s this gap had increased to 40%. In addition, the University Bachelors
versus high school diploma gap for women had increased from 45% to 51% between 1980-2005
(Fortin et. al. (2012).
In conclusion, it is evident that the rise in income inequality since the 1980s in Canada
can be partially attributed to an increase in immigration levels and more strongly attributed to the
change in trading patterns between Canada and the rest of the world.

References

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Burt, M., Ai, L. (2012). Walking the Silk Road: Understanding Canadas Changing Trade
Patterns. Conference Board of Canada. Publication 13-196
Dion, P., Bonhert, N., Population Projections for Canada (2013 to 2063), Provinces and
Territories (2013 to 2038): Technical Report on Methodology and Assumptions. doi: 91-620-X
Fortin, N., Green, D.A., Thomas, L.,Milligan, K. (2012) Canadian Inequality: Recent
Developments and Policy Options. Canadian Public Policy, Volume 38, Number 2, June/juin
2012, pp. 121-145 (Article) Published by University of Toronto Press DOI:
10.1353/cpp.2012.0017 (page 130)
Moore, E.G., Pacey, M.A. (2003),Changing Income Inequality and Immigration in Canada,
1980-1995. Canadian Public Policy / Analyse de Politiques. Vol. 29, No. 1, pp. 33-52.
Published by: University of Toronto Press on behalf of Canadian Public Policy
N.a, For Richer, For Poorer, The Economist, October 13, 2012, 21.
Picot, G., Hou,F. (2014), Immigration, Low Income and Income Inequality in Canada: Whats
New in the 2000s? Social Analysis and Modelling Division, Statistics Canada. doi:11F0019M,
no. 364

Appendix

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increase
in
1976-

Graph depicting the

in income inequality
Canada between
2010

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Assignment Five: Security Dilemma in East Asia

Tensions are increasing between China and Japan as they battle for physical control of the
energy-rich Senkaku islands in the East China Sea. These tensions reflect broader security,
ideological and historical confrontations between the two East Asian powers, which could
potentially result in conflict. In this paper I will argue that Japan has been compelled to enhance
its security through increasing its defense budget to $53 billion because of feelings of insecurity
resulting from Chinas expansion of its military capacity. I will support my thesis by first
analysing three potential arguments, and their respective observable implications, for the increase
in Japans military expenditure. These three arguments are under the broad headings Alliances
in East Asia Commitment problem and the Security Dilemma. Afterwards, I will engage
with the presented evidence to systematically discount the former two arguments, thus affirming
the presence of a Security Dilemma as the motivating force behind Japans increase in their
military expenditure.
Alliances in East Asia
It can be hypothesized that Japan has increased its defense budget to $53 billion because
of the decrease in support which Japan has been receiving from the United States of America
(U.S). Within the international regime, states seek to either increase their own military capacity
(internal balancing) or form alliances and pool resources with other countries (external
balancing) in order to maintain prevent the rise of a hegemon and maintain the Balance of Power.
Japan had previously relied on offshore support from the U.S in order to balance against the
threat of China becoming a hegemon in that region. However, in previous years, America has
been reducing its support towards Japan leaving Japan vulnerable in the face of a potential
Chinese invasion. As succinctly put by Yosuke Isozaki, a security adviser to Mr. Abe in an article
titled Japans Military Spending by the Economist (2014), Truth be told, the US can no longer
afford to play the worlds [and Japans] policeman. This decrease in support from the U.S has
compelled Japan to balance internally, thus increasing its defense budget in order to decrease its
vulnerability towards China. If this causal logic were true, apart from the increase in Japans
military expenditure, one would also expect to see evidence of a decrease in U.S military support
towards Japan.
Commitment Problem
It can also be hypothesized that Japan has increased its defense budget because it fears
that China may break its 1978, Peace and Friendship Treaty alliance with Japan in the future.
This scenario is known as a Commitment problem where there exists a difficulty to enter into
or maintain an alliance because there is a future incentive for a party in the alliance to renege.
This problem is further exasperated by the absence of a third party enforcer. This scenario is seen
as played out in the Japan-China relations. According to an article titled How uninhabited
islands soured China-Japan ties published by BBC news (2014), ties between China and Japan
have been strained by a territorial row over a group of islands, known as the Senkaku islands in
Japan and the Diaoyu islands in China. In the late 1970s both sides agreed to shelve the
territorial issue (while in no way abandoning their claims to the islands) and formed a Treaty of
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Peace and Friendship in 1978. However, there exists an incentive for China to break this
agreement in the future as the Senkaku islands prove to be a very valuable asset as they are close
to important shipping lanes, offer rich fishing grounds and lie near potential oil and gas reserves
(BBC News, 2014). They are also in a strategically important location, amid rising competition
between the US and China for military primacy in the Asia-Pacific region. As such, Japan would
be compelled to pre-emptively increase its military capacity in the present because of its
expectations that China will renege in the future. If this causal logic were true one would not
only expect to see an increase in Japans military expenditure but that this increase would happen
before (pre-emptively) Chinas increase in its military capacity.
Security Dilemma
Finally, it can be hypothesized that Japan has been compelled to enhance its security
through increasing its defense budget to $53 billion because of feelings of insecurity resulting
from Chinas expansion of its military capacity. This scenario is known by realists in the field of
International Relations as a Security dilemma. A security dilemma, as defined by Kaji, Burgess
& Burgess (2003) in their article Beyond Intractability, occurs when two or more states each
feel insecure in relation to other states. None of the states involved want relations to collapse,
but as each state acts militarily to make itself more secure, the other states understand its actions
as threatening. A cycle of unintended provocations emerges, resulting in a heightening of the
conflict which may eventually lead to open warfare (Kanji et.al, 2003). This scenario is seen as
played out in the Japan-China relations. Chinas move to maintain or improve its security by
staging a string of incursions into the seas around the Senkaku islands has been cited in Japans
latest defence white paper as dangerous activities (The Economist, 2014). This white paper
betrays Japans notable feelings of insecurity relative to China. These feelings of relative
insecurity and tensions between the countries have compelled Japan to increase its military
capacity in order to enhance its security. If this causal logic were true one would not only expect
to see an increase in Japans military expenditure but that this increase would happen after
Chinas increase in its military capacity.
Evidence and Analysis
The three causal logics detailed previously in this essay point to the general observable
implication that Japan would increase its military capacity. However each causal logic also has
its own distinct observable implication against which we can test using evidence. The evidence
points to two general conclusions. First, China began to increase its military capabilities prior to
Japans increase in the same. The Economist states that prior to 2010, the Japanese had seen a
decade of decline in the countrys defense spending while Chinas defense spending had seen
double digit growth (2014). As such, this evidence rules out the hypothesis supporting the
commitment problem which had the observable implication that Japan would have increased its
spending prior to Chinas increase in the same. Instead, this evidence supports the hypothesis
concerning the Security dilemma wherein the observable implication is that Japan would
increase its military spending after Chinas increase in the same. Furthermore, the evidence
indicates that the United States of America has not decreased its support for Japan. In an article
titled The U.S-Japan Security Alliance 1951 published by the CFR Backgrounders (2014),
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Japan and the US formed a U.S.-Japan Mutual Security Treaty which outlined that Japan would
grant the United States the territorial means for it to establish a military presence in the Far East
in return for U.S protection in case of war. During an April 2014 visit to the region, President
Obama backed Tokyo's administration of the contested islands stating that "What is a consistent
part of the alliance is that the treaty covers all territories administered by Japan," (CFR
Backgrounders, 2014). This statement underscores U.S. continued support for Japan's security.
As such, this evidence rules out the hypothesis concerning alliances in East Asia as this
hypothesis had the distinct observable implication that the US would decrease support for Japan.
In conclusion, the evidence supports the Security Dilemma hypothesis that Japan has
been compelled to enhance its security through increasing its defense budget because of feelings
of insecurity resulting from Chinas expansion of its military capacity.

References

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D.MCN (2014, Sept. 1) Japans military spending. The Economist. Retrieved from
http://www.economist.com/blogs/banyan/2014/09/japans-military-spending
Drift, R., (2014). The Japan-China Confrontation Over the Senkaku/Diaoyu Islands Between
shelving and dispute escalation Global Research, The Asia-Pacific Journal, Vol. 12, Issue
30, No. 3
Kanji, O., Burgess, G. and H. Burgess (2003) . Beyond Intractability. Conflict Research
Consortium, University of Colorado
n.a (2014, Nov. 10) How uninhabited islands soured China-Japan ties. BBC News. Retrieved
from http://www.bbc.com/news/world-asia-pacific-11341139
Xu, B. (2014, July.1). The U.S-Japan Security Alliance.CFR Backgrounders. Retrieved from
http://www.cfr.org/japan/us-japan-security-alliance/p31437

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