Economic growth enriches the less fortunate
Montreal, June 22, 2023 – Economic growth increases the incomes of the least well-off at the same rate as average incomes, concludes a study published this morning by the Montreal Economic Institute.
“The idea that economic growth occurs at the expense of the less fortunate does not hold water,” explains Vincent Geloso, senior economist at the MEI and author of the study. “Not only do they benefit just as surely, but income growth seems to be distributed evenly across socio-economic classes.”
The author bases his work notably on a 2023 study of the evolution of per capita income for the poorest 10% in 113 countries from 2000 to 2015. The data from this study show that in general, a one-percent increase in average incomes is associated with a similar increase for those in the lowest income decile.
These conclusions echo those of a 2002 World Bank study on income growth in 93 countries between 1950 and 1999, as well as a 2016 study that reproduced and updated that previous study’s results.
The MEI also shows that economic freedom is connected to greater social mobility, which accentuates the positive effects of economic growth on the incomes of the less fortunate, as confirmed by several recent studies.
Using data from Statistics Canada, the author notes that Quebecers who were in the lowest income decile in 2015 had seen their circumstances improve by two deciles in the space of five years.
“Beyond a certain income level, regulation is just a cost of doing business. That is not the case for the less fortunate,” explains Mr. Geloso. “The less fortunate are the most affected by regulation, and they are the ones who stand to benefit the most from the growth that a lighter regulatory burden would enable.”
The MEI study is available here.
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The MEI is an independent public policy think tank with offices in Montreal and Calgary. Through its publications, media appearances, and advisory services to policy-makers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.
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