Klein reforms improved income mobility for the least fortunate, MEI study finds

• On average, the least fortunate 10 per cent of Albertans jumped an extra 0.8 deciles up the income ladder over five years thanks to the reforms.

Montreal, February 15, 2024 – Reductions in government spending and regulatory burden under the Ralph Klein government, in Alberta, led to increased income mobility among the poorest segment of the population, according to a study released this morning by the Montreal Economic Institute.

“Alberta’s reforms in the 1990s show that a low-tax, smaller government environment can be a boon to income mobility,” explains Vincent Geloso, senior economist at the MEI and co-author of the study. “By getting government out of the way, Premier Ralph Klein’s reforms made it possible for many of Alberta’s poorest to climb up the income ladder more quickly.”

Adjusted for inflation, per person government spending fell by 32 per cent in Alberta between 1992 and 1997 under Klein.

The government also enacted a series of market-friendly reforms, such as reducing regulation in the energy sector, privatizing crown corporations, and cutting personal and corporate tax rates.

Empirical analysis shows that by 2005, the after-tax per person income of the poorest 10 per cent of Albertans had grown 73 percentage points faster over a five-year period than it would have without the reforms.

The same analysis shows that the poorest Albertans were able to climb the income ladder an extra 0.8 deciles on average over five years thanks to the reforms.

The authors explain that this income growth resulted from the new opportunities that were created thanks to the reforms.

“By reviewing its fiscal and regulatory burden, Alberta made it easier for Albertans to start a business or find a good job as its economy grew,” explains Geloso. “What this teaches us is that governments can help the least fortunate among us to improve their own lot by taxing and spending less.”

The authors are calling on other Canadian provinces to take inspiration from those reforms.

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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