B.C.’s former director of debtor assistance and debt collection sees hard times ahead because of the rise in consumer borrowing in recent years. In a phone interview with the Georgia Straight, Doug Welbanks said that the recent credit crunch has demonstrated that people can’t keep borrowing endlessly. He noted that the Bank of Canada has reported that, excluding mortgages, consumer credit has more than doubled in the past decade—from $187 billion in 2000 to $416 billion in 2009.

“For many years, people have been in a five-year cycle of borrowing on the credit cards or a line of credit, then remortgaging [their homes], and paying out the consumer debt and [getting] back on the consumer wheel again,” Welbanks said. “As equity drops, people are not going to be able to do that.”

He predicted that as a result, people will find that they have to spend more money making monthly payments to deal with consumer debt. “It’s quite frightening in my opinion,” Welbanks said. “It still hasn’t really hit us yet.”

His comments came shortly after the Canadian Centre for Policy Alternatives, a left-wing think tank, released a report on March 10 chronicling the growing income gap among B.C. families. It revealed that after adjusting for inflation, 60 percent of families with children were earning less in 2006 than similar families earned in the late 1970s. The incomes of the top 10 percent of B.C. families with children, on the other hand, rose sharply.

The study also revealed that middle-class families in B.C. have been “squeezed” to a greater extent than those in other provinces. The report’s author, economist Iglika Ivanova, told the Straight in a phone interview that even in relatively good economic times, most B.C. families are unable to get ahead. “This means that economic growth alone doesn’t guarantee that people are going to benefit—especially those at the lower end of the income spectrum,” Ivanova said.

The bottom half of B.C. families with children took home 31.8 percent of after-tax income between 1976 and 1979, while the Social Credit party governed the province. B.C. ranked first out of nine provinces. (Prince Edward Island wasn’t included in the CCPA data table.) From 2003 to 2006—a period in which the B.C. Liberals were in power—the bottom half of B.C. families with children took home only 26.9 percent of after-tax income and B.C. ranked last on this list.

“I think that given that now we’re entering a recession, the most pressing priority would be to deal with those at the low end of the income spectrum and to deal with poverty,” Ivanova said, “because we know in B.C., we have the highest rate of child poverty in Canada—16 percent in after-tax terms—and the highest rate of overall poverty as well. We can start reducing the gap by dealing with people at the low end of the spectrum.”

Last year, the Paris-based Organization for Economic Co-operation and Development reported that the rich in Canada “are particularly rich compared to their counterparts in other countries”. The poor are also wealthier than the OECD average, though by a significantly lower margin. The OECD also reported that inequality and poverty rates increased “rapidly” in Canada between the mid 1990s and the middle part of this decade after 20 years of continuous decline.

Ivanova pointed out that B.C. has the worst inequality in Canada, and that Canada and Germany have had the worst record of increasing inequality among OECD countries in recent years. “Employment insurance, social benefits, family benefits, child benefits—this is what determines the level of inequality and poverty among countries,” she said. “Countries with higher cash benefits had lower inequality and poverty. And countries like Canada that have seen their cash benefits decrease over time are countries that are experiencing growth in poverty and inequality.”

Welbanks said he wasn’t surprised to hear that the CCPA report had chronicled a growing income gap among B.C. families. He cited other research in this area in his 2007 book Julius Seizure: Stories From the Secret World of Bankruptcy, Debt Collection and Student Loans (Chateau Lane Publishing). “At some point,” he said, “the debt cycle had to be broken.”