1
The Historical Origins of the Persistence Difference in Economic Outcomes Experienced by
Indigenous People in Canada
Isabella Leung
2
Introduction
Indigenous people are people who settled in Canada before the European settlers. Canada
has 5% of Indigenous people.1 In Canada, there are three types of Indigenous people: Inuit, Metis
and First Nations. Inuit are those who lived in the Arctic Circle, Metis are those with mixed
ancestry with the Europeans, and First Nations are those who lived south of the Arctic Circle.
First Nations make up of the largest share of the Indigenous population while Inuit made up the
least.2
Indigenous people in Canada were experiencing higher levels of poverty compared to the
rest of Canadians. According to Statistics Canada, the poverty for all Canadians was 8.1%. For
Indigenous people, the poverty rate was way higher than that. As suggested in the same study,
“In Winnipeg, which has the largest Indigenous population of all urban centers in Canada, 23.2%
of First Nations people, 10.5% of Métis and 14.4% of Inuit lived in poverty in 2020.” Indeed, the
poverty trend has been consistent for many years. In 2015, more than 20% of Indigenous people
were living in poverty, which was higher than the national rate.3 Indigenous people also
performed worse in the labour market compared to other Canadians. The unemployment rates of
Indigenous people were persistently higher that all Canadians. From 2006 to 2021, the
“Indigenous Population Continues to Grow and Is Much Younger than the Non-Indigenous
Population, Although the Pace of Growth Has Slowed,” Statistics Canada, September 21, 2022,
https://www150.statcan.gc.ca/n1/daily-quotidien/220921/dq220921a-eng.htm?indid=32990-1&indgeo=0.
2
Zach Parrot, “Indigenous Peoples in Canada,” The Canadian Encyclopedia, accessed March 28,
2023, https://www.thecanadianencyclopedia.ca/en/article/aboriginal-people, para 1.
3
Xuelin Zhang and André Bernard, “Disaggregated Trends in Poverty from the 2021
Census of Population,” Government of Canada, Statistics Canada, November 9, 2022,
https://www12.statcan.gc.ca/census-recensement/2021/as-sa/98-200-X/2021009/98-200-X2021009eng.cfm.
1
3
unemployment rate for Indigenous people was always more than 10% while the rest of Canada
was lower than that. 4
Despite from all the negative economic outcomes, the Inuit were experiencing fewer
gender differences in the labor market. For most Canadians, women were at a disadvantage in the
labour market. In Canada, men earn around 15% more than females in Canada since 1980s.5 Men
also had a higher labour participation rate compared women. 6Men are relatively better off in the
job market. However, in Inuit communities, the labour force outcomes for Inuit women were
relatively better compared to all Canadians. Even though there was a huge wage gap between
non-Indigenous and Indigenous Canadians, the gender wage gap for Inuit was smaller compared
to most Canadians. The gender wage gap was 13%, and 4% for 2001 and 2006 respectively, and
only 1% in 2011, which is lower than the rest of Canada.7 Researchers even found that the labour
participation rate was higher for women compared to men from 2003 to 20118, which was a
phenomenon that never happened among other Canadians.
In the second section, I will discuss the origins of these problems using a historical
perspective. I found out that poor property rights was one of the main causes that lead to poverty
Government of Canada, “Labour Force Characteristics by Region and Detailed Indigenous
Group,” Labour force characteristics by region and detailed Indigenous group, Statistics Canada, January
6, 2023, https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410036501.
5
Government of Canada, “Pay Gap, 1998 to 2021,” Statistics Canada, May 30, 2022,
https://www150.statcan.gc.ca/n1/pub/14-28-0001/2020001/article/00003-eng.htm, Chart 1.
6
“Labour Force Characteristics by Province, Monthly, Seasonally Adjusted,” Statistics Canada,
March 10, 2023, https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410028703.
7
Magalie Quintal-Marineau, “The New Work Regime in Nunavut: A Gender Perspective,” The
Canadian Geographer / Le Géographe Canadien 61, no. 3 (2017): pp. 334-345,
https://doi.org/10.1111/cag.12387. Table 1. In the table given, the researchers calculated gender wage gap
𝑤𝑜𝑚𝑒𝑛 𝑤𝑎𝑔𝑒
by calculating 𝑚𝑒𝑛 𝑤𝑎𝑔𝑒 . However, in most studies, gender wage gap was calculated by1 −
4
𝑤𝑜𝑚𝑒𝑛 𝑤𝑎𝑔𝑒
𝑚𝑒𝑛 𝑤𝑎𝑔𝑒
8
. Therefore, the percentage show were 1- the gender wage gaps shown on the table.
Ibid, Table 2
4
for Indigenous people in Canada. Residential schools also decreased the children’s likelihood for
children to receive education, thus leading to a poverty gap. However, being less culturally
assimilated compared to other Indigenous people with lower enrollment in residential schools
had led to the more positive outcome for Inuit women in the labour market. In the third section, I
pointed out a couple of limitations of our current theoretical assumptions by examining the
historical origins of the economic outcomes. Our current economic theories did not account for
the fact that good institutions and laws were needed to foster a free market in order for resources
to be distributed evenly such that the general public would be benefited, and our economic
predictions fail to include personal experiences and other emotional factors when we predict the
number of schooling a person receives. After eliminating these limitations, we could better
understand the reasons that lead to poverty and reduced amount of schooling of the Indigenous
people. Finally, I would want to emphasize that eliminating cultural barriers do not necessarily
lead to negative economic outcomes.
Historical Perspective
Poor property rights was one of the main causes that lead to poverty for Indigenous
people in Canada. The Indian Act signed on 1876 forbade Indigenous people in Canada to own
any land. 9Canada’s government had made effort to try to allot the land back to the Indigenous
people in the 20th century. However, the process was still unsuccessful. Indigenous Canadians
were still unable to claim most of the land back. Claiming their reserved land involved high
transactional cost. Reclaiming those land often required involving filing court cases, which
involves hiring lawyers and paying lots of administration fees. Claiming those land would often
9
Tom Flanagan; Christopher Alcantara, "Individual Property Rights on Canadian Indian
Reserves," Queen's Law Journal 29, no. 2 (Spring 2004): p.489
5
require formal documents showing that they own a certain amount of land before the colonial
era. However, most of the Indigenous tribes did not have formal records of the land they claimed
they have owned before the European settlers. With a low success rate and unable to afford to
file court cases, many already poor indigenous people who could not pay the court fees would
either have to live off the reserve or remain homeless. Even though they successfully claimed
their own land, they could not fully utilize the land to generate economic profits.10The land that
were allotted back had poor security tenure rights, meaning that they might be leased to the
Indigenous people and the Canadian government has the ultimate right to acquire those land
again. For land that were occupied by private companies, after the court ruled that the land
should be allotted back to the indigenous people, they were only responsible for giving a portion
of their profit to the band council instead of the entire ownership of the land.11 Therefore the land
resources are usually Housing prices are steadily increasing for the past 20 years. Being unable
to acquire land, indigenous people would not be able gain the huge profit gain form having land,
which leads to lower income levels and property. This also leads to homelessness for many
indigenous as they were unable to have land property.
Not being able to receive good education was one of the reasons that lead to poverty in
Indigenous people in Canada. Parents of residential schools are less likely to send kids to public
school due to their trauma. Residential schools were established during the 19th and 20th
centuries. Since 1920, all indigenous children between the ages of seven and 15 were quired to
attend either a residential or a day school. Residential school attendees were often sexually and
mentally abused. They spent half of their time on spent in academics, and the other half in
10
11
Ibid, p.495
Ibid,p, 506
6
manual labour.12 Students were not allowed to go back home and often needed to stay away from
their family for a long period of time. As most on-reserve areas did not have public schools,
many Indigenous people end up attending residential schools. 13A study found that with parents
attending residential school, the mothers were more likely to have poor parenting skills and
mental health due to their sufferings in residential schools. Mothers who attended residential
schools did not know how to advocate for their children when they are kicked out of school due
to behavioral problems. Mothers who were survivors of residential schools were also less likely
to trust the government or the western education system due to their own negative experiences.
Therefore, they were less likely to invest in the children’s education. 14 According to the study,
children who had mothers attended residential school were approximately 4.5% points more
likely to be expelled from school and were more likely to be suspended from school by 5%
points compared to parents who did not go to residential school. Children are less likely to get
along very well with their teachers and like likely to go to school.15With the lack of
encouragement to receive education, Indigenous people continued to stay in poverty. Using a
study from 2003, researchers found that the income gap among those who did not complete high
school was the largest. The median income of the indigenous people is two-thirds lower than the
non Indigenous people who did not complete high school. On the other hand, the median income
Donna L. Feir and M. Christopher Auld, “Indian Residential Schools: Height and Body Mass
Post‐1930,” Canadian Journal of Economics/Revue Canadienne D'économique 54, no. 1 (2021): pp.
131-144, https://doi.org/10.1111/caje.12495.
13
Donna L. Feir, “The Long‐Term Effects of Forcible Assimilation Policy: The Case of Indian
Boarding Schools,” Canadian Journal of Economics/Revue Canadienne D'économique 49, no. 2 (2016):
pp. 437-439, https://doi.org/10.1111/caje.12203.
14
Donna L Feir, “The Intergenerational Effects of Residential Schools on Children’s Educational
Experiences in Ontario and Canada’s Western Provinces,” International Indigenous Policy Journal 7, no.
3 (2016), pp.24 https://doi.org/10.18584/iipj.2016.7.3.5.
15
Ibid, pp.6
12
7
of the indigenous people who completed a university degree is only 80% lower than the non
Indigenous people who have a university degree. 16More education will contribute to a higher
income level in Canada. Using data from 2016 as an example, Canadians who had a bachelor’s
degree make approximately $25,000 more annually than those who have a high school diploma.
17
To wrap up, the negative experience faced by residential school survivors lead to a negative
education experience faced by the next generation, thus leading to a lower median income of the
Indigenous people in Canada.
Despite all the negative outcomes, the Inuit were experiencing fewer gender differences
in the labour market. This was because they were less culturally assimilated compared to other
Indigenous people with lower enrollment in residential schools. Residential schools had led to
cultural assimilation in many Indigenous communities. Residential school attendees were
forbidden to practice their own culture or speak their own language. Therefore, for those who
attended residential school they were less likely to participate in traditional activities and less
likely to speak their own Aboriginal language in the home even though they have left the
residential school. However, enrollment in residential schools for Inuit were limited. Due to the
harsh climate and the lack of economic opportunities in the northern rural areas, missionaries had
a lower incentive to set up residential schools. Up till 1960s, only 6 residential schools were
built. There were also no mandatory enrollment policies for Inuit people to attend residential
16
Helmar Drost and John Richards, Income on- and off-Reserve: How Aboriginals Are Faring
(C.D. Howe Institute, 2003).Figure 7
17
Government of Canada. “Unemployment Rate, Participation Rate and Employment Rate by
Educational Attainment, Annual.” Statistics Canada, January 6, 2023.
https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410002001&pickMembers%5B0%5D=1.1&
amp;pickMembers%5B1%5D=2.9&pickMembers%5B2%5D=4.2&pickMembers%5B3%5D=5
.3&cubeTimeFrame.startYear=1999&cubeTimeFrame.endYear=2022&referencePeriods=
19990101%2C20220101.
8
schools. Those who didn’t attend simply went to school with other Metis or other immigrants in
their local area.18 Children were also allowed to go back home to stay with their parents after
school. Therefore, gender roles were not affected by European culture as they were less
culturally simulated, which lead to women having comparatively better labour outcomes
compared non Indigenous people. In western Europe culture, men are perceived as the decision
maker and the provides financial support for the family. However, women were considered to be
decision makers and were required to take more responsibilities in Inuit communities. A study
was conducted to discover the gender roles in the Nunavut Inuit communities. According to the
study, researchers find that while men are hunters, women are expected to make decisions of the
household regarding work allocation and resource distribution. Parents might require their young
daughters to take a larger responsibility to help with a variety of domestic chores while young
boys do not need to take responsibility. Besides that, men are not necessarily to provide financial
support to the family. An ideal man Inuit community should be hunters. Indeed, men are
generally not expected to be hunters in Europe since the 18th century. The researcher argues that
as men are more encouraged to be hunters with fewer responsibilities, women are more
encouraged to work in wage-paying jobs, which contributes to a higher labour participation rate
for females.19 Therefore, this contributes to women in general having better labour outcomes
than men.
The Inuit and Northern Experience. Montreal [Québec] ;: Published for the Truth and
Reconciliation Commission of Canada by McGill-Queen’s University Press, 2016.pp.3-5
19
Magalie Quintal-Marineau, “The New Work Regime in Nunavut: A Gender Perspective,”pp.
341-345
18
9
Discussion
Current theoretical assumptions did not account for the fact that good institutions and
laws were needed to foster a free market in order for resources to be distributed evenly. In a free
market, if firms have to increase their profit, the general public will at some point benefit from it.
This is because in order for a firm to increase its profit, it will have to hire more workers. To hire
more workers, they will have to increase the wage of the workers to attract more workers to
produce their goods. Therefore, the income of the workers will increase, and thus GDP per capita
will increase. Also, if firms want to make more profit by producing more of a certain good, the
supply of the goods will increase, leading to a decrease in the equilibrium price of the good, and
the general public will be able to access the good at a lower cost. However, the fact that good
institutions and laws were needed to foster a free market. Canada did not have good laws to
ensure that resources were distributed evenly, which lead to income inequality. For Indigenous
people in Canada who gave up their land resources previously, if private companies made a
profit on their reserves, they simply didn’t need to share all of their profit with the indigenous
communities in Canada as it was not required in the law. Indigenous people in Canada were
simply forced to do manual labour in residential schools even though they are abused.
Governments and firms did not need high wages to incentivize them to go to work as it was
illegal for them to not send their child. As a result, only a small number of people would be able
to enjoy the economic benefits. The Indigenous people do not have a higher GDP per capita as
the profits were not distributed to them.
Current economic assumptions also failed to include personal experiences and other
emotional factors that affect the number of schooling a person receives. Our current theoretical
assumptions state that the number of schooling that a person receives were determined by
10
financial incentives. Using current assumptions, the marginal benefit could be determined by the
increase in income and the probability of employment after receiving an education. The marginal
cost could be the forgone income for not working or the direct cost of tuition. The number of
education we receive will be at the point where marginal cost equal to marginal benefit.
However, there are other factors that also affect the marginal cost and marginal benefit of going
to school, such as mistrust of the education system and fear their children being abused at school.
For Indigenous people, the perceived marginal benefit for going to school is much smaller than
the other Canadians. To better illustrate it let’s use a diagram to illustrate that.
If we only account for the income and the probability of employment after receiving education,
the marginal benefit will be MB1 on the diagram and the number of schooling received will be
Y1. However, for Indigenous people, the perceived marginal benefit of going to school is much
smaller than that of other Canadians. As mentioned above, mothers who are survivors of
residential schools are less likely to trust the government or the western education system due to
their own negative experiences. Therefore, they might perceive their children as having a lower
marginal benefit for attending school due to a higher possibility of being abused. Therefore, the
11
marginal benefit would shift from MB1 to MB2, and the number of schooling would decrease
from Y1 and Y2. If we account for those factors, then we could explain the reasons that the
Indigenous people were taking low levels of education compared to the other Canadians, thus
better understanding the poverty faced by Indigenous people.
Having cultural differences does not necessarily create an economic barrier. Theoretical
literature states that cultural barriers will hinder economic development as they were unable to
trade as transaction cost increase. With cultural barriers, economies were unable to communicate
with each other able information about trade, which increase transactional costs thus increasing
the overall cost of trading. Trade is important for economic growth and allows countries to sell
what they are more specialized with, thus generating more economic profit. Germany and USA
were able to have more frequent trade as they were having the same measuring systems, whereas
Britain was unable to have persistent economic growth after Industrial Revolution because they
were unable to adapt the culture of other countries while promoting its products to other
countries. This is because USA and German were able to adapt the culture of other countries
while selling their goods, which allows them to generate more profit through trade. Therefore, in
theory, cultural assimilation will lead to greater economic growth as the cultural barriers are
eliminated. With all the Indigenous people speaking the same language and having the same
culture as the French and English colonists, indigenous people would have better economic
outcomes. However, this was not the case. Even with high levels of cultural assimilation through
residential schools for the First Nations people, they were still experiencing high levels of
poverty. On the other hand, the Inuit were able to experience a smaller gender wage gap
compared to other in a male-dominated society as they perceived gender roles differently. This is
because women were more encouraged to work in their culture as opposed to Europeans.
12
Conclusion
Indigenous people in Canada were facing many persistent differences in economic
outcomes. Indigenous people were facing higher levels of poverty compared to other citizens in
their own countries. However, Inuit in Canada were having fewer gender barriers in terms of
labour outcomes. Poor property rights was one of the main causes that lead to poverty for
Indigenous people in Canada. Residential schools also decreased the children’s likelihood for
children to receive education, thus leading to a poverty gap. Despite from all the negative
economic outcomes, the Inuit were experiencing fewer gender differences in the labour market.
This is because they were less culturally assimilated compared to other Indigenous people with
lower enrollment in residential schools. Through examining the historical origins of the
economic outcomes, I pointed out a couple of limitations of our current theoretical assumptions.
Our theoretical assumptions predicted that if firms have to increase their profit, the general
public will at some point benefit from it. However, these theories did not account for the fact that
good institutions and laws were needed to foster a free market in order for resources to be
distributed evenly such that the general public would be benefited. Our current theoretical
assumptions also state that the number of schooling that a person receives were determined by
financial incentives such as the cost of tuition and the potential income increase after receiving
education. However, these predictions fail to include personal experiences and other emotional
factors. After eliminating these limitations, we could better understand the reasons that lead to
poverty and reduced amount of schooling of the Indigenous people. Finally, I would want to
emphasize that eliminating cultural barriers do not necessarily lead to negative economic
outcomes.
13
Drost, Helmar, and John Richards. Income on- and off-Reserve: How Aboriginals Are Faring.
C.D. Howe Institute, 2003.
Egan, Brian, and Jessica Place. “Minding the Gaps: Property, Geography, and Indigenous
Peoples in Canada.” Geoforum 44 (2013): 129–38.
https://doi.org/10.1016/j.geoforum.2012.10.003.
Feir, Donna L, and Randall Akee. “Estimating Institutionalization and Homelessness for Status
First Nations in Canada: A Method and Implications.” International Indigenous Policy
Journal 9, no. 4 (2018). https://doi.org/10.18584/iipj.2018.9.4.2.
Feir, Donna L. “The Intergenerational Effects of Residential Schools on Children’s Educational
Experiences in Ontario and Canada’s Western Provinces.” International Indigenous Policy
Journal 7, no. 3 (2016). https://doi.org/10.18584/iipj.2016.7.3.5.
Feir, Donna L. “The Long‐Term Effects of Forcible Assimilation Policy: The Case of Indian
Boarding Schools.” Canadian Journal of Economics/Revue canadienne d'économique 49,
no. 2 (2016): 433–80. https://doi.org/10.1111/caje.12203.
Feir, Donna L., and M. Christopher Auld. “Indian Residential Schools: Height and Body Mass
Post‐1930.” Canadian Journal of Economics/Revue canadienne d'économique 54, no. 1
(2021): 126–63. https://doi.org/10.1111/caje.12495.
Government of Canada, Statistics Canada. “Labour Force Characteristics by Region and Detailed
Indigenous Group.” Labour force characteristics by region and detailed Indigenous group.
Government of Canada, Statistics Canada, January 6, 2023.
https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410036501.
Government of Canada. “Does Education Pay? A Comparison of Earnings by Level of Education
in Canada and Its Provinces and Territories.” Statistics Canada, November 29, 2017.
https://www12.statcan.gc.ca/census-recensement/2016/as-sa/98-200-x/2016024/98-200x2016024-eng.cfm.
14
Government of Canada. “Pay Gap, 1998 to 2021.” Statistics Canada, May 30, 2022.
https://www150.statcan.gc.ca/n1/pub/14-28-0001/2020001/article/00003-eng.htm.
Government of Canada. “Unemployment Rate, Participation Rate and Employment Rate by
Educational Attainment, Annual.” Statistics Canada, January 6, 2023.
https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410002001&pickMembers%5B0%
5D=1.1&pickMembers%5B1%5D=2.9&pickMembers%5B2%5D=4.2&pickMembers%5B
3%5D=5.3&cubeTimeFrame.startYear=1999&cubeTimeFrame.endYear=2022&reference
Periods=19990101%2C20220101.
“Indigenous Population Continues to Grow and Is Much Younger than the Non-Indigenous
Population, Although the Pace of Growth Has Slowed.” Statistics Canada, September 21,
2022. https://www150.statcan.gc.ca/n1/daily-quotidien/220921/dq220921aeng.htm?indid=32990-1&indgeo=0.
The Inuit and Northern Experience. Montreal [Québec] ;: Published for the Truth and
Reconciliation Commission of Canada by McGill-Queen’s University Press, 2016.
Kendall, Joan. “Circles of Disadvantage: Aboriginal Poverty and Underdevelopment in Canada.”
American Review of Canadian Studies 31, no. 1-2 (2001): 43–59.
https://doi.org/10.1080/02722010109481581.
“Labour Force Characteristics by Province, Monthly, Seasonally Adjusted.” Statistics Canada,
March 10, 2023. https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410028703.
Parrot, Zach. “Indigenous Peoples in Canada.” The Canadian Encyclopedia. Accessed March 28,
2023. https://www.thecanadianencyclopedia.ca/en/article/aboriginal-people.
Quintal-Marineau, Magalie. “The New Work Regime in Nunavut: A Gender Perspective.” The
Canadian Geographer / Le Géographe canadien 61, no. 3 (2017): 334–45.
https://doi.org/10.1111/cag.12387.
Tom Flanagan; Christopher Alcantara, "Individual Property Rights on Canadian Indian
Reserves," Queen's Law Journal 29, no. 2 (Spring 2004): 489-532
15
Zhang, Xuelin, and André Bernard. “Disaggregated Trends in Poverty from the 2021 Census of
Population.” Government of Canada, Statistics Canada, November 9, 2022.
https://www12.statcan.gc.ca/census-recensement/2021/as-sa/98-200-X/2021009/98-200X2021009-eng.cfm.