Policy Implications
There is little debate that income inequality is rising in many countries,
including Canada. There is more debate about the relative importance of
the possible causes, such as those discussed above. There is even more
debate about whether income inequality really matters and, if it does,
what can be done to reduce it.
Does It Matter?
Some argue that poverty is obviously important, but inequality is not.
Economists who make this argument stress the fact that economies will
always have income inequality and that what really matters is that people
have enough income to live satisfactorily and that they have the ability to
increase their incomes through appropriate efforts. A clear exposition of
this view is found in a recent book by McGill University’s William
Watson, The Inequality Trap.
Others argue that, aside from poverty, the inequality of income is itself
important. Recent research emphasizes the negative impact on social
cohesion that comes from having large income gaps between society’s
richest and poorest, and the lack of trust between members of society that
develops when rich and poor see themselves as members of different
communities. This research also notes the strong connection between
income inequality and many social problems, including crime, children’s