14.3 Income Inequality LO 4
The functional distribution of income refers to the shares of total
national income going to each of the major factors of production—
land, labour, and capital. The size distribution of income refers to the
shares of total national income going to various groups of
households.
Canada has considerable inequality in the distribution of pre-tax
income. The poorest fifth of families currently receives 2.8 percent of
total income; the richest fifth receives over 46 percent. Canada’s tax-
and-transfer system reduces this inequality only modestly.
Income inequality has been rising in Canada and many other
countries over the past few decades.
Several possible explanations for rising inequality have been
examined, including technological change, globalization, the
declining power of labour unions, and rising executive compensation.