According
to an article from Macleans, recent studies from the Ottawa-based Centre for
the Study of Living Standards state that when it comes to income inequality,
the government really does play a big part. Taxes as well as benefits provided
by the Canadian government are some of the things that can be credited towards
when it comes to minimizing the gap between the rich and the poor citizens of
Canada. Although taxes and spending have repressed inequality, they have not
been enough to stop the increase in inequality over time.
This
study has shown that there although the government isn’t all that aggressive
when it comes to using policy to reduce inequality, there is plenty of wiggle
room for them to do so. When comparing Canada to other industrialized
countries, we seem to fall short of the efforts being put into redistribution
of income. Although this seems to be true, statistics have shown that income
inequality was 44 percent less severe than it would have been if governments
had not taxed the upper class more than the poor, and handed out benefits to
low-income families.
This
article states that things like old-age benefits or family benefits (transfer
payments) were responsible for most of this dampening effect, whereas 30
percent of the reduction was accounted by taxation.
Although
most would assume that the increase of inequality took place recently due to
the public outcry, the study actually shows that most of it took place 2-3
decades ago.
Because
of the lack of effectiveness of government redistribution of income in British
Columbia and Alberta, they were obviously the most unequal provinces. Whereas
the government programs in Newfoundland and Labrador, Nova Scotia, and Prince
Edward Island were most effective because the rich and poor were closer
together.
The
Canadian government was most effective in 1994, and this study shows that if we
were to have continued with that level of redistribution, we could have easily
eliminated half of the rise in inequality over three decades. Because of the
fact that we didn’t do so, Canada ended up ranking 24th out of 35 countries in
terms of equality in the late 2000’s. We also ranked 25th out of 30
countries when it came to being active users of tax or transfer policies in
order to redistribute income.
