VANCOUVER (NEWS1130) - The income gap is widening, but it wasn't always that way; News1130 is speaking with an economist about why it is happening and when it started.
Up until the mid-90s, Labour Economist
David Green says the income gap was slightly widening. "But after tax and transfer, income inequality was essentially not growing at all. We fully offset the trend with taxes and transfers."
In the mid-90s, governments cut taxes at the top and transfers at the bottom. Then the income gap spiked in 2001.
"You watch that blue line.. I can tell you exactly when
Gordon Campbell came in. But like I said, if you look and you run up to about 1996, you can see it's a flat line," he explains.
He says if we don't do something to stop it, we're not much better than the US. "Now, after tax and transfers, income inequality is rising. Rising not quite at the same rate as the US, but at a pretty strong rate relative to most other
OECD countries."
How do you stop it?
"You do more tax and transfers," argues Green. "You start taxing more at the top and transferring more at the bottom. But like I said, the political reaction in the mid-90s suggests there may be a limit on how far you can go."
Instead, he says policies may have to address what is going on in the labour market, like encouraging a strong union movement.