Free Leaning Against Income Inequality In Canada Article Review Sample
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Economic parity is important for economic development
Various studies have been carried out to find out the effects of huge differences in income between people in the three social strata; the rich, the middle class and the poor. One study has shown that a huge gap in earnings between the owners of capital and the providers of labor makes it difficult for the lower classes to improve their social position as most of the gains of their work accrue to the owners of capital. A small gap in earnings between these two groups has been seen to have the effect of motivating the laborers to work harder in order to improve their financial position. This has the overall effect of improving the economic performance of a country that, in this case, is Canada (Pammett & Frizzell, 1996).
The following is a comparison of Canada to other countries (developed and otherwise).
Canada’s economic status is frequently compared to the United States of America due to the similarity, in general, economic performance and the geographical proximity of the two nations. While United States remains an uncontested superpower, its proximity to Canada and the nexus in economic policies essentially make a strong case for comparisons. Studies have shown that America has higher rates of inequality between capital owners and providers of labor. This has been attributed to lack of government intervention as well as business processing outsourcing. The earning disparity has worst hit Mexico. The economic disparity in Mexico has the overall effect of reducing the gross domestic product of the political entity. The rich makeup a minute fraction of the population thus an increase in their earnings is not as significant as enhance the income of the middle and lower classes.
Dangers of inequality are explained in the paragraph below.
The principal threat high-income inequality poses increased poverty. The rich get richer, and the possibility, of earning more, becomes elusive to the lower classes. The elusiveness of increase in income demoralizes the laborers thus slowing down economic growth. Rising inequality could also have the effect of entrenching poverty in a society beating the point of having democracy.
The domino effect is that the earnings of low-income earners reduce due to desperation to keep afloat or to move the next social class. This is evident in the United States of America and Mexico where unskilled labor is very cheap. Low cost of such labor is of benefit to the rich but worsens the condition of the lower class (Green & Kesselman, 2011).
The Canadian government has used various methods to mitigate the increase in income inequality in the country.
The government of Canada has used fiscal policies to reduce the income inequality gap. The Canadian government has made significant strides in reducing the gap. When the earnings are compared on a pre-tax basis, there is increased parity. The after tax aspect shows that the disparity is far from being achieved. The glaring income inequality has become the subject of discussion in political debates and commentaries. The parity can cause social instability and social imbalance. One of the ways of dealing with the problem at hand is to change the taxation policies to cushion the low-income earners without demoralizing the owners of capital. This is best done when there is an improvement in economic performance as the rich will be more likely to cooperate with the plan. A study in the report shows that Germany has better parity when earnings are compared to taxation.
Limiting outsourcing of cheap labor is another way of reducing the income-earning gap. This is because the fee for work gets to the local laborers as opposed to the cheap labor in developing nations. This should be done with great caution as it could lead to a sharp increase in the prices of goods thus lowering exports and causing inflation in the local market.
False signs of development are as follows.
A general increase in the output of a country can at times give a false impression of the performance of its economy. It is one of the mistakes people make concerning wealthy countries. In most of the cases, the wealthy increase their output at the expense of the poor. The resulting effects are a society that appears to be rich. The few wealthy people become more prosperous while on the contrary the laborers stagnate, improve slightly or in some cases earn less. Mexico is the worst hit by this problem
Causes of inequality are innovation and ownership of capital
Innovation is one of the causes of income inequality. This is because the owner of the idea is put in the position of the owner of capital. This is a healthy form of inequality as it encourages creativity and creates employment opportunities for the providers of labor. The unhealthy form of inequality is the one caused by few people in society having access to the various forms of capital. This has the effect of locking some citizens in the cycle of poverty.
In conclusion, it is noteworthy that the western system of the economy would naturally have its beneficiaries as well as its casualties. In that context, income inequality comes out as one of the greatest casualty especially given the inclination towards private individual accumulation of income. That having been said, it is the function of government to give counterbalancing measures.
Green , D. A., & Kesselman, J. R. (2011). Dimensions of Inequality in Canada. Ontario: UBC Press.
Pammett, J., & Frizzell, A. (1996). Social Inequality in Canada. New York: McGill-Queen's Press.
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