Should the federal government intervene to curb growing income gap between rich and poor?

Government policies have contributed to Canada's disappearing middle class, states a report by the Conference Board of Canada.

The study, released Wednesday, notes while the average Canadian is financially better off than a generation ago, income inequality has increased over the past 20 years.

The richest 20 per cent of Canadians now earn 39 per cent of Canada's after-tax income compared to 36 per cent in 1977. The poorest 40 per cent of Canadians receive only 20 per cent of the national income.

The study cites declining unionization rates, stagnating minimum wages, falling top marginal tax rates and unfavourable changes to employment insurance (EI) and welfare programs as potential reasons for the widening gap.

Should the government care about income inequality?

Income gap measures may not give us information about the living conditions of the poor, their health and their access to economic opportunity, but social policy experts argue that governments need to pay heed.

"High inequality raises two questions. First, what is the impact on the economic well-being of a country? The answer is that high inequality can diminish economic growth if it means that the country is not fully using the skills and capabilities of all its citizens or if it undermines social cohesion, leading to increased social tensions," said Conference Board CEO Anne Golden in a release.

"Second, high inequality raises a moral question about fairness and social justice."

Others have argued income gaps are negatively affecting Canada's affordable housing situation.

"The cost of owning a home in Canada today is higher than it's been for 18 years. This phenomenon is directly linked to Canada's growing income gap. What happens when the fortunes of the richest 10 per cent soar? The price of housing soars . . . for every­one," notes a report from the Canadian Centre for Policy Alternatives.

"The ability to afford the basics - hous­ing, post-secondary education, saving for retire­ment — is a serious challenge for many Canadi­ans."

Should the government care about a shrinking middle class? Yes.

Will a low-tax, free-enterprise Harper government intervene and implement a more aggressive tax redistribution scheme? Likely not.

(Reuters Photo)