Increasing Income Inequality, a Major Public Health and Societal Problem:
What are the trends, why is this happening and what can be done?
By: John Miller
Income inequality is increasing steadily in Canada as it is in most developing countries. While poverty levels persist at unacceptably high rates the very wealthy are taking an ever bigger share of incomes so that wealth is increasingly being concentrated in the hands of a very small percentage of the population at the top of the socioeconomic (SE) hierarchy.
This increasing inequality in income and wealth is having profound effects on the economy, the environment, the effective functioning of democracy and most importantly on population health.
The effects on the economy are several: first, as wealth is increasingly concentrated among the already very wealthy who have more money than they can spend, there is less consumption of market products and a slowing of economic growth; second, there is a reduction of economic mobility – that is the opportunity in life to move up the SE ladder and achieve a higher standard of living (and health).
The effects on democracy are very important to consider when thinking about how to make the changes needed to reverse the trend of increasing SE inequity. Money is power, so those with plenty of resources can heavily influence governmental and corporate policies in their favour so that they keep and enhance their wealth. Hence we slowly see a well-functioning democracy and market economy replaced by a plutocracy/oligarchy. In recent times this has resulted in the widespread implementation of so-called ‘neoliberal’ economic policies that are contributing to increasing inequality (more discussion below).
The environment also suffers from the differential political power stemming from an increasingly inequitable distribution of wealth. As governments deregulate and corporations pursue ever increasing profits, natural resources are depleted and pollution (including greenhouse gases and therefore global warming) increases.
And SE inequality has huge effects on population health. Statistics Canada estimates that income inequality accounts for 40,000 premature deaths per year in Canada. In the US where income inequality is considerably worse than in Canada, the life expectancy of the white, non-Hispanic middle class is dropping for the first time after most of a century of steady increases. The causes of death are often the ‘diseases of despair’ (suicide, opioid overdoses, alcohol, tobacco, violence).
And health inequalities are on the rise in Canada with respect to unhealthy lifestyles. The rates of smoking tobacco, poor diets, lack of physical activity, stress and obesity are becoming ever higher among those of low SE status.
And we see the consequences on a daily basis: more precarious employment at below poverty levels, unaffordable housing, increasing numbers of homeless people sleeping on our sidewalks, epidemics of opioid overdose deaths across the province and the country.
The reasons for these alarming changes in our society are now well known. They include (among others):
- The changing economy: the economy has shifted from one driven by resource extraction and manufacturing, retailing and services, to one dominated by financialization and IT. And in the financial sector (banks, insurance, investment) and IT (software, hardware, etc.) the remuneration for top executives has skyrocketed compared to entry level employees or other sectors.
- Automation, artificial intelligence and robotization are eliminating many low –skill jobs.
- Offshoring: many companies, pursuing better profits, have moved manufacturing jobs to China, Mexico and other countries with more ‘attractive’ tax and labour policies.
- The acceptance by many politicians, policy makers and the public of a ‘Neoliberal’ ideology: this is an ideology advanced notably by Milton Friedman and Friedrich Hayek in the US, and others including a number of well-funded ‘think tanks’ and implemented by Ronald Reagan and Margaret Thatcher and some of their successors (including the current Liberal government in BC). Neoliberalism promotes the notion of Adam Smith’s economic ‘invisible hand’: a free (liberal) market where a well- informed public is free to make rational choices as to how they spend their money on products and services so that the economy will flourish and grow, wealth will be created and theoretically ‘trickle down’ to even the poorest so that poverty will not exist and there will be an equitable sharing of overall wealth. This neoliberal ideology promotes smaller (more business friendly) government, lower personal and corporate taxes, deregulation, balanced budgets, fewer public services and privatization of services such as education, health care, prisons, libraries, garbage collection, etc. It is an ideology that has now been shown empirically to be ineffective and unfair. And economists such as Thomas Piketty have shown that an unrestrained free market economy will inevitably lead to an ever increasing concentration of wealth among the elite.
Action is now needed to reverse this unhealthy development in our society. Persistent poverty, precarious work and decreased SE mobility is causing widespread unhappiness, hopelessness, stress and despair, a lack of social cohesion, and worse health and increased healthcare and other societal costs. It is also considered by many analysts to lead to such populist political outcomes as the election of Donald Trump and Brexit. When we also consider depletion of resources and environmental pollution, unless appropriate action is taken now, this unsustainable situation will lead to an ever worsening downward spiral.
So what can be done? There are two broad approaches to this problem;
A long term strategy is a (slow) movement to transform the business world to move away from a primary focus on ‘shareholder value’ and increased return on investments (i.e. profits) and toward a broader focus on social value and corporate social responsibility. There are many such companies that have various forms of employee ownership, cooperatives, profit sharing, revenue sharing and so forth. These should be encouraged and policies and incentives should be enhanced to speed up this transformation. But this will be a slow process so we must look to more immediate solutions.
Of most relevance to the current election in BC, there is a need for government policies that will create a dynamic economy while at the same time addressing poverty and the unhealthy concentration of wealth at the top of the SE hierarchy. This will require policies that redistribute wealth from the top to the bottom and middle rungs of our society. This can be done by what economists call ‘taxes and transfers’.
A progressive policy agenda for a new BC government could include:
1. Taxes: several policies should be considered:
- Making income tax more progressive by increasing the top marginal rates (particularly on extreme cases of executive compensation/bonuses) and decreasing rates for middle and low incomes
- Regulating stock buy-backs
- Closing loopholes such as tax breaks on capital gains, dividends, income splitting
- Wealth and inheritance taxes
- Increased taxes on socially harmful products: alcohol, tobacco, sugar, fossil fuels (and carbon more generally), pollution
2. Government transfers and services:
- Improved access to early childhood care and development (ECD)
1. 10$/day daycare
2. Increased ECD capacity
- An enhanced earned income tax benefit
- Improved benefits for the poor : increased welfare, unemployment and disability rates (possibly a guaranteed annual income such as being tested in Ontario)
- A commitment to reducing poverty through a formal poverty reduction strategy ( BC has the highest childhood poverty rates while being the only jurisdiction in Canada not to have a poverty reduction strategy)
- A formal homelessness strategy
- Improved public education
- Improved healthcare services
- Infrastructure development: public transit, renewable energy, power grid, social housing, recreation facilities, communications, internet access.
- Sustainable environmental policies
3. Employment policies
- Minimum wage $15/h
- Incentivize a Living wage
Other jurisdictions, notably some of the Nordic countries, have such progressive policies and consequently have healthier populations. By electing a government in BC that will implement such a policy agenda we can hope to return to a more equitable, compassionate, happy, dynamic society that will reduce health inequities and ensure sustainable health and wealth for generations to come.