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Income polarization is when a nation has a large gap between its highest earners and its lowest earners, with only a small number of mid-level earners in between.
The income distribution of a nation has a profound effect on the society at every level. The per capita tax collected from a few wealthy individuals and a great many poor people is vastly less than you would get from a large pool of middle income earners.
To compound the effect of lower tax revenue, a nation with many poor people living below the poverty line has a much higher demand for expensive social services – from government assistance programs including income support programs to increased law enforcement and health services costs.
Across the board, maintaining social order is more expensive in a society with a high degree of income polarization. A healthy society and a strong social safety net cannot be sustained on the backs of the working poor.
Focusing on simple growth and a bigger economy increases income polarization and inequality in society. Globalization leads to off-shoring of high paying jobs overseas, while importing huge numbers of low skilled workers keeps wages (and consequently productivity) down. In extreme cases, foreign temporary workers have even been brought in to fill jobs that Canadians won’t take at the wages offered.
Focusing on creating better jobs and higher incomes reduces income polarization. Investing in training, productivity and education produces higher incomes and higher quality employment, which reduces the number of working poor.
What if we could guarantee everyone a living wage? That is the idea explored in detail in this Huffington Post article: Minimum Income: What You Should Know About The Idea That Could Revolutionize The 21st Century.