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Widening income inequality is recognized in many countries today as a serious global and national problem. It threatens to undermine economic growth, political and social stability, physical health and psychological well-being, and is blamed for unleashing disruptive populist and anti-globalization forces.
At the same time, economic research shows that public policies to reduce inequality through redistributive measures – such as higher social tax rates, including unrestricted cash transfers to the poor and capital gains taxes on the rich – do not have negative impact on work Effort, savings and investment, as explained in an earlier article, "How inequality and low wages can stall growth" (ST, July 21, 2018).
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