On Measuring ‘Good’ and ‘Bad’ Income Inequality

By construction, income inequality measures employed in well-being analysis presume all individual differences to be deleterious to the social good. Yet some differences, for example, those acceptable to all and necessary for optimal resource allocation in producing that well-being, are demonstrably beneficial. Measured inequality is an amalgam of both deleterious or ‘Bad’ and beneficial or ‘Good’ differences, and from both policy and well-being measurement perspectives, distinguishing between types with measures fit for purpose makes sense, especially if the types are taking different paths. Here, as an exemplar, the distinction is explored in considering the progress of human resource, gender, and immigrant status-based personal income differences in twenty-first-century Canada. Categorising human resource-based differences as efficiency promoting ‘Good’ inequalities and gender and immigrant status-based differences as discriminatory and ‘Bad’ reveals that, under all proposed measures, while aggregate and ‘Good’ inequality grew over the sample period, ‘Bad’ inequality diminished, reinforcing the case for inequality measures that are fit for purpose.