Generally, the way labour economists think about this is the interaction between technical change and globalization. This began, probably in the late 1970s and early 1980s, to polarize the labour market. People who traditionally did routine tasks, whether they were physical or cognitive, saw the value of those skills fall tremendously. As a result you saw weekly wages at the lower end fall significantly in Canada. On the other hand, people who did non-routine tasks, whether those were physical or cognitive tasks, saw the returns to their skills rise significantly.
The third reason that inequality rose was because of the very significant rise in the share of income going to the top 1%. That happened for different reasons as well—technology, globalization, but also changes in corporate culture and our proximity to the U.S.
All of this has led to higher inequality in Canada steadily since the early 1980s, but the take-home pay after taxes and transfers has remained basically the same. The tax and transfer system outdid the market in the growing market inequalities up until the mid 1990s. After that, either because of a lack of political will or for whatever reason, the tax system began to echo the market much more and we lost the distributive role.
That said, in Canada, the tax transfer system significantly does change inequality.