Canada’s income and wealth gap is worse than ever

Posted on October 24, 2024 by Sunny South News

New data out of Statistics Canada this month tells us what many Canadians already guessed: the rich are getting richer and the poor are getting poorer.

The latest report on incomes and wealth in Canada shows that the average household has a net worth of just over $1 million. That sounds pretty good. It’s like Canadians are doing just fine.

But when you see how that wealth is distributed, it’s a different story.

StatsCan tells that story by dividing the population into five slices, from richest to poorest. As of the second quarter of 2024, the richest 20 percent had a net worth, per household, of more than $3.4 million. Those households own 67.7 percent of all the wealth in the country.

That’s not bad if you’re in that group. But things are different at the other end of the spectrum.

The bottom 20 percent of the wealth distribution have no wealth at all. In fact, they have negative wealth.

All they own is their debts.

The wealth gap between the top 20 percent and the bottom 40 percent is now the highest it has been since StatsCan started tracking it.

When looking at disposable incomes, not total wealth, we also see big differences from top to bottom. While many wealthy households have high incomes from working, it was not just their wages that made them richer in 2024 – their investments helped too. The richest 20 percent saw their disposable incomes grow by 7.6 percent from mid-2023 to mid-2024.

The lowest-earning households don’t usually set aside much money for investments. That’s because they’re trying to put food on the table.

Still, those low-income households saw strong wage growth, averaging 14.3 percent, year over year. This was partly due to increases in the minimum wage in all provinces and territories except Alberta. Despite better wages, the least wealthy still saw their net worth fall, thanks to higher costs for mortgage debt. (Few low-income Canadians have mortgages, but those who do are hit hardest by high interest rates.)

The 60 percent of Canadians whose wealth and incomes are higher than the bottom group but lower than the top are not faring well either: those folks saw their share of the country’s disposable income fall. The return on their investments, such as it was, could not keep up with higher costs for interest on their mortgages, credit cards, and car loans.

And it wasn’t just homeowners who fell behind; renters took a hit when landlords passed higher interest costs on to tenants in the form of higher rents.

One bright spot in the financial picture was the average household debt-to-income ratio, which fell slightly in the second quarter of 2024. Still, those in their prime earning years carried a heavy burden of debt, thanks to their mortgages. Those aged 35 to 44 owed a soul-crushing 260 percent of their incomes to creditors.

In the years ahead, some of those burdens may grow lighter as interest rates fall. That’s a good thing. But lower interest rates won’t solve Canadians’ financial woes. Here’s why: Our problems are caused, to a large degree, by the way Canada is designed: it’s designed to move wealth upwards.

These days, politicians go out of their way to recognize that “people are hurting.” That’s why, for example, many provinces have cut gasoline taxes.

Here’s the problem, and here’s the truth: Not everyone is hurting. The pizza delivery driver in the 15-year-old Corolla needs all the help we can give; the rich realtor in the $150,000 Lincoln does not.

Until we make tackling income and wealth inequality part of all our policy discussions, things will stay the way they are.

The rich will get richer. And you know what will happen to everyone else.

Randy Robinson is director of the Canadian Centre for Policy Alternatives’ Ontario office.