Statistics Canada says income equality has been worsened by the cost-of-living crisis
The continued impact of the cost-of-living crisis has increased Canada’s income equality gap according to newly-released official figures.
The first quarter of 2023 has had a significant effect on savings and wealth of those with the lowest incomes and younger Canadian adults due to rising inflation and decreasing real estate values.
Statistics Canada says that the gap in the share of disposable income of those in the top 40% and bottom 40% of household incomes increased to 44.7%, up 0.2 percentage points.
While this is a rise from a year earlier but it smaller than pre-pandemic when it averaged 45.1% (from 2010-2019).
The gap in net worth between the most and least wealthy increased by 1.1 percentage points in the first quarter of 2023 year-over-year.
While households aged less than 45 years accounted for 36.2% of all households, they represented 55.2% of those in the lowest two wealth quintiles.
Across all groups, net worth was impacted most by real estate (92%) and the least wealthy saw mortgage rates increase by far more (24%) than the increase in the average value of their homes (6%).
Lower incomes from wages, investments
Average wages and salaries showed clear differences in pace between the bottom income households at 1% and the average overall at 4%.
The bottom income group also saw their average net investment income reduce in the first three months of this year, largely due to increased interest rates impacting charges for holding balances on credit products.
But with many low-earners retiring they saw an overweight share of net transfer payments (48.5% vs. 18.5% for all households), mostly due to Old Age Security and Canada Pension Plan/Quebec Pension Plan payments.
Households with the top 20% of incomes were of course also subject to higher interest rates on borrowing but gains in investment earnings, mainly from dividends and bank deposits, which grew at almost double the average pace (+22.7% vs. +13.4% for all households) more than made up for this.
Wealthier households also posted a 13.2% gain in net investment income and self-employment (13%) but saw net transfer payments fall 2.7% and taxes rise 2.8%.
Savings and debt
The data also shows that savings were impacted by rising costs for all groups except the top 20% with middle-income groups most likely to be paying out more than their income.
Debt remains a concern with only the oldest cohort improving their debt-to-income ratio relative to pre-pandemic.
The debt-to-income ratio for the youngest households reached 207.5% in the first quarter, up 13.4 percentage points from the first quarter of 2022.
