But the wealth gap has stabilized due to differing handling of assets
Canada’s income gap has widened as investment gains for households with the highest incomes grew faster than wage growth for those with the lowest incomes.
New figures from Statistics Canada shows that, in the third quarter of 2024, there was a 46.9 percentage point gap between the disposable income of households in the top 40% of income distribution and those in the lowest 40%. The gap was 46.3 points a year earlier.
Higher interest rates have boosted investment yields on savings and investment accounts, which the report notes are less commonly used by those with lower incomes who have limited resources for savings and investments.
The households in the lowest 20% of income earners saw weaker growth in disposable income (4%) relative to other income levels. And while they saw their wages increase by $115 or 5.2%, they saw mortgage and consumer credit costs rise by $122 or 9.4%. Wage growth was greater for public sector workers than goods producers.
For the highest 20% of income earners, their disposable income grew by 7% year-over-year in the third quarter, more than the other quintiles, as growth in investment income grew 15 times higher than the increase in interest paid on borrowing.
The wealthiest 20% of Canadian households accounted for almost two-thirds of Canada's total net worth in the third quarter of 2024, averaging $3.3 million per household, while the least wealthy households (bottom 40% of the wealth distribution) accounted for 3%, averaging $83,189.
However, the wealth gap stabilized as the lowest 20% saw gains in the average value of their financial assets (+9%) and real estate (+3%). Although the wealthiest 20% saw financial assets rise 12%, their real estate assets lost 4% of their value.
Wealthier households tended to hold onto their real estate assets while the less-well-off were more likely to purchase or refinance at more favourable terms as interest rates eased. The least wealthy saw the fastest rise in their net worth (8%) among all the income groups, thanks to their real estate assets.
Savings gains
With the rise in the cost of living easing in the third quarter, most income groups were able to increase their average net saving compared to a year earlier.
The largest gain was for middle-income earners (27%) despite their relatively low wage growth. Meanwhile, net saving for the bottom 20% of the income distribution was down by 2.6%.
