Income inequality gap widens in Canada, as wealthiest 20% increase net worth at fastest pace: StatCan

Income inequality in Canada increased in the second quarter of 2024, according to Statistics Canada, hitting the largest gap since the agency started tracking the data in 1999.

StatCan said in a release on Thursday that the share of disposable income between households in the top 40 per cent and the bottom 40 per cent reached 47 percentage points, the largest gap recorded.

This comes even as the lowest income households raised their share of overall income in the second quarter. StatCan says the bottom 20 per cent of income earners in Canada saw above-average growth in disposable income in the second quarter compared to last year, with the strong wage growth ($417, an annual increase of 14.3 per cent) offsetting increases in interest paid on mortgage and consumer credit ($218, a rise of 17.6 per cent.) The data agency notes that the wage gains for lowest income households were mainly for those working in service-sector jobs, as well as professional and personal service.

While the lowest income households saw their wages go up, the increase failed to outpace gains for the highest income households. The top 20 per cent of income earners saw disposable income increase at a faster pace than last year, as "growth in investment income was far greater than the increase in interest paid.” When it comes to wealth, the top 20 per cent of the wealth distribution accounted for 67.7 per cent of Canada’s total net worth, with an average of $3.4 million per household. StatCan says the richest 20 per cent increased their net worth at the fastest pace of any other cohort in the second quarter compared to last year. The bottom 40 per cent accounted for 2.8 per cent of total net worth, with an average of $69,595 per household.

When it comes to mortgage debt, StatCan found that youngest households – those under the age of 35 – have continually reduced their mortgage debt balances since the end of 2022 “as rising interest rates and housing cost pressures have made home ownership less affordable.” The agency notes that the youngest households may be reducing their mortgage balances because prospective homeowners may be priced out of the housing market, while existing homeowners "may be paying off their existing mortgage debt balances and moving into more affordable accommodations."

“As well, the youngest households may be receiving financial support from family to help them cope with the cost of living and reduce their debt obligations,” StatCan said.

At the same time, older households have increased their average mortgage debt compared to last year. The agency says “older households may be increasing their mortgage debt for various reasons, such as to buy an investment property, to assist younger relatives with the purchase of a home, or for a range of other priorities.”

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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