The income gap between Canada’s wealthiest and lowest income households has widened to 65 per cent between the top 20 per cent of earners and the bottom 40 per cent of earners in 2023, as higher yields benefited the wealthy and debt charges weighed on lower income households.
“Income inequality increased in 2023 as the gap in the share of disposable income between households in the two highest income quintiles and two lowest income quintiles was the largest since 2015,” Statistics Canada researchers write in the report, Distributions of household economic accounts for income, consumption, saving and wealth of Canadian households, fourth quarter 2023.
Increased borrowing costs
“While higher interest rates can lead to increased borrowing costs for households, they can also lead to higher yields on savings and investment accounts. Lower income households are more likely to have a limited capacity to take advantage of these higher returns, as on average they have fewer resources available for saving and investment.”
With the Bank of Canada’s policy interest rate doubling from 2.5 per cent to five per cent in a year, average disposable incomes among lower income households was relatively unchanged during the year. Highest income households, however, saw disposable incomes increase the fastest, thanks to a four per cent gain in wages and a 15.7 per cent gain in investment income, on average.
Wealth distribution
“Most wealth is held by relatively few households in Canada. The wealthiest (top 20 per cent of the wealth distribution) accounted for more than two-thirds (67.7 per cent) of Canada’s total net worth in the fourth quarter of 2023, averaging $3.3-million per household, while the least wealthy (bottom 40 per cent of the wealth distribution) accounted for 2.7 per cent, averaging $67,038.”
