How is wealth distributed in Canada?

If you were asked how much money the average person has in Canada, do you think you could accurately make a guess? Most people have an understanding of the fact that there are those in society who have a lot and those who have little, but many people are surprised at just how wide the gap between the top and bottom is. 

In fact, the issue of wealth inequality has been the subject of a lot of criticism and political discussions for many years now as concerns grow about the large wealth gap. But just how bad is the situation, and is it truly an issue at all?

What is the average Canadian worth?

The most recent data on Canada's financial situation from statistics Canada comes from the year 2019. At that time, a Canadian family's median net wealth was $329,900. In 1999, this figure was $153,100, representing a growth of over 115% in 20 years.

One of the largest household assets contributing to this growth is, no doubt, the value of real estate which makes up the most valuable asset for most Canadians. Almost two-thirds of Canadians reported owning a principal residence with a median value of $400,000. As the values of real estate go up, so does the net worth of real estate owners, though debts also rise as mortgage loans grow.

Age-wise, those in the under 35 range had the lowest median household net worth and those in the range 55 to 64 with the highest. This generally goes along with the conventional idea that people save until retirement then live off their savings. For geographic distribution, those in Ontario and British Columbia reported the highest net worth.

How is Canadian wealth distributed?

The thing about the wealth in Canada is that, though we have plenty of money to go around, we still have thousands of people homeless, in poverty, or just getting by while a small few have more money than they could spend if they wanted to. Such is the nature of unequal wealth distribution.

According to recent statistics from the Parliamentary Budget Office tracking family wealth distribution, the top 1% of the richest families in Canada own over a quarter of Canada's wealth, while the top 10% own over half of the total wealth. Going farther down, the top 20% of the wealthiest Canadian households own almost two-thirds of all wealth in the country. 

In order to make that top 1% of Canadians, you would need to be worth about $10,000,000. The top 0.01% wealthiest people are worth an average of about $25,000,000 and share more than 5% of the wealth in the country between around 37,500 people. The share of wealth held by the lowest 40% of wealth holders is just 2.5%.

However, though the share of wealth owned by the top 1% has remained relatively stable for many years, there has been something of a levelling in the lower percentiles. Where the top 10% now owns less, the middle 40% owns more than they did in previous years, reflecting a wealthier Canadian middle class. Those in the lowest percentiles continue to own a small percentage of the wealth and have not seen significant increases in that figure.

What is considered a wealthy income in Canada?

The average Canadian income is around $50,000 per year, without counting those who make no income. This means that if you make more than that, you can consider yourself an above-average earner. Yet, even above the average, you would probably still struggle to buy a home. The fact that the average person can still struggle financially is one of the major reasons why a wealth gap is considered problematic.

Should we be concerned about income inequality?

Wealth in itself is not necessarily an issue, though the vastly uneven distribution is generally seen as a problem.

There are those who would argue that amassing wealth is a valid reality of our economic system and that those with extreme wealth have earned it and should not be penalized for their good fortune and hard work.

There are others who take moral objections to a society that can provide for everyone but allows the rich to prosper and the poor to suffer. These groups would especially argue that our economic system has, for a long time, privileged some groups over others and has allowed wealth to be accumulated as a result of unequal social systems rather than a surplus of hard work or worthiness.

Especially during the COVID-19 pandemic, some of the hardest hit were those with the least money to sustain themselves through hard times. Many have lost their jobs, their homes, and been economically ruined while those with more economic power have been sheltered or able to actually grow their wealth significantly in this time. The issue is most abundantly clear in the widely publicized cases of corporate CEOs who made millions of dollars a year while their employees struggled on minimum wage or got laid off.

For some real estate investors, wealth inequality is actually a crucial factor. After all, if you own a rental property, for example, you are relying on those with less money to generate income for you, whereas if they were able to afford a home of their own you wouldn't be renting to them.

Wealth inequality, therefore, can be considered one of the symptoms of our current housing crisis as it allows a small number of people to increase the cost of homes while the average Canadian finds the prices increasingly out of reach. This, in turn, creates a feedback loop driving investors to buy while more and more people are forced to rent.

How does wealth distribution in Canada compare to the world?

On the world scale, Canada actually ranks pretty well in terms of wealth distribution, with many other countries reporting much higher levels. The United States, the United Kingdom, and Australia all have higher levels of wealth inequality than in Canada, while countries like Japan, Norway, and Germany have less. The fact that other countries have it worse does not mean this isn’t an issue that we should care about.

What can be done?

If you see financial inequality as an issue to be tackled, there have been various proposed actions to help create a more equal distribution of wealth.

The proposed wealth tax

One such remedy is a wealth tax. The idea behind this tax is that the tax system as it is now greatly favours the wealthiest Canadians. The wealth tax would be a step towards a more fair tax system and would tax those who own above a certain amount so those funds could go towards bettering our society. Those taxed would probably still be able to live pretty comfortably with a fewer million.

Such a tax is estimated to be able to generate billions of dollars a year in tax income. This sort of tax has seen support from many political parties, though with varying degrees of tax rates and income cutoffs. However, the Canadian government has yet to create a wealth tax.

Opponents of a wealth tax say that punitive measures against the wealthiest Canadians would simply cause them to move their assets out of the country, causing massive impacts on our economy. When you consider that the wealthiest are also among those with the largest holdings in many of our most productive industries, this is a valid concern and a concern that a hypothetical wealth tax would need to account for in order to be effective.

In order to help those on the lowest end of the wealth spectrum, there have also been some calls to increase minimum wages and instate universal basic incomes. These measures are designed to ensure that even those among the lowest earners are still able to live happy and healthy lives. Though these programs would cost a lot of money to our government, in combination with a wealth tax, these could be a realistic option.

Other uses for this tax income could go towards child care, affordable housing, or climate issues, all of which would serve to work towards a much more fair distribution of wealth and serve the greater good of our whole country, not just a select few.