Thanks to generous government support efforts, all households finished 2020 with higher incomes than the year before — with lower- and middle-income households benefiting most, according to new data from Statistics Canada.
The national statistical agency reported that income inequality declined in 2020, as the gap between the highest- and lowest-income households shrank by 1.9 percentage points, compared with the previous year.
“The overall gains were led by unprecedented increases in current transfers in the second quarter, as governments’ Covid-19 support measures were implemented to help mitigate negative impacts from the pandemic,” the agency said.
Households in the lowest 20% saw their disposable income rise 17.6% and net worth gained 10.7% over 2019 levels.
“Gains in net worth for the lowest-income earners were driven by larger percentage increases in real estate assets that outpaced increases in mortgage debt,” StatsCan said, adding that the lowest-income households also reduced their non-mortgage debt by more than other groups in 2020.
Notwithstanding the rise in income, employee compensation dropped in 2020 for all households, with the lower-income households and younger households taking the hardest hit, “as many people in these households work in industries or jobs hard-hit by the pandemic,” StatsCan noted.
The agency also reported that overall household spending declined in 2020, led by the highest-income earners, who reduced spending by 7.0% compared with the previous year. These high-income households also saw net worth rise by 9.0% in 2020.
With incomes up and spending down, savings improved for all households, too.
“Middle-income households experienced some of the biggest gains as they switched to a net saving position in 2020 from a net dissaving position in 2019,” StatsCan said.