distributing wealth
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The income gap between the wealthiest and bottom 40% of earning households has grown each year following the onset of the Covid-19 pandemic, but new data from Statistics Canada shows that gap grew more slowly in 2024.

The gap has grown from a low of 39.7 percentage points in 2020 to 47.1 percentage points in 2024, the statistical agency said on Monday. But while it increased by 2 percentage points in 2022 and 2023, it rose by just 0.5 percentage points in 2024.

The income gap is defined as the difference in the share of disposable income held by the top 40% of households compared with the bottom 40% of the income distribution. 

Meanwhile, the wealth gap between the top quintile and the bottom 40% of households stood at 61.5 percentage points in the last quarter of 2024, remaining unchanged from the same quarter a year earlier.

This was partially attributed to lower interest rates. Lower-income households tend to be more indebted and benefit from easing borrowing costs. Household interest payments grew by 9% in 2024 compared to 2023, much lower than the 52.8% growth in 2023 relative to 2022.

“The finances of the least wealthy households were supported by declining interest rates, easing inflationary pressures and increasing real estate values,” Statistics Canada said in a release.

The least wealthy Canadians also increased their net worth at the fastest pace (+8.8%) relative to other households as they benefitted from a combination of above-average gains in real estate (+4.5%) and average growth in financial assets (+9.2%).

Lower-wealth households increased their real estate values through home purchases and general increases in home prices, among other reasons. The wealth gains for the lowest quintile of household wealth were mainly attributed to lower interest rates, which increased mortgage debt (+$3,177) by less than the increase in value of their homes (+$4,879).

In contrast, net worth gains for the wealthiest households were derived only from financial assets (+9.9%), while the average value of their real estate dropped slightly (-0.4%).

Despite high interest rates and housing costs, younger households under age 35 were the only age group to continually decrease their mortgage debt since the end of 2022. The year-over-year decrease for the fourth quarter of 2024 was –4.7%, less than for the same period in 2023 at -5.2%.

Younger households may be reducing their mortgage balances as an age group by turning away from the housing market due to unaffordability, while existing homeowners bought their homes when interest rates were much lower.