Amid an array of government pandemic supports, some income inequality metrics improved in 2020, according to new data from Statistics Canada.
In a new report, StatsCan provided data on household net worth by quintile, which found that the wealth gap narrowed in 2020, as net worth for the poorest 40% of households increased at a faster pace than for the wealthiest 20%.
Total household wealth jumped by 10.5% in 2020 to $12.9 trillion. For the bottom two-fifths of households, wealth grew by 23.5% during the year, higher than the 8.9% increase for the top fifth.
That said, the top 20% of households continued to control more than two-thirds of total domestic wealth (67.5%).
By contrast, the bottom 40% of households accounted for just 2.5% of total wealth. The segment had an average of $41,400 in financial assets and $84,200 in real estate.
The bottom 40% was also the only group that reduced its average debt in 2020, with both mortgage and non-mortgage debt declining during the year. Whereas, wealthier households added debt, particularly mortgage debt, in 2020.
StatsCan also reported that the gap between the richest and poorest Canadians was larger when measured by wealth rather than income. While the wealthiest households control 67.5% of net worth, the highest-income households held 45.4% of household wealth.
Still, in 2020, the gap in disposable income between the highest-earning and lowest-earning households narrowed to its lowest point on record — as disposable income grew faster among lower- and middle-income earners, StatsCan reported.
Disposable income rose by 21.3% for the lowest 20% of earners in 2020, and by 14.4% in the second-lowest quintile, the agency said.
“In most provinces, it was the lowest two income quintiles that saw the largest increases in their disposable income in 2020, except British Columbia where it was the top income quintile that recorded the biggest income gains,” StatsCan reported.
Alongside the increases in disposable income, household spending dropped at a record rate due to public health restrictions, which generated “an unprecedented increase” in household saving, it added.
Both the oldest households (comprised of individuals aged 65 and older) and the youngest households (comprised of individuals under age 35) recorded the largest increases in their saving rates in 2020, StatsCan said.
“While an increase in their pension entitlements…boosted the oldest households’ saving rate, it was higher disposable income, coupled with declines in spending, that pushed the youngest household saving rate into double-digit territory for the first time ever,” StatsCan said.
The pandemic — and the government’s fiscal response to it — drove these unprecedented shifts in income, wealth and savings in 2020, but StatsCan also noted that the gap in wealth between the highest and lowest income households has also narrowed by five percentage points since 2010.
“The top 20% of income earners had an average net worth of almost $1.9 million per household, compared with about $292,000 for the bottom 20%,” it said.