A family walks past an open house in the Mount Pleasant neighbourhood of Vancouver, BC.Rafal Gerszak/The Globe and Mail
Canadian families have gotten wealthier on average over the past decade, thanks to the rising value of homes, pension plans and investments.
The average wealth of Canadian families climbed 73 per cent to $554,100 in 2012 from 1999, adjusted for inflation, a Statistics Canada paper shows.
That said, the pace of growth hasn't been uniform. The further up the income ladder, the bigger the increases in net worth. The richest fifth of families saw their net worth grow 80 per cent, compared with a 38-per-cent gain among the bottom fifth of earners.
The results suggest wealth is growing more concentrated in Canada – as with the United States and some other countries – driven by changes at the very top.
The 5 per cent of families at the top of the income distribution hold 21 per cent of the country's total wealth, up from 19 per cent 13 years earlier.
The findings show "wealth inequality has grown," said John Myles, professor emeritus of sociology at the University of Toronto who has written on income inequality trends.
Over the time period, "wealth (or net worth) increased faster among families at the top of the income distribution, largely because of asset gains," the paper said. "As a result, wealth became slightly more concentrated."
Inequality has been an oft-debated subject in recent years, but there are different ways to assess trends in well-being. Income and wealth are two distinct measures. In this paper, Statscan defines income as a flow, earned by families over a year and counted before tax. Wealth, or net worth, is a stock, defined as the value of assets in a family, minus outstanding debt. Wealth accumulation depends on life cycle factors – such as someone's age – and the capacity to generate income.
The fifth of families with the highest incomes saw their average wealth rise 80 per cent to $1.3-million, the strongest growth among income groups. At the other end, the fifth of those with the lowest incomes saw gains of 38 per cent in that time, to $109,300, the slowest pace of growth.
As a result, families in the top quintile had 11.9 times the level of wealth of families in the bottom in 2012, up from 9.1 times in 1999, the study said.
In terms of concentration, the richest fifth of families held 47 per cent of total household wealth, up from 45 per cent in 1999. Those in the bottom fifth held 4 per cent of total wealth in 2012 compared with 5 per cent in 1999.
As for the fifth of families in the middle of the income distribution, average wealth rose 73 per cent, to $453,300.
Wealth grew among the top quintile largely because of increases in the value of employer pension plans and other non-real-estate assets, such as investments. Their share of debt rose slightly, too, to 41 per cent of overall debt in 2012, from 40 per cent.
At the other end, lower-income families have a growing share of their assets in real estate, while a growing portion of their debt is in mortgages. (Their share of debt was unchanged at 5 per cent.)
The differences in the composition of growth are important, Prof. Myles said, as lower-income families now have more of their wealth in housing, which is less liquid than other assets. "The portfolio of those at the bottom has become less diversified, and makes them more vulnerable to a shock in housing prices."
Total assets and debts both rose. Half of the increase in assets was from real estate and the other half from other types of assets, such as pension plans.
The paper included income trends. It found those in the top quintile saw the fastest income gains in the time period, while those at the bottom saw the slowest growth. In 2012, the average family income of those in the bottom quintile was $13,600, before tax, compared with $180,600 in the top quintile and $57,200 for families in the middle quintile.
The study also looked at the share of families with low income and no wealth. This share rose slightly, to 3.5 per cent from 3.3 per cent in 1999.
Tavia Grant