The big story in the release of data from this week’s Survey of Financial Security from Statistics Canada was that the median net worth of Canadian households has been increasing very significantly.
Net worth is the value of all assets (mainly housing, pensions and other financial assets) minus all debts. Median net worth has risen by 80 per cent from 1999, and by 44 per cent from 2005 in inflation-adjusted terms, to $247,800. (In a median, half have more and half have less.)
As former British prime minister Harold Macmillan once quipped, “You’ve never had it so good.” Or so it would seem.
The big change from 2005 was that wealth in the form of housing equity rose significantly. Median house values increased by 47 per cent, while the median mortgage amount outstanding rose by 42 per cent. With housing assets accounting for about one-third of all assets, and many older homeowners having no mortgage, these gains gave a broad boost to net worth.
More surprisingly, given the financial crash of 2008, the median value of financial assets outside of pensions also rose significantly from 2005 to 2012, up 43 per cent. Such assets are concentrated mainly in the hands of the affluent.
The fact that housing equity gains outpaced the growth of financial assets probably explains why wealth inequality fell modestly, though from a very high level. The top 20 per cent of Canadian households held 67.4 per cent of all net worth in 2012, down a bit from 69.2 per cent in 2005. However, the bottom 20 per cent saw no increase in net worth over this period and, in fact, owe more than they own.
Those who think the data indicate broadly based prosperity can certainly point to rising net worth for the middle class. However, if and when housing prices correct, as many economists expect, assets will fall while mortgage debt will remain unchanged.
The other story buried in the numbers is increasing inequality between older and younger Canadians.
Looking at changes between 1999 and 2012, the median net worth of households headed by a person under age 35 rose just 9 per cent, far less than gains of about 50 per cent for those in the 35-to-64 age groups, and 70 per cent for households headed by a person over 65.
The major reason for this difference is probably that only 37 per cent of people under 35 who head households are homeowners.
And the under-35 households are getting deeper into debt. Between 1999 and 2012, the median assets of households headed by people under 35 rose by 14 per cent, but the median debt of such households rose 61 per cent.
The picture from 2005 to 2012 is less dramatic, but the median net worth of households headed by persons under 35 rose just 19 per cent, and that figure was matched by households headed by persons aged 35 to 44. Both of these younger age saw gains valued at less than half of the country’s overall 44-per-cent increase in median net worth.
The recent housing boom may have boosted wealth and modestly reduced wealth inequality from a very high level. But younger Canadian families are being left behind.
Andrew Jackson is the Packer Professor of Social Justice at York University and senior policy adviser to the Broadbent Institute.