Latest Statistics Canada data: the poor are getting poorer, and the rich are getting richer!

Statistics Canada released the "2024 Fourth Quarter Household Economic Accounts Distribution Report" on Monday, providing a detailed analysis of the income, consumption, savings, and wealth status of households across various categories nationwide.

The report reveals that the disparity in income and wealth in Canada remains significant. Although the overall economic environment has improved due to interest rate cuts, the "living conditions" of households at different income levels are showing starkly divergent trends.

In 2024, the disposable income growth rate of the wealthiest 20% of households (+5.9%) was higher than the national average (+5.5%), mainly due to substantial growth in investment returns, which was seven times greater than the increase in their interest expenses.

In contrast, wages for the lowest-income 20% of households decreased—on average by CAD 391, a drop of 3.3%. Their overall disposable income grew by only 3.6%, the weakest among all income brackets. Groups working in manufacturing and transportation were most affected by the soft job market.

This means that while high-income households are growing wealthier through investment, low-income households are struggling due to shrinking wages.

Data shows that the income gap in Canada—the difference in the proportion of disposable income between the top 40% and bottom 40% of households—reached 47.1 percentage points in 2024, the highest since the pandemic. Compared to the low point of 39.7 percentage points in 2020, this gap has continued to widen, but it increased by only 0.5 percentage points in 2024, with a noticeable slowdown (it increased by 2 percentage points each year in 2022 and 2023).

The report also shows that households in the middle 60% of income saw their income grow by 5.4% in 2024, on par with the national average, but their wage growth reached 5.7%, becoming the main driver of their income growth. Since their consumption growth was only 3.1%, the net savings of middle-class households significantly increased, reducing their net "negative savings" (i.e., spending more than earning) by 22.7%.

In other words, middle-class households are not only "earning," but also "saving." By contrast, the net negative savings of the lowest-income households increased by 2.7%, with living costs still under intense pressure.

Wealth concentration remains severe in Canada: the wealthiest 20% of households control 64.8% of the nation's net assets, with an average household net worth of approximately CAD 3.3 million. The bottom 40% of households account for only 3.3% of the country's net wealth, with an average household net worth of just CAD 84,600.

However, the net asset growth rate for low-wealth households reached 8.8% in the fourth quarter of 2024, the highest among all groups. This was primarily driven by dual factors: growth in real estate assets (+4.5%) and financial assets (+9.2%).

Notably, households headed by individuals under 35 were the only group to reduce mortgage debt for two consecutive years. In the fourth quarter of 2024, their mortgage balances decreased by 4.7% year-over-year. High interest rates and housing costs have made young people more cautious, and some received family assistance.

In contrast, mortgage debt for households headed by individuals aged 55 and above increased (+7.7% to +8.3%), possibly used for property investment or to assist children in purchasing homes.

Meanwhile, the debt-to-income ratio for all age groups declined or remained stable, indicating a general reduction in financial risks for Canadian households. The debt-to-income ratio for younger groups (under 35) fell from 175.3% to 160.8%, with the largest decline.

This report from Statistics Canada clearly demonstrates that lower interest rates have indeed improved the financial situation of some households, particularly middle-income and low-wealth groups. However, there is still severe inequality in income distribution. Wages for low-income earners have stagnated or even regressed, while high-income earners continue to expand their advantages through investments.

Original article: https://www.toutiao.com/article/1829407894321163/

Disclaimer: This article solely represents the author's personal views.