Inflation is not helping, of course.
The Canadian economy is under pressure, the consequences of which most of us are extremely familiar with. Groceries are among many things getting more expensive as inflation drives up the cost of living – but the overall financial pressure is divided extremely unevenly across the Canadian population, according to a recent report from Statistics Canada.
In fact, income inequality between Canadians is currently at the highest it has been since the COVID-19 pandemic began in 2020.
In the second quarter of 2022, the richest 40% of Canadians controlled nearly two-thirds (64.4%) of all disposable income whereas the poorest 40% controlled less than a fifth. Perhaps more dramatically, the highest 10% of earners took home 41.2% of all disposable income, while the lowest 10% only controlled 5.6%.
It's abundantly clear from these numbers that the income gap in Canada is enormous, with a relatively small fraction of the population receiving almost half of the total disposable income brought in by Canadians in the second quarter of this year.
The income gap described by these statistics is both extreme and chronic — it's been bad for longer than COVID-19 has been around, but the pandemic certainly didn't help equalize households.
The average disposable income for the top 20% of households is currently seven times higher than that of the lowest-income 20% of households, a massive difference only exacerbated by the lowest 20% experiencing a 5.7% decrease in disposable income this quarter.
Because of increased inflation, every household is feeling extra pressure, especially those in the middle of the pack, who experienced a huge 218.4% decrease in average net saving. In other words, it's getting much harder for the median Canadian family to put money aside for the future, which can risk affecting their children's financial futures as well.
Inflation being what it is, the relation between the cost of living and disposable income matters greatly, regardless of wage and salary increases. Thus, the report states "households with higher disposable income tend to have a better ability to absorb general cost-of-living increases, as a smaller portion of their budgets [is] dedicated to spending on necessities."
The one bright spot in this assessment of Canadian household finances is that, for all age groups under 65, average wages and salaries increased this quarter. This has meant that those in the "core working-age groups" — between 35 to 54 years old — saw a slight increase in their disposable income, just 5.8%.
This article's cover image was used for illustrative purposes only.