Gap Between Canada’s Rich and Poor Continues to Widen at Record Levels
According to a report by Statistics Canada, inflation, higher interest rates, and declining real estate values are exacerbating wealth inequality in Canada. Younger households are apparently the demographic cohort being most impacted by this financial development.
The richest 20% of households hold 67.8% of net worth in Canada in the first quarter, whereas the bottom groups made up 2.7%.
The 65.1 percentage point difference was 1.1 points higher than the same period in 2022. It’s the fastest uptick in records that goes back to 2010.
Despite Prime Minister Justin Trudeau’s vow to fight the country’s growing inequality problems, inequality has only sharpened in Canada owing to an alarming rise in home prices during the Wuhan virus pandemic.
The Bank of Canada’s vigorous interests rate hike policy to stave off inflation has put tremendous pressure on Canadian households holdings considerable debt.
The least wealthy segments of Canadian society were impacted more by recent economic pressures. In turn, their net worth dropped by 13.8%, over triple the rate of decrease for the wealthiest Canadians.
The disparity in the share of disposable income between households in the top and bottom 40% of the income spectrum reached 44.7 percentage points, which marks a 0.2 percentage point increase from a year ago.
The reduction in net worth for all households was largely due to real estate, with the average value plummeting by 8.6% from 2022. The least wealthy group witnessed their mortgage debt increase at a much faster rate than the total value of their property portfolio.
On top of that, debt-to-income ratios for younger and core working-age groups hovered at record highs, and well north of pre-pandemic rates. The ratio for the youngest households went up 207.5%, which marks a 13.4 percentage point increase from 2022. For households in the age range of 35 to 44, the ratio surged by 16.6 percentage points to 275.8%.
The share of younger households has increased in terms of the total Canadian population, which now accounts 47.3% of all growth since 2021’s third quarter, largely due to high levels of immigration.
“Persistently high interest rates and inflation are likely to continue to strain households’ ability to make ends meet without going further into debt, especially vulnerable groups, such as those with the lowest income, the least wealth and those of younger age groups,” the statistics agency stated.
Due to the Canadian government’s zealous mass migration policies, such inequalities will widen as mass migration generally puts upward pressure on housing prices. As a result, many Canadians will be priced out of the housing market or at least have to pay an arm and a leg just to have a decent home.
Just like the United States’ case, the solution to this problem is by passing patriotic immigration reforms that heavily restrict mass migration.