Record Pace of Inequality in Canada as Inflation and Higher Rates: Inflation, rising interest rates, and falling real estate values are worsening wealth inequality in Canada, with younger households suffering the most.
Statistics Canada reported on Tuesday in Ottawa that the wealthiest 20% of households controlled 67.8% of the country’s net worth in the first quarter, while the poorest constituted 2.7%.
Record Pace of Inequality in Canada as Inflation and Higher Rates Exacerbate Income Disparity
This difference of 65,1 percentage points was an increase of 1.1 percentage points from the same period one year prior. It is the fastest increase since records began in 2010, although the wealth gap is still marginally smaller than it will be in 2020.
The widening wealth disparity poses a challenge for Prime Minister Justin Trudeau, whose government has pledged to reduce inequality, only to see it grow as a result of a rapid increase in housing prices during the pandemic. It also emphasises a consequence of the Bank of Canada’s aggressive interest rate increases to combat inflation, which are exerting pressure on the nation’s indebted households.
In response to recent economic pressures, the net worth of the least affluent decreased by 13.8%, which is more than three times the rate of decline for the wealthiest.
The gap between the top 40 percent and bottom 40 percent of households in terms of disposable income has reached 44.7 percentage points, up 0.2 percentage points from a year ago.
The decline in household net worth was almost entirely attributable to an 8.6% decline in the average value of real estate since a year ago. The mortgage debt of the least affluent group increased at a much faster rate than the total value of their property holdings.Younger and core working-age groups’ debt-to-income ratios were also at record highs and well above pre-pandemic levels. The ratio for the youngest households reached 207.5%, up 13.4% points from the previous year. For those aged 35 to 44, the proportion increased by 16.6 percentage points to 275.8%.
Younger households have recently increased their proportion of Canada’s total population, accounting for 47.3% of all growth since the third quarter of 2021, primarily as a result of high immigration levels.
“Persistently high-interest rates and inflation are likely to continue to strain the ability of households to make ends meet without incurring additional debt, especially for vulnerable groups such as those with the lowest income, the least wealth, and those in younger age groups,” the statistics agency said.
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