Recent spikes in the cost of living and a drop in real estate values are leading to “unprecedented impacts” on the savings and wealth of the most vulnerable Canadians, a new report from Statistics sa国际传媒 has found.
The report, released Thursday, said the first-quarter trends would likely impact people with lower incomes, less wealth and younger age groups the most. That’s all leading to a growing gap between the richest and poorest Canadians.
“Most wealth is held by relatively few households in sa国际传媒,” concluded the StatCan researchers.
The richest 20 per cent of Canadians now hold two-thirds of net worth, while the least wealthy in the country — which include 40 per cent of Canadians — hold only 2.7 per cent of the country’s wealth. That gap rose 1.1 per cent over the previous year.
“This was the fastest increase on record for these estimates, which date back to 2010,” the study said.
Recent economic pressures hit least wealthy hardest
Nearly 40 per cent of low-income earners said government support was their main source of income, up 4.6 per cent from a year earlier.
Waiting outside the Richmond Food Bank, Jacqueline Lendaza recently told the Canadian Press she and her husband have done everything they can to save money, including growing vegetables on their apartment’s balcony and even giving up driving.
“I used to pay $2.19 for a small carton of milk and now I am paying $3.40. I am living off credit cards. We can’t afford gas. I gave up my vehicle a while ago,” Lendaza said.
Lendaza said she and her husband turned to the food bank near their home to keep their heads above water.
“The beginning was really difficult and it was embarrassing to come in, but after you have been a few times you get used to it,” she said.
While the country’s highest earners saw their average disposable income grow at a faster-than-average pace, average wages and salaries for low-income earners grew relatively slower.
Recent economic pressures dropped the net wealth of sa国际传媒's poorest by 13.8 per cent between early 2022 and early 2023. That’s more than triple the rate of decrease for the wealthiest Canadians.
Middle-income earners, meanwhile, were hit hardest by inflation over the last year. In early 2022, they had a net savings of $521. But a year later, they spent an average of $1,306 more than they earned in income, the study found.
All household groups saw declines in net worth due to a fall in real estate values over the previous year, with the least wealthy and those under 35 facing the biggest financial hits.
Young, core working-age groups face rising debt
Both younger and core working-age groups faced the highest debt-to-income ratios since the record began in 2010. By early 2023, they were well above pre-pandemic levels, the study found.
Both groups faced debt-to-income ratios of well over 200 per cent in the first quarter of 2023, a double-digit increase from the previous year.
“Although households of younger workers increased their employment income, persistently high inflation and interest rates continued to restrain their ability to make ends meet…” found the study.
The study also found younger households “tend to hold higher balances on credit cards and mortgages relative to older age groups.”
Persistently high interest rates and inflation would likely continue to hamper households’ ability to make ends — without going into further debt.
With files from the Canadian Press
