Article content

(Bloomberg) — Income inequality in Canada has returned to pre-pandemic levels due to stronger wage gains, richer retirement benefits and declining government transfers to high-earning households.

The gap between the incomes of the top and bottom 40% of households in Canada narrowed in the second quarter, according to data released Wednesday by Statistics Canada. The highest-earning group had 63.6% of households’ disposable income, while the bottom had 18.5%. 

Article content

That difference of 45.1 percentage points matches levels seen before Covid-19 temporarily shuttered the country’s economy. It’s down from a high of 47 points a year ago, when lower-income families contended with the end of generous pandemic income benefits and a relatively weaker labor market, the agency said.

Government transfers to the bottom 40% of households averaged C$47.1 billion ($34.2 billion) a quarter over the last year, up more than 8% from a year earlier and higher than in 2020, according to Bloomberg calculations. 

But top-earning households received 26% less in government aid than they did in that first year of the pandemic, when Prime Minister Justin Trudeau’s government adopted sweeping programs to help millions of households replace lost wages. 

The new numbers are partly driven by measures introduced by federal and provincial governments to ease the burden of higher inflation on poorer households with payments or other aid. The lowest 20% of households saw their payments from government rise a fifth — including a 10% top-up to the retirement benefits of Canadian seniors 75 years and older. 

Article content

Wage increases boosted incomes in the second-lowest quintile of earners. Compensation rose 6.9% from a year earlier for that group, thanks to record-low unemployment and stronger labor conditions. High earners also benefited from wage gains and investment earnings, but received less in government transfers. 

The wealth gap widened relative to a year earlier, the agency said, but remains lower than pre-pandemic levels. Falling property values and rising mortgage debt obligations weighed on the net worth of lower-wealth households.

Trudeau’s government pushed Canada’s fiscal position into record deficits during the pandemic by deploying large-scale income replacement programs designed to keep Canadians at home to prevent the spread of the virus.

An audit later concluded that the government may have overpaid benefits by as much as C$32 billion, largely due to a lack of post-payment verification.

Share this article in your social network