Posthaste: Canada’s middle class is losing momentum as wealth gap widens
The wealth gap has widened in Canada, as inflation, higher interest rates and lower property prices put the squeeze on middle-income families, a key engine of the economy.
A new study by TD Economics says Statistics Canada’s latest data on distributions of household economics accounts show the income gap has not been this wide since 2015.
“This distribution matters for Canada’s bottom line,” said Toronto Dominion economist Maria Solovieva.
National household net worth rose last year by 4.5 per cent to $16.4 trillion, rebounding from a decline of almost 6.5 per cent in 2022, but these gains were not shared across all income groups, says the report.
While income in the wealthiest households increased 6 per cent from the year before, income in the bottom and second quintiles barely rose or declined.
The wealth of all families rose in 2023, but higher-income households benefited the most because they held more financial assets, the big driver of gains last year.
Real estate, on the other hand — a substantial portion of wealth for the lower income groups, lost value, and mortgage debts increased.
Middle-income earners also became more indebted as earnings failed to keep up with inflation, racking up the largest increase in their debt-to-income ratio of any of the groups.
So what does this mean to the economy?
“The importance of these families in the economy cannot be overestimated,” said Solovieva.
Spending by middle-income households was the biggest contributor to consumption gains coming out of the pandemic.
“Key drivers of the pandemic economy, these families now face financial constraints that necessitate more conservative spending habits,” she said.
As they tighten their purse strings, overall consumer spending will
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