Income Gap Reaches Record High in Canada: StatCan

Statistics Canada building and signs are pictured in Ottawa on July 3, 2019. Sean Kilpatrick/The Canadian Press

Canada’s income gap reached a record high of 49 percentage points in the first quarter of 2025, as those with the highest incomes gained from investments, while those with the lowest incomes were affected by declining wages, according to Statistics Canada.

The income gap has increased each year in Canada following the start of the COVID-19 pandemic, a July 16 Statistics Canada report indicates. In the first quarter of 2021, a gap of 43.8 percentage points was recorded.

The federal agency defines the income gap as the difference in disposable income between households in the top 40 percent and the bottom 40 percent of income distribution.

“Households’ ability to maintain their economic well-being varies with macroeconomic conditions,” the report says, noting factors such as inflation, interest rates, employment rate, income, and real estate values.

Though interest rates were relatively high in 2023, the Bank of Canada had reduced its key policy rate from 5 percent in April 2024 to 2.75 percent by March of this year, which Statistics Canada noted was “in response to easing inflationary pressures.” Additionally, household interest payments declined by 4.8 percent in the first quarter of this year compared to that of last year, marking the first drop since 2022.

While lower-income households tend to benefit more from decreasing interest rates compared to higher-income households, they may also be more susceptible to job loss during “economic downturns,” the report says. Statistics Canada’s Labour Force Survey indicates that the employment rate has been on a “declining trend” since early 2023.

Wage Gains

In the first quarter of 2025, households in the bottom 20 percent of income distribution had the weakest growth in disposable income compared to that of last year, due to declining average wages resulting from reduced hours of work, the report says. Labour market conditions were found to be “notably weak” in the mining and manufacturing sectors.

The largest decline in investment income was experienced by the lowest-income households as well.

Middle-income households’ wages increased at a “below-average pace” in the first quarter this year compared to that of one year prior, and investment earnings for this group declined.

Average disposable income for the highest-income households grew at the fastest pace of any income group, which the report indicates was mainly caused by gains in wages and investment income.

Net savings declined in the first quarter of 2025 for the lowest-income households, as income gains “did not keep pace” with spending increases, especially for housing and utilities, the report says.

Meanwhile, net savings improved for middle-income households as wage gains allowed their disposable income to grow faster than spending. A growth in wages and investments allowed the highest-income households’ net savings to grow at an “above-average pace,” the federal agency says.

Real Estate

The top 20 percent of wealthiest households accounted for 64.7 percent of Canada’s total net worth in the first quarter of this year and averaged $3.3 million per household, the report said, noting “most wealth is held by relatively few households in Canada.”

By contrast, the bottom 40 percent of least wealthy households accounted for 3.3 percent of the country’s net worth, and averaged $85,700 per household.

The wealth gap between the top 20 percent and bottom 40 percent increased by 0.2 percentage points in the first quarter this year compared to last year, reaching 61.4 percentage points.

Net worth for the least wealthy households grew by 3.1 percent due to a growth in financial assets, however, Statistics Canada says the growth was limited due to “weaker economic and housing market conditions” leading to a decline in real estate values.

An increasing number of the least wealthy Canadians bought homes in the first quarter of 2025 as real estate values dropped, however mortgage costs exceeded the increased value of their real estate holdings.

Meanwhile, the wealthiest households increased their net worth at an “above-average pace” as the group avoided debt financing and experienced strong growth in the value of their financial assets, the report says.

Younger Households

Households made up of Canadians younger than age 35 experienced the slowest wealth growth-rate out of any age group as they reduced their real estate holdings, Statistics Canada says. As home ownership has become less affordable in recent years due to rising interest rates and housing costs, the youngest households are the only group to continually experience decreasing mortgage debt.

“Prospective homeowners may be turning away from the housing market due to affordability concerns,” the federal agency said. “For their part, existing homeowners who purchased a home when interest rates were much lower from 2020 to 2022 may be paying off their existing mortgage debt balances or moving into more affordable accommodations.”

Additionally, the report indicates that some younger households could be “prioritizing coping with the cost of living and reducing their debt obligations” when they receive financial support.

On the other hand, households aged 55 and older increased their average mortgage debt in the first quarter this year, which could be related to buying investment properties, assisting younger relatives with purchasing a home, among other reasons, the report says.

When it comes to debt-to-income ratio, younger age groups experienced a decline mostly due to gains in wages and investment income exceeding increases in debt, while ratios for households aged 55 and older remained “relatively stable,” the federal agency found.