Are concerns about wealth and income inequality in Canada justified?
Populations are unequal in many ways – height, weight, abilities, and talents. None of this generally causes concern. However, debates often ignite when it comes to income and wealth inequality. These financial disparities influence access to resources, opportunities, and social mobility, which can have profound effects on individuals and society. Are concerns about inequality justified, and what do the numbers tell us about the state of inequality in Canada today?
Measuring inequality is complex. Income inequality can be assessed before or after taxes or by including social transfers such as employment insurance. Wealth inequality adds another layer, often producing larger disparities than income measurements. Statisticians frequently use the Gini coefficient to measure inequality. This metric ranges from zero to one, where zero represents perfect equality (everyone has the same income or wealth) and one represents perfect inequality (one person has everything, and everyone else has nothing).
Canada’s Gini coefficient for disposable income is approximately 0.3, which is more equal than the United States (around 0.39) but less equal than countries like Sweden (0.25). This provides a numerical snapshot of Canada’s inequality compared to its global peers.
 Photo by Markus Spiske |
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According to Statistics Canada, wealth inequality in 2023 revealed stark divides. The richest 20 per cent of households held 67.7 per cent of the country’s total wealth – an average of $3.3 million per household. In contrast, the bottom 40 per cent held just 2.7 per cent, averaging $67,038 per household. Income inequality has also increased, as reflected in the widening pay gap between CEOs and average workers. For instance, in 2023, some Canadian CEOs earned more than 200 times the salary of the average worker.
Globally, Canada’s inequality levels are moderate. According to the Organisation for Economic Co-operation and Development (OECD), Canada ranks in the middle of industrialized nations for income inequality after taxes and transfers. Countries such as the U.S. and the U.K. experience greater disparities, while Canada aligns more closely with France and Sweden.
In 2022, for example, the top one per cent of Americans accounted for 21 per cent of pre-tax income and owned 35 per cent of the nation’s wealth. In Canada, these figures were 11 per cent and 25 per cent, respectively. Canada’s more equitable distribution translates into stronger social safety nets and fewer cases of extreme poverty compared to its southern neighbour.
Historically, inequality has shifted significantly. Economist Thomas Piketty’s research shows that in Canada, the period between 1940 and 1980 was marked by relatively low income inequality. This era of equality stemmed from policies that supported broad-based economic growth, such as progressive taxation and strong social programs. However, since 1980, gaps have widened, stabilizing somewhat in the last two decades.
Economically, high inequality does not appear to harm growth in wealthier nations. The U.S., one of the most unequal countries globally, continues to demonstrate robust economic growth. Research from the National Bureau of Economic Research indicates that inequality can even encourage growth in wealthier nations while stifling it in poorer ones. However, the societal consequences of inequality tell a different story.
Excessive inequality undermines social cohesion and fuels resentment, polarization, and political instability. The International Monetary Fund (IMF) warns that inequality erodes trust and weakens societies, while the World Bank links extreme inequality to entrenched poverty, stifled growth, and social conflict. The health impacts are also striking. A report from the JAMA Network revealed that in the U.S., the wealthiest one per cent live an average of 14.6 years longer than the poorest one per cent. These disparities underscore the tangible human costs of economic inequality.
Returning to the levels of equality seen between 1940 and 1980 may not be feasible in today’s globalized, technology-driven economy. However, targeted policies could help reduce income inequality in Canada. The Conference Board of Canada proposes implementing a federally distributed, means-tested minimum income to efficiently support vulnerable groups. It also suggests that inheritance taxes and improved access to health care, education, and daycare could help reduce inequality and improve social mobility. Countries like Finland, which have experimented with universal basic income programs, demonstrate the potential of such policies to reduce poverty and improve well-being.
While income inequality may not hinder economic growth, it poses significant risks to social stability and cohesion. Canada’s levels of inequality remain moderate compared to global peers, but rising disparities cannot be ignored. Policies aimed at reducing inequality – such as minimum income programs and expanded access to essential services – are not just moral imperatives; they are necessary to maintain a cohesive, stable, and prosperous society.
By addressing inequality thoughtfully, Canada can strengthen its social fabric while continuing to foster economic growth.
Explore more on Inequality, Poverty, Cost of living, Globalization
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