In the run up to the federal cabinet retreat in Montreal this past week the Trudeau Liberals reached back for a golden oldie: helping the middle class.
As the announcement from the Prime minister’s office put it:
“The retreat will prioritize efforts to support the middle class and build an economy that works for everyone.”
Sounds good, but anyone following the political hit parade will note there’s something missing from the erstwhile Liberal mantra – there’s no mention of helping not only the middle class, but also “people working hard to join it.”
That’s an interesting omission likely due to the fact that while low income households are feeling it the most, economic anxiety is spreading to other income groups, to the Liberals’ political peril.
The Angus Reid Institute reported last week that 43 percent of people who say they voted for the Liberals in 2021 are looking to vote for another party. According to the pollster, those planning to desert the Liberals “are almost twice as likely to say that they worry that they won’t be able to meet their monthly housing costs in the next six months compared to those who are still Liberal.”
Coincidentally, as the Trudeau cabinet was convening to get advice from experts on policies to ease the economic anxiety of Canada’s middle class – and save their own political bacon – Statistics Canada released its quarterly data on income and wealth.
Although the report highlighted the widening of income and wealth inequality over the past year, the latest quarterly data had some positive news for the middle class and its erstwhile Liberal champions.
Disposable income was up 9 per cent for the quarter ending Sept. 30, 2023. And despite inflation and higher interest rates, net savings – current household income less current expenditure – improved in the third quarter for all income quintiles.
(Income and wealth quintiles divide the population aged 15 years and over into five equal-sized groups according to the rank of their total income or wealth.Each quintile contains 3,246,420 households).
The third and fourth quintiles enjoyed the largest increase in net savings – 64 percent for the third quintile, 101 percent for the fourth. Those two middle class income groups, as well as the top 20 percent of households, also experienced year-over-year increases in net savings.
Table 1. Changes in Net Savings by quarter
| Quintile | Change Q2-Q3 | Change Q3/22-Q3/23 |
| First (Lowest) | 3.6% | -9.8% |
| Second | 25.6% | -9.0% |
| Third | 63.8% | 5.1% |
| Fourth | 100.9% | 13.1% |
| Fifth (Highest) | 13.4% | 5.7% |
Source: Statistics Canada 36-10-0662-01
As the second column of the table shows, net savings increased for all quintiles in the third quarter. But as the third column shows, for the lowest 40 percent of households expenditures for the year exceeded income, producing negative net savings.
Some 6.5 million households – presumably working hard to join the middle class – were deeper in debt in the third quarter of 2023 than they were at the same time in 2022.
The lowest 20 per cent averaged $8,527 per household in arrears, $760 more than the third quarter of 2022. The next lowest quintile averaged $3,901in debt, $323 more than a year earlier. Meanwhile, the top 20 percent enjoyed net savings of $16,130 per household, up from $15,426 in quarter three of 2022.
So although the third quarter results show that 60 percent of income earners are doing better, the bottom 40 per cent are worse off, their income gains more than offset by increased expenditures. Clearly not the time to drop the “people working hard to join it” from the catchphrase. But there’s more to the story.
Wealth gap
Net savings vary from quarter to quarter depending on factors like income, living costs, pension and property valuation. StatsCanada data on wealth – net worth – provides insight into how the different income levels are doing over time. Looking back through the past eight-plus years of Liberal government, the picture that emerges is the opposite of the trend over the past year. When it comes to net worth – assets minus liabilities – the lowest 40 percent have been faring relatively better than the middle 40.
As the latest quarterly report indicated, wealth inequality has widened over the past year, with the gap between Canada’s richest 20 per cent and the poorest 40 percent growing by 0.2 per cent. This is mainly the result of growth in financial assets held by the wealthy, while higher living costs weighed on the lowest income households. But the latest increase in the gap notwithstanding, the wealth gap in the third quarter of 2023 remained lower than it was before the pandemic.
To be clear, the wealth disparity picture in Canada remains grim. Most wealth is held by the top 20 per cent, accounting for 67.4 per cent of net worth in the third quarter of 2023, an average of $3.3 million in wealth per household. The bottom 40 per cent of the wealth distribution accounted for 2.8 per cent of the total. Wealth averaged only $67,738 per household, with many households in negative territory with more liabilities than assets.
The 2023 third quarter wealth gap of 64.6 percentage points – the difference between the 67.4 per cent share held by the highest quintile and the 2.8 per cent held by the two lowest – was up from 64.4 a year earlier. The 40 per cent in the middle had 29.8 per cent of the wealth in the most recent quarter, down a bit from 30.0 per cent a year earlier.
A remarkable feature of the wealth gap is how little it has changed over the years. But what change there has been is for the better – the disparity in wealth has become slightly less egregious.
Data goes back only to 2010, when wealth was measured at $507,316 per Canadian household. The gap in 2010 was 67.4, with the top 20 getting 68.9 per cent of the wealth and the bottom 40 getting a mere 1.5 per cent.
By the third quarter of 2023, wealth had nearly doubled, to $972,113 per household and the gap narrowed to the current 64.6 percentage points.The share for the wealthiest 20 per cent dropped 1.5 percentage points to its current level of 67.4 while the share for the poorest households rose from 1.5 to its current 2.8 per cent.
Ironically, since the Trudeau government came to power with its focus on the middle class, the share of wealth for the middle 40 per cent has actually gone down slightly, from 30.1 per cent in 2015 to 29.8 per cent in the most recent quarter.
Table 2: Percentage share of wealth by wealth quintile
| Quintile | 2015 | 2019 | 2021 | 2022 | 2023 |
| Lowest | -0.2% | -0.2% | 0.0 | 0.0 | 0.0 |
| 2nd | 2.4% | 2.5% | 2.9% | 2.8% | 2.8% |
| Bottom 40 | 2.2% | 2.3% | 2.9% | 2.8% | 2.8% |
| 3rd | 9.1% | 9.1% | 9.6% | 9.4% | 9.4% |
| 4th | 21.0% | 20.5% | 20.7% | 20.6% | 20.4% |
| Mid 40 | 30.1% | 29.6% | 30.3% | 30.0% | 29.8% |
| Highest | 67.7% | 68.1% | 66.9% | 67.2% | 67.4% |
| Gap (Percentage points) | 65.5 | 65.8 | 64.0 | 64.4 | 64.6 |
Source: Statistics Canada 36-10-0661-01
Since StatsCanada began compiling this data when the Harper Conservatives were in power, the mid-40 group’s share of the wealth has rarely fallen below the 30 per cent level. The fact it now sits at 29.8 per cent is not a good look for a government striving to rebuild its bridges to the middle class.
But at least the Liberals can point to some modest improvement for the lowest 40 per cent and a slight, albeit precarious, drop in the wealth gap – from 65.5 to 64.6 – since they came to power. Whether any such message will be heard amid daily reminders of homelessness and a “cost of living crisis” is another matter.
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