The Daily — Distributions of household economic accounts for income, consumption, saving and wealth of Canadian households, fourth quarter 2023 (2024)

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Released:2024-04-17

Gaps in household income and wealth widened in2023relative to a year earlier as higher interest rates had a negative impact on the income and net worth of the lowest income and least wealthy households.

Income gap widens to highest rate since2015as debt charges weigh on lower income households

Income inequality increased in2023as the gap in the share of disposable income between households in the two highest income quintiles and two lowest income quintiles was the largest since2015.

While higher interest rates can lead to increased borrowing costs for households, they can also lead to higher yields on saving and investment accounts. Lower income households are more likely to have a limited capacity to take advantage of these higher returns, as on average they have fewer resources available for saving and investment.

Higher interest rates weighed on average disposable income for lower income households in2023. Along with a doubling of the Bank of Canada's policy interest rate from2.5% in July2022to5.0% as of July2023, average disposable income for lower income households was relatively unchanged, as increases in interest payments on mortgages and credit cards offset gains in employment and investment income.

Chart1
Change in average disposable income for lowest income quintile, including contribution of each income component,2023relative to2022

Highest income households increase income at fastest pace as they gain the most from investment income

Average disposable income for the highest income households (top20% of the income distribution) increased at the fastest pace of any income group in2023relative to a year earlier, due entirely to gains in wages (+4.0%) and net investment income (+15.7%).

The highest income households were the only group to increase their net investment income, as gains in investment earnings were greater than increases in interest payments in2023.

Chart2
Change in average disposable income for highest income quintile, including contribution of each income component,2023relative to2022

Dis-saving deepens for lower income households amid cost-of-living pressures

In contrast with a12.6% gain in net saving for the highest income households, net dis-saving worsened for households in the lowest60% of the income distribution in2023relative to a year earlier. Cost-of-living increases—especially for housing and transportation—outpaced income gains for lower income households.

Chart3
Average household net saving by income quintile

Wealth gap widens as financial asset gains benefit wealthiest

Most wealth is held by relatively few households in Canada. The wealthiest (top20% of the wealth distribution) accounted for more than two-thirds (67.7%) of Canada's total net worth in the fourth quarter of2023, averaging $3.3million per household, while the least wealthy (bottom40% of the wealth distribution) accounted for2.7%, averaging $67,038.

The gap in wealth between the top20% and the bottom40% reached65.0% in the fourth quarter of2023, an increase of0.4percentage points over the same quarter of the previous year. For all households, a gain in the average value of financial assets (+4.7%) counteracted a reduction in real estate values (-0.5%). More than half (58.3%) of asset holdings for the wealthiest were financial assets, compared with28.0% for the least wealthy.

Least wealthy have weakest net worth growth as mortgage debt offsets real estate gain

Although the least wealthy held and acquired real estate, their average net worth was relatively unchanged in the fourth quarter of2023compared with a year earlier (+1.1%), as the increase in mortgage debt to finance those assets (+4.5%) offset the increase in the value of their real estate holdings (+2.6%).

In contrast, the wealthiest increased their net worth at the fastest pace of any household group (+2.7% vs. +2.3% for all households) in the fourth quarter of2023compared with a year earlier, derived mainly from financial asset gains (+5.1%). The average value of real estate for the wealthiest declined by0.9% over the same period, about the same rate as the average household. Meanwhile, debt was relatively stable, growing by1.0% as the wealthiest avoided higher levels of borrowing.

Chart4
Change in average net worth for lowest two wealth quintiles, including contribution of each wealth component, fourth quarter of2023relative to fourth quarter of2022

Youngest households de-leveraging from mortgage debt at a slower pace

The youngest households—those under the age of35years—were the only age group to continually decrease their mortgage debt balances since the end of2022, as rising interest rates and inflationary pressures made owning a home less affordable in2023. Reductions in mortgage debt for the youngest households have been stabilizing recently, as the year-over-year reduction for the fourth quarter of2023(-3.8%) was slower than for the third quarter (-4.9%).

Households in the youngest age group may be reducing their mortgage balances for various reasons. Prospective homeowners may be turning away from the housing market due to affordability concerns, while existing homeowners who purchased a home when interest rates were much lower a few years ago may be paying off their existing mortgage debt balances or moving into more affordable accommodations. As well, others may be receiving financial support from family to help them cope with the cost of living and reduce their debt obligations.

Chart5
Change in average household mortgage debt by age group of major income earner

Youngest households' debt-to-income ratio declines while debt service ratio increases

Debt-to-income ratios were the highest for core working-age households (aged35to64) in the fourth quarter of2023, ranging from160.5% for those aged55to64years to247.9% for those aged35to44years. Debt for core working-age households increased at a faster rate than disposable income, especially for those aged55to64years (+3.2percentage points), as employment income gains were offset by higher debt charges. Over the same period, the debt-to-income ratio declined for the youngest households (-15.0percentage points) and for households whose major income earner is a senior (-0.9percentage points for households aged65years and older). While the ratio for the youngest households declined due to reductions in mortgage debt combined with strong wage gains, seniors benefitted from gains in investment earnings.

Chart6
Debt-to-income ratio by age group of major income earner

Renters less able to generate saving and wealth due to lower incomes and limited property ownership

Renters tend to have lower incomes than homeowners, which limits their ability to manage increases in the cost of living. Homeowners had an average disposable income of $114,118in2023(+3.9% from2022), compared with $60,533for renters (+1.1% from2022).

In2023, renters spent30.6% of their income on housing (+1.2percentage points from2022), significantly higher than the share for homeowners, at20.9% (+0.3percentage points). Renters' lower incomes and higher allocations of income to housing costs make it more difficult for them to make ends meet, and to save for such things as a downpayment on a home. In2023, homeowners had net saving of $9,847(+$913or +10.2% from2022), while renters had net dis-saving of -$3,869(+$977or +33.8%).

Renters also face barriers in their ability to generate wealth due to limited property ownership. Homeowners accounted for91.0% of all wealth at the end of2023, due equally to real estate and financial asset holdings.

Over time, homeowners' ability to generate wealth, as measured by the net worth to income ratio, has grown substantially, increasing from855.0% in the fourth quarter of2010to1,111.0% in the fourth quarter of2023(+256.0percentage points). Over the same period, renters' net worth as a share of income remained relatively stable, increasing from342.5% to420.9% (+78.4percentage points).

Persistently high interest rates and inflation are likely to continue to strain households' ability to make ends meet without going further into debt, especially vulnerable groups, such as those with the lowest income, the least wealth, renters, and those in younger age groups. The latest figures from the Monthly Credit Aggregates program indicate that household debt continued to increase up to January2024, although there was a continued slowdown in mortgage borrowing as interest rates and significantly increasing home prices likely dissuaded buyers.

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Table1Share of disposable income by income quintile, including gap between top two and bottom two income quintiles

Table2Disposable income by income quintile, average dollars per household,2023relative to2022

Table3Net worth by wealth quintile, average dollars per household, fourth quarter of2023relative to fourth quarter of2022

Sustainable Development Goals

On January1,2016, the world officially began implementation of the 2030Agenda for Sustainable Development—the United Nations' transformative plan of action that addresses urgent global challenges over the next15years. The plan is based on17specific sustainable development goals.

The distributions of household economic accounts for income, consumption, saving and wealth of Canadian households are an example of how Statistics Canada supports the reporting on the Global Goals for Sustainable Development. This release will be used in helping to measure the following goal:

Note to readers

Statistics Canada regularly publishes macroeconomic indicators on household disposable income, final consumption expenditure, saving and wealth as part of the Canadian System of Macroeconomic Accounts (CSMA). These accounts are aligned with the most recent international standards and are compiled for all sectors of the economy, including households, non-profit institutions, governments and corporations along with Canada's financial position vis-à-vis the rest of the world. While the CSMA provide high quality information on the overall position of households relative to other economic sectors, the Distributions of Household Economic Accounts (DHEA) provide additional granularity to address questions such as vulnerabilities of specific groups and the resulting implications for economic well-being and financial stability. These estimates are an important complement to standard quarterly outputs related to the economy.

The DHEA estimates released today provide estimates of income, consumption, saving and wealth, including their sub-components by various household distributions up to the fourth quarter of2023. Estimates have also been revised for prior periods to incorporate the latest CSMA benchmarks, including revisions back to the first quarter of2023for the income, consumption, saving, and wealth series.

The term "income gap", referred to in this text, is defined as the gap in the share of disposable income between households in the top40% and bottom40% of the income distribution. The "wealth gap" is defined as the gap in the share of net worth between households in the top20% and bottom40% of the wealth distribution. Estimates for net worth distributed by wealth quintile are combined for households in the lowest two quintiles for ease of illustration, since the average household in the lowest wealth quintile owed more in liabilities than it owned in assets, such as self-employed workers with negative net business equity and recent graduates with student loan balances.

As with all data, the DHEA estimates are not without their limitations. While some distributions are estimated using timely microdata or micromodels, such as wages and salaries and household debt, other distributions, including those for household final consumption expenditures, social transfers in kind and assets rely on assumptions or use data from prior reference periods. Users should keep these limitations in mind when analyzing the estimates included in this release.

All values are expressed in nominal unadjusted rates. As a result, the estimates presented in this release are not adjusted for variations over time that may occur due to seasonal patterns and/or price inflation. Since the quarterly series are not seasonally adjusted, comparisons should only be made using estimates for the same quarter of each year.

Next release

Data on the Distributions of Household Economic Accounts for the first quarter of2024will be released on July17.

Products

The data visualization product "Distributions of Household Economic Accounts, Wealth: Interactive tool," which is part of Statistics Canada – Data Visualization Products (Catalogue number71-607-X), is now available.

The article "Distributions of Household Economic Accounts, estimates of asset, liability and net worth distributions,2010to2023, technical methodology and quality report," which is part of the Income and Expenditure Accounts Technical Series (Catalogue number13-604-M), is also available.

Details on the sources and methods behind these estimates can be found in Methodological Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-607-X). See section "Distributions of Household Economic Accounts" under Satellite Accounts and Special Studies.

The Economic accounts statistics portal, accessible from the Subjects module of our website, features an up-to-date portrait of national and provincial economies and their structure.

The Latest Developments in the Canadian Economic Accounts (Catalogue number13-605-X) is available.

The User Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-606-G) is available.

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