The lowest-income households saw massive gains in average disposable income during the second quarter, says Statistics Canada
During the second quarter, the national income gap fell from the historic highs seen the year prior, mainly because of significant gains in worker wages and improved benefits for retirees.
In its latest report, Statistics Canada said that the income gap – defined as the gap in the share of disposable income between the top 40% and bottom 40% of household incomes – retreated from the record high of 47% in Q2 2022 to 45.1% in Q2 2023.
The lowest-income households in the bottom 20% of income distribution saw robust annual gains in average disposable income in the second quarter, largely driven by increased transfers.
“The 10% top-up to Old Age Security benefits for seniors aged 75 years and older accounted for more than one-quarter of the overall increase in transfers to the lowest income households,” StatCan said. “In the second quarter of 2023, 40.5% of the lowest income households claimed government transfers as a main source of income, up from 35.7% a year earlier.”
BMO Senior Economist & Director of Economics Sal Guatieri noted that national #affordability is currently at its poorest since 1988, with around 39% of median income required to purchase an average-priced home in Canada. https://t.co/0b3wc6do1g#mortgageindustry #housingmarket
— Canadian Mortgage Professional Magazine (@CMPmagazine) August 28, 2023
However, elevated interest rates continue to have a disproportionate impact on the lowest-income households, with the average net investment income for these households dropping during the second quarter of 2023.
“Credit card balances had a more significant impact on the lowest income households, as increases in interest charges were evenly split between credit cards and mortgages for the lowest income households, while the average household dedicated two-thirds of the overall increase in interest payments to mortgage-related debt,” StatCan said.
Saving up money in the current environment is also proving exceptionally difficult. StatCan reported that net savings for the lowest-income households declined by 3.9% (-$360) on an annual basis.
“Income gains for these households did not match cost-of-living increases, especially for clothing and footwear as well as for transport,” StatCan said.
