There’s no doubt high- income earners have been doing well lately. From 1992 to 2004, almost all the growth in incomes has gone to the 5% of individuals at the top of the income scale. Just about everyone else saw hardly any change in their income during that period.

The gap between rich and poor is growing, says economist Armine Yalnizan, a research associate with the Canadian Centre for Policy Alternatives’ Growing Gap project in Toronto and the author of a CCPA report on the issue: “This is during the best of economic conditions,” she notes.

In 2004, she says, the richest 10% of Canada’s families raising children were earning 82 times the earnings of the poorest 10% of Canada’s families, on average. “That is approaching triple the ratio of 1976,” Yalnizan says, “which was around 31 times.”

The after-tax income gap has not been this high in at least 30 years, and it has been growing faster than ever since the late 1990s.

Along with a growing income gap, there has been a massive increase in wealth inequality over the past two decades. So much so that analysts suggest Canadian families are becoming increasingly unequal in their capacity to deal with income losses in bad times, or even to initiate forward-looking strategies in good times. That may be cause for concern in uncertain times.

“Wealth provides access to economic resources,” says another report by René Morissette and Xuelin Zhang, analysts with the business and labour market analysis division at Statistics Canada. Wealth helps people deal with unexpected expenses or income losses. People who have a reserve of wealth can liquidate some of their financial or real assets to deal with these situations. What’s more, says the StatsCan report, those who have enough net worth can reduce their work hours, take more risk with their investments or even try self-employment.

The authors found that families in the top 10% of wealth distribution held 52% of household wealth in 1984. By 2005, their share had risen to 58%. (The numbers don’t include the value of employer-sponsored pension plans). During this period, only families in the top 10% increased their share of total wealth. StatsCan defines wealth as the difference between the value of a family’s total assets — not including collectibles, valuables, annuities or RRIFs — and its total debts. The numbers are based on a survey of assets and debts taken in 1984 as well as surveys of financial security taken in 1999 and 2005.

Median net worth — the amount at which half of surveyed families are above and half are below — stagnated or fell for the bottom 40% of families. For instance, families in the lowest 10% saw their median net worth drop by roughly $7,500 (in 2005 dollars) over the 1984-2005 period. For families in the highest 10%, median net worth increased by $237,000 to $659,000 — depending on the sample used — over the same period.

There was no improvement in the proportion of families with zero or negative net worth during that period, either. In fact, the study found 14% of families had more debts than assets in 2005 — up from 11% in 1984. As well, 24% of families had no financial wealth in 2005, more than in 1984, when 18% had no financial wealth.

Just how well people have been doing depends on the type of family. Lone-parent families and non-elderly unattached individuals, for instance, had low median and average wealth, reflecting — at least partially — the absence of a second earner, the authors say.

Young families, in which the main income recipient was 25 to 34, saw their median wealth fall by 50% or more between 1984 and 2005. Families in which the major income recipient was aged 35 to 54 were in a similar position — unless the major income recipient was a university graduate, in which case median wealth rose by 39%.

Looking only at average wealth numbers, the picture seems brighter. But that probably reflects large increases in wealth for those at the top. And many of those are older people who have managed to accumulate savings in RRSPs and LIRAs, as well as in home equity.

The StatsCan report acknowledges part of the increase in average wealth is the result of an aging population. Average wealth increased by at least 79% in families in which the main income recipient was aged 65 or older. Elderly unattached individuals found their median wealth more than doubled — from $48,000 in 1984 to $100,000 in 2005 (in 2005 dollars). But average wealth fell by up to 12% when the major income recipient was 25 to 34.

@page_break@Average wealth did not improve over the 1984-2005 period for families in the bottom fifth of the distribution. In contrast, it rose about $19,000 for those in the middle group and by more than $400,000 for those in the top fifth. In a study of the growing gap, Yalnizan concludes: “The rich are getting richer, the poor aren’t going anywhere and there are fewer people in the middle to mediate the two extremes.

“We ignore these trends at our collective peril,” she warns. IE