One of the key findings of Statistics Canada's latest household income report is that the income gap between high-income and low-income households has reached record levels. Added to this is the extraordinary rate at which wealth inequalities are widening in Canada. In short, the rich get richer, middle-income people get poorer, and the already poor stay poor.
In its October 2024 report, Statistics Canada defines the “income gap” as the difference in the share of disposable income between the top two quintiles (40% of wealthiest households) and the bottom two quintiles (40% of the poorest households). In the second quarter of 2024, this gap stood at 47%, the highest level ever recorded.
While low-income households experienced above-average wage growth, this was offset by an increase in interest paid on mortgages and consumer credit. As a result, their share of disposable income has remained virtually unchanged. For the bottom quintile, this share stood at a paltry 6.2%. While this is a slight increase from 2023, it means that a large portion of Canadian households are on the verge of crisis.
Middle-income households (third quintile) are the worst off. Their share of disposable income increased from 17.4% in the second quarter of 2023 to 16.6% in 2024.
For high-income households (top quintile), the additional debt burden from rising interest rates was more than offset by higher returns on savings and investment accounts. This group saw its share of disposable income increase from 41.6% in 2023 to 42.4% today.
An even more striking feature of the report is the rapid increase in the wealth gap. The Statistics Canada report states bluntly: “Most wealth is held by a relatively small number of households in Canada. » The gap between the richest and least rich increased by 1.1% during the first quarter of 2023 compared to the same period of the previous year, representing the largest increase on record.
The richest Canadians (meaning the top 20%) held 67.7% of the total net worth. The net worth of these households increased by 2.3% in the second quarter of 2024 compared to the previous year, bringing the average value of a household in this group to $3.4 million.
On the other hand, the net worth of the least wealthy households decreased by 1.4% in the second quarter of 2024 compared to the previous year. These households (i.e. the bottom 40%) represented only 2.8% of Canada's total net worth.
The report notes that young households (defined as those aged under 35) were the only group to continually reduce their mortgage debt. There are several explanations for this, but for young, low-income workers, the likely reason is that they are being gradually priced out of the housing market due to the combination of high housing prices and interest rates. A Scotiabank survey found that 29% of respondents in this age group now live with parents or relatives, an increase of nine points from three years ago.
Canada's real gross domestic product (GDP) grew by just 0.5% in the second quarter of 2024, after growing by 0.4% in the first quarter. In other words, the widening wealth gap comes at the expense of the least well-off part of society.
The impact of growing inequality can be seen in various aspects of daily life. The number of homeless people is increasing and tent encampments are becoming more and more common in Canadian cities. Nearly 23% of the population reported experiencing some form of food insecurity in 2022. Low-income Canadians are often forced to rely on food banks due to the prohibitive costs of housing and produce basic necessity. Food Banks Canada released a report showing that in March 2024, more than two million people visited food banks – a new record. With such demand, the food bank system itself is pushed to the brink. Low-income workers often hold precarious jobs doing “on-demand” work, and often work multiple jobs to pay for rent and food.
After the release of the Statistics Canada report, Canadian politicians pledged to tackle the problem. Chrystia Freeland, finance minister in the Trudeau Liberal government until her spectacular resignation on Monday, made a typical lip service statement: “We are working very, very hard to oppose this trend in the global economy toward increasing inequalities. We oppose it with very specific policies designed to support middle-class Canadians and people working hard to join the middle class. »
This is a web of lies. Rapid growth in income inequality and the concentration of wealth in a few hands at the top of society are the product of four decades of ruthless austerity in public spending and attacks on workers' rights, combined with massive subsidies and tax cuts for Canadian businesses, implemented at all levels by all parties in theestablishment.
The nine years of rule of the Liberal Party under Justin Trudeau, unwaveringly supported by the unions and the New Democrats, accelerated this process. At the start of the pandemic, the Trudeau government unconditionally distributed $650 billion to the banking and corporate elite. In recent years, the government has used a combination of high interest rates and soaring inflation to impose real wage costs on the working class, while the rich and well-off profited handsomely.
This record, along with the systematic efforts of liberal unions and NDP allies to stifle class struggle by sabotaging strikes, allowed far-right demagogue Pierre Poilievre to pose as a friend of workers. The leader of the official opposition of the Conservative Party of Canada, who appears ready to take the place of Prime Minister in the next election, grotesquely attempted to pose as a defender of Canadian workers following the publication of the report of Statistics Canada. He told reporters at a news conference: “Today, Statistics Canada reported that the gap between rich and poor is at its highest level in history, after neo-money printing -liberal-democrat has inflated the assets of the super-rich while inflating the cost of living for everyone else. »
In reality, the Trudeau government has picked up its policies where its conservative predecessor, Stephen Harper, left off. All major parties, including those of theestablishment Quebecers, have imposed ruthless attacks on the living standards of the working class since the 1980s. In the 1990s, the Liberal government of Prime Minister Jean Chrétien presided over the largest cuts in social spending in Canadian history, despite budget surpluses. In 1998-99, under the leadership of Finance Minister Paul Martin, Ottawa's spending on social programs fell to 12% of GDP, the lowest level in almost half a century.
In the early 2000s, the Liberals embarked on a new big business-led campaign focused on cutting corporate taxes and personal income taxes. These reductions were sold to the public as a boost to middle-income Canadians. But, with the reduction of the tax on capital gains, they had the effect of distorting the distribution of wealth in favor of the most privileged.
During the 2008 financial crisis, the Harper Conservatives bailed out Canada's largest banks to the tune of tens of billions of dollars. This massive state aid was offered without conditions. During the two-year bailout period, the banks remained highly profitable, rewarding shareholders and top executives handsomely.
More recently, at the height of the COVID-19 pandemic crisis, Canada's Liberal government funneled hundreds of billions of dollars to the biggest banks and corporations. While the wealth of the country's richest was protected, most working-class Canadians had to settle for wage increases below inflation, further impoverishing large swaths of the population. Union bureaucracies have played an important role in helping government and business limit wage increases.
Although Justin Trudeau's unpopular Liberal government is touting new symbolic measures to combat the cost of living crisis, including a two-month GST holiday on certain items, this patching up will do nothing to solve the cost crisis. of life nor the growing gap between the rich and the poor. In addition, Canada's international economic position is deteriorating. The global crisis of capitalism is increasing pressure on all governments around the world to take on the working class to make their economies more competitive for transnational finance capital and to subordinate all of society's resources to waging a world war. Developed economies are turning toward protectionism and economic nationalism, a situation reminiscent of the period before World War II.
Furthermore, the global crisis of capitalism and the desire of the United States, Canada and their other imperialist allies and proxies to “resolve” this crisis by redividing the world through war in Eastern Europe, the Middle East and China in the Asia-Pacific region, now threaten the world's population with total catastrophe. And to finance these wars, imperialist governments will demand more “sacrifices” from the working class.
The working class must respond by building an international anti-war movement to end capitalism, the source of inequality and war, and redistribute society's vast resources to meet the basic social needs of the vast majority.
(Article published in English on December 21, 2024)
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