Statistics Canada’s new survey of household finances throws cold water on the often-voiced assertion that the ranks of the country’s middle class have been dramatically thinned by the combined forces of rising income inequality, globalization and disruptive technological change.
According to the Survey of Financial Security, the median net worth of Canadian families rose by an impressive 44.5% between 2005 and 2012, after adjusting for inflation, reaching $243,800 in the latter year. Since 1990, inflation-adjusted median family net worth has increased by almost 80%. The assets used to compute net worth include principal residences, pension-related assets, the business equity held by households, and various other non-pension financial assets. The biggest liabilities of households, in descending order, are mortgages, lines of credit, automobile loans, credit card debt, and student loans.
Because the Statistics Canada survey focuses on median rather than average net worth, the very high levels of wealth found at the top of the wealth distribution do not distort the overall findings. The median figures reported can be thought of as capturing the financial situation of the “typical” family units being measured.
Contrary to what many may believe, the rise in net worth was not limited to the most affluent Canadian families. Figure 1 summarizes the percentage change in median net worth by quintiles, which is based on dividing all Canadian households into five equally-sized groups according to their net worth. As shown, from 2005 to 2012 families in the third quintile had the largest increase in median net worth, while over the longer period from 1999 to 2012 the fourth quintile saw the biggest jump. The lowest income families (those in the first quintile) experienced a decline in inflation-adjusted net worth between 1999 and 2012. Most families in the lowest quintile actually have a negative net worth (liabilities exceed assets).
Figure 1: Change in Median Net Worth by Quintile
(% change over the period shown)
Turning to the survey results by province, BC ranked first in the country in median net worth in 2012, at $344,000, followed by Saskatchewan and Alberta. Of interest, BC also posted the biggest increase in median net worth from 1999 to 2012, at 128%, which was well above the growth rates of the other provinces. Median net worth is lowest in Atlantic Canada. See Table 1 for details.
Table 1: Median Net Worth by Province, 2012
(in 2012 dollars; and the % increase since 1999)
|Nfld and Labrador||$167,900||98.7%|
British Columbia’s strong showing is mainly due to the high cost of housing in the province, which ends up being reflected in relatively high values for principal residences on the asset side of the household balance sheet (for families that are home-owners). While high housing costs do translate into larger mortgages, it’s important to remember that most homeowners have significant positive equity in their properties, and many own their homes mortgage-free.
Overall, the new survey paints a more positive picture of financial well-being in Canada (including in British Columbia) than is often conveyed by media commentaries and some other published reports. Among other things, the results challenge the idea that most middle income families have suffered a decline in economic fortunes. The data also flatly undercut the claim that all of the gains in wealth in Canada have accrued to a narrow slice of the population.
It should be noted that the Survey of Financial Security focuses on wealth rather than income. Even if the trends in median net worth across households do not point to greater economic inequality, there is evidence that the distribution of income – particularly market income, which is calibrated on a pre-tax, pre-government transfer basis – has become more unequal. However, it is encouraging to learn that Canada’s “middle class” seems to be holding its own based on the ownership of wealth.
 See Statistics Canada, “The Daily,” February 25, 2012, available at www.statcan.gc.ca/daily-quotidien/dq140225b-eng.htm
 Net worth is defined as assets minus debts. The median family is the family at the exact mid-point of the entire net worth distribution.
 Employer pension plans, Registered Retirement Savings Plans, and Registered Retirement Income Plans.