Investment income continues to drive the fortunes of those at the top
Income inequality in Canada continues to head in the wrong direction, according to new official stats.
In the second quarter of 2025, Canada’s income inequality remained entrenched at a record level, as the top 40% of households continued pulling away from the bottom 40%, even while the broader economy cooled.
Falling real estate valuations added pressure on less affluent households, while wealthier Canadians reaped the benefits of strong financial market returns, the latest Statistics Canada analysis reveals.
The income gap, measured as the difference in shares of disposable income between the top 40% and bottom 40% of households, held firm at 48.4 percentage points in Q2 2025, matching the previous year’s all-time high.
Overall, average disposable income rose 3.9% year-over-year, down from 5.9% in Q2 2024 as sluggish wage growth, particularly in manufacturing, trade, and professional services, dragged the aggregate figure lower. For the poorest 20% of households, disposable income grew faster (+5.6%), but nearly all of that lift came from increased government transfers rather than stronger employment income.
Meanwhile, investment income for those same low-income households plunged (−21.2%), overwhelmed by interest income declines (−2.1%) that outpaced a fall in interest expenses (−8.1%).
At the top of the income scale, the top 20% of earners saw only 3.1% growth in disposable income, below the average and driven by weakening wage momentum. However, their net investment income jumped sharply, supported by declining interest payments relative to a year ago (−9.6%).
With income constrained, the quarter marked the first time since 2022 that net saving fell across all income groups. Although inflation has eased, wage growth couldn’t keep pace with costs for essentials like housing, transport, and food. Higher-income households weathered this better due to relatively stronger net investment returns and favorable interest rate dynamics.
Household net worth grew by 4.5% year-over-year, driven by a 9.1% surge in financial assets, even as real estate values dipped 1.0%. The wealthiest 20% owned nearly two-thirds (64.8%) of all net worth, averaging C$3.4 million per household. By contrast, the bottom 40% held only 3.3%, with an average net worth of about C$86,900.
READ: Most of Canada’s wealth disparity stems from age, not luck or policy, report says
The wealth gap widened slightly to 61.5 percentage points, up 0.2 from a year ago.
Lower-wealth households did see positive net worth growth (+4.7%), but that was almost entirely due to gains in financial assets (+8.3%). Their real estate gains (+4.1%) lagged mortgage costs (+7.7%), and many were more exposed to a soft housing market.
In contrast, affluent households combined strong equity gains (+9.6%) with modest mortgage debt growth (+1.9%).
The youngest cohort (under 35) saw the slowest wealth growth (+2.1%) and were the only age group that reduced mortgage debt. Average mortgage debt for this group declined by 2.0%, although the pace of decline slowed versus 2024. Meanwhile, their debt-to-income ratio fell to 178.1% (down 5.3 percentage points). However, weak income growth (just +1.3%) kept their debt service burden broadly flat.
Households with earners aged 35-44 carried the highest debt burdens (254.2%) but saw the largest reduction in debt service ratios, as income gains outpaced debt costs. Older households (45+) increased mortgage levels the fastest (over 8%), possibly to fund investment property purchases or assist family.
