Wealth distribution in Canada
Statistics Canada has released results of the latest wealth survey (Survey of Financial Security, or SFS), covering the 2005 year (previous survey was for 1999, and prior to that, 1984). This makes for an interesting comparison, as the 1999 results came at a time when stock markets were bubbling, whereas by 2005 the bubble had shifted to real estate. One notable stat right upfront is that principal residence has increased as a share of total assets, from 31.6% in 1999 to 33.4% in 2005.
This trend is, of course, reflected on the debt side of the ledger as well. In fact, while median assets increased by 23% between 1999 and 2005 (adjusted for inflation), median debt rose an astonishing 38%. It is also notable that while debts represent real money that is owed, assets are essentially paper â€“ based on market value, which in the case of real estate is determined on the margin by trends in sales. But if a large share of people tried to cash in by selling their homes, prices would plummet.
In terms of distribution, the report finds a worsening situation with regard to wealth inequality. By quintiles, the largest gains in net worth accrue to the top quintile (up 43% from 1999) and things scale down from there; the bottom quintile had a 70% decline in net worth. In the supplementary tables, it is notable that there are now over one million households with over a million dollars in net worth. These households, 8.2% of families, hold 46.5% of the total net worth. Overall, the top 20% had 69.2% of total net worth, while the bottom 20% had 2.4% and the bottom 60% had 10.8%.
My colleague Steve Kerstetter, who wrote the CCPA’s analysis of wealth distribution based on special runs from the last SFS, notes that the sample size is much reduced in the 2005 update, from 23,000 to 9,000, which makes the finer-grain analysis (by wealth level, by province) more difficult.
He also notes that the new release includes imputations for pension income. This was controversial last time around since even though they have a cash value they cannot be used as collateral (numbers on this basis were provided but as a supplement not the core approach). The new change in methodology limits comparisons with previous surveys. The supplemental tables provide for some comparisons with 1999, but they require further computation, so I will report more on them later.