Study: Changes in wealth across the income distribution, 1999 to 2012
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Between 1999 and 2012, the average wealth (or net worth) of Canadian families rose from $319,800 to $554,100, or 73% (in 2012 constant dollars). Average wealth increased faster among higher-income families during this time period.
Although closely related, income and wealth are two distinct and different concepts of economic well-being. Income is a flow, defined in this study as total income earned by the family over the course of a year (before tax). Wealth (or net worth) is a stock figure, defined as the total value of family assets minus outstanding debt.
Among the 20% of family units with the highest incomes, or top income quintile families, average wealth increased by 80% between 1999 and 2012, rising from $721,900 to $1,300,100.
At the other end of the income spectrum, the 20% of families with the lowest incomes—or bottom income quintile families—increased their average wealth by 38%, from $79,500 to $109,300.
Over the same period, the 20% of families that were in the middle of the income distribution—also called middle income quintile families—increased their average wealth by 73%, from $261,800 to $453,300.
Changes in total net worth
Between 1999 and 2012, the cumulative net worth of Canadian families increased by $4.17 trillion (in constant 2012 dollars). This was the result of a $4.92 trillion increase in the overall values of assets, combined with a $0.75 trillion increase in the overall value of debt.
Half of the increase in the overall value of assets was due to real estate, while the other half was due to other types of assets (including employer pension plans). Such results, however, varied by income quintile.
Among top quintile families, net worth increased by $2.02 trillion—the result of a $2.33 trillion increase in assets and a $0.31 trillion rise in debt. About 45% of asset gains were due to real estate and 55% were due to other types of assets.
Among bottom income quintile families, net worth increased by $0.12 trillion as they combined a $0.15 trillion increase in assets with a $0.03 trillion increase in debt. Most asset gains (73%) were related to an appreciation of real estate values.
Changes in wealth concentration and financial portfolio
Over time, changes in net worth can lead to shifts in wealth concentration and in the financial portfolio of Canadian families.
In 2012, families in the top income quintile held 47% of the total household wealth held by Canadian families. This compared with 45% in 1999. Families in the top quintile also held 41% of the overall debt in 2012 (compared with 40% in 1999).
Conversely, families in the bottom income quintile held 4% of total wealth in 2012, compared with 5% in 1999. In both 1999 and 2012, bottom income quintile families held 5% of the overall debt.
Examining shifts in the composition of assets and debt held by Canadian families is also important—particularly the portion occupied by real estate assets and mortgage debt.
Between 1999 and 2012, real estate assets as a share of overall assets rose in all income quintiles, but particularly among bottom income quintile families.
For example, real estate assets as a proportion of total assets rose from 46% to 57% among families in the bottom income quintile. For the top income quintile families, the share increased from 34% to 40%.
By comparison, the debt composition remained relatively stable over the period, as mortgage debt accounted for approximately three-quarters of overall debt in both 1999 and 2012 in almost all income quintiles.
The exception was among families in the bottom quintile, as mortgage debt accounted for 64% of total debt in 2012 compared with 61% in 1999.
Little change in the proportion of families with low income and no wealth
The study also examined the proportion of family units with "low income and no wealth," which are defined as those whose family income was below 50% of the median, and with a net worth equal or below zero (excluding employer pensions).
In 2012, 3.5% of Canadian family units had low income and no wealth. This proportion was largely unchanged from 1999 (3.3%).
Some types of families were more likely to be in this situation than others.
This was the case among families whose major income earner was aged 15 to 34 (8%), families whose major income earner had less than a high school diploma (5%); unattached individuals (9%), lone-parent families (10%) and families who immigrated recently (8%).
Note to readers
In this study, data from the Survey of Financial Security (SFS) are used to examine the changes in wealth across the income distribution. The study also provides information about the proportion of Canadian families with low income and no wealth. The SFS is a household survey that collected information from Canadian families on assets and debts, and also on a number of other personal and family characteristics – such as age, education, income, marital status, and employment. Prior to 2012, the SFS was conducted in 2005 and in 1999. All values in the study are expressed in 2012 constant dollars, using the all-items Consumer Price Index as a deflator.
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