Distributions of household economic accounts for income, consumption and saving of Canadian households, fourth quarter 2021
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Released: 2022-04-06
Household disposable income grew at a slower pace for lower income households than those with higher incomes in 2021. As a result, the gap between the top two and bottom two income quintiles' share of total disposable income increased in 2021 relative to the prior year, although it remained well below pre-pandemic levels.
While the distributions of household economic accounts provide important insight into the trends in household economic well-being and income inequality in Canada, the results in this release focus on the changes in income, consumption and saving for groups or an average household with specific socioeconomic characteristics. It is important to recognize that not all households, even those with similar characteristics, necessarily experience the same economic or financial situations.
Income gap widens for first time during pandemic as disposable income grows at a slower pace for lowest income households
At the beginning of the COVID-19 pandemic in 2020, households in the lowest income quintile recorded higher annual growth in their disposable income, reaching an average of $33,000 (+28.8%) vs. $169,300 (+2.7%) for the highest income quintile, as the introduction of government COVID-19 support measures more than compensated for losses in employment income. Conversely, along with the easing of pandemic restrictions and business re-openings in 2021, the highest income households increased their disposable income at almost double the rate of the lowest income households, reaching an average of $178,100 (+5.2%) vs. $34,000 (+2.9%) relative to 2020; most of these gains were derived from wages and salaries.
As a result, the gap between the highest and lowest income households—calculated as the difference between the top two and bottom two quintiles' respective shares of total disposable income—increased by 0.2 percentage points, from 40.6% in 2020 to 40.8% in 2021. Despite this recent increase in the disposable income gap, it remains well below levels observed prior to the pandemic (44.4% in 2019).
The winding down of COVID-19 support measures has the largest impact on lower-income households
Although a larger proportion of the total value of COVID-19 government support measures went to middle- and upper-income quintiles (66.2% of all support measures in 2020), the two lower-income quintiles benefitted relatively more. Due to the winding down of a number of government support measures in 2021, the value of support measures as a share of disposable income for the lowest income quintile declined to 2.4% in 2021, compared with 10.9% in 2020. In contrast, these support measures represented 1.0% of disposable income for the highest income quintile in 2021, down from 3.3% a year earlier.
Chart 1
Change in disposable income by income quintile, including contribution of each income component, 2021 relative to 2020
On a quarterly basis, most of the declines in the government support measures occurred at the end of 2021. These measures represented 2.9% of disposable income for the lowest income quintile in the fourth quarter of 2021, compared with 0.4% for the highest income quintile.
Gains in employment income for younger households outweigh reductions in transfers
Households with a major income earner aged less than 35 years recorded the highest increase (+9.1%) in average disposable income in 2021 relative to 2020, while average disposable income for households with seniors (aged 65 years and older) declined by 4.1%. Younger households saw stronger gains in wages and salaries, while decreases in income for older households were derived from all sources other than wages and salaries—including reductions in self-employment income, net investment income and transfers received, as well as from increases in taxes paid. Reductions in average transfers received occurred for all age groups, due mainly to the winding down of pandemic-related government support measures, especially for those households with a major income earner aged 45 to 54 years (-20.6%).
Chart 2
Change in average disposable income by age group of major income earner, including contribution of each income component, 2021 relative to 2020
Average net saving declines across most household groups, especially for middle-income households and households with seniors
Along with the easing of pandemic restrictions in the fourth quarter of 2021, which increased opportunities for households to spend, average net saving declined for most households by income quintile. While average net saving declined the most for middle-income households, down 29.9% relative to the prior quarter, average net saving for households in the lowest income quintile dipped below levels last recorded in the first quarter of 2020—the first time this has occurred for this household group since the start of the pandemic.
Chart 3
Average household net saving by income quintile
Households in every age group decreased their average net saving in the fourth quarter of 2021 compared with the previous quarter, especially seniors (-30.6%). While average net saving for households with seniors dropped below levels last seen before the start of the pandemic, this may not necessarily imply a worsening of their economic well-being, since households in older age groups tend to have accumulated significant pension assets from which they may draw to fund their consumption.
Sustainable Development Goals
On January 1, 2016, the world officially began implementation of the 2030 Agenda for Sustainable Development—the United Nations' transformative plan of action that addresses urgent global challenges over the next 15 years. The plan is based on 17 specific sustainable development goals.
The distributions of household economic accounts for income, consumption and saving are an example of how Statistics Canada supports the reporting on the Global Goals for Sustainable Development. This release will be used in helping to measure the following goal:
Note to readers
Statistics Canada regularly publishes macroeconomic indicators on household disposable income, final consumption expenditure and net saving as part of the Canadian System of Macroeconomic Accounts (CSMA). These accounts are aligned with the most recent international standards and are compiled for all sectors of the economy, including households, non-profit institutions, governments and corporations along with Canada's financial position vis-à-vis the rest of the world. While the CSMA provide high quality information on the overall position of households relative to other economic sectors, the Distributions of Household Economic Accounts (DHEA) provide additional granularity to address questions such as vulnerabilities of specific groups and the resulting implications for economic well-being and financial stability, and are an important complement to standard quarterly outputs related to the economy.
The DHEA estimates released today provide estimates of income, consumption and saving and their sub-components by various household distributions for the fourth quarter of 2021. The data were also revised back to 2018 in order to incorporate new household counts based on the latest demographic trends, as well as new benchmarks from the CSMA released in March 2021, which were revised for each quarterly period in 2021.
As with all data, the DHEA estimate are not without their limitations. While some distributions are estimated using timely microdata or micromodels, such as wages and salaries, others, including household final consumption expenditures and social transfers in kind, rely on assumptions or use data from prior reference periods. Users should keep these limitations in mind when analyzing the estimates included in this release.
All values are expressed in quarterly nominal unadjusted rates, unless otherwise specified. As a result, the estimates presented in this release are not adjusted for variations over time that may occur due to seasonal patterns and/or price inflation.
Products
Details on the sources and methods behind these estimates can be found in the publication Methodological Guide: Canadian System of Macroeconomic Accounts (13-607-X). See the section "Distributions of Household Economic Accounts'' under Satellite Accounts and Special Studies.
The Economic accounts statistics portal, accessible from the Subjects module of the Statistics Canada website, features an up-to-date portrait of national and provincial economies and their structure.
The Latest Developments in the Canadian Economic Accounts (13-605-X) is available.
The User Guide: Canadian System of Macroeconomic Accounts (13-606-G) is available.
Contact information
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