After-tax income is defined as total income (market income plus government transfers) less income taxes. Thus, after-tax income reflects income redistribution through transfers and taxes.

After five consecutive years of growth, after-tax income experienced a pause in 2002

After adjustment for inflation, average after tax income for families of two or more people reached $60,500 in 2002, remaining virtually unchanged from 2001 (+ 0.3%). This change was significantly less than what these families experienced between 1996 and 2001, when the average annual increase was 3.2%. As with after tax income, market income (-0.2%) and total income (-0.3%) remained relatively stable from 2001 to 2002. Nevertheless, after tax income had risen 18% since 1996.

The income of lone parent families headed by women climbed from $25,300 to $30,800 (+22%) between 1996 and 2002. In 2001, it was $32,500.

Families of two or more people whose main income earner was under 65 years of age received after tax income in 2002 of $63,200, virtually the same as that of the previous year (+0.2%). However, the average after tax income of these families had risen by almost $9,800, or close to 18%, since 1996.

In recent years, average after tax income of elderly families increased steadily, rising from a low of $39,000 in 1996 to a high of $43,400 in 2002. However, since 1996, these families had experienced slower growth (+11%) than families whose main income earner was under 65 years of age (+18%), by a difference of 7 percentage points.

Average after tax income for unattached individuals was $25,900 in 2002, relatively unchanged from 2001 (+2.4%). These people had experienced steady growth in their income (+17%) since 1996.

Differences from province to province between 1996 and 2002

After tax income of families with two or more people had risen in all provinces since 1996. Between 1996 and 2002, the national growth rate for this type of family was 18%, but rates varied considerably from province to province. Alberta and Ontario both exceeded the national average with growth rates of 20% and 18% respectively. The growth rates in the other provinces varied between 8.3% (Prince Edward Island) and 17% (Nova Scotia and Quebec). Between 2001 and 2002, after tax income for these families remained relatively stable for all provinces.

Similarly, after tax income for unattached individuals increased unevenly among the provinces. Since 1996, it had seen growth of 17% for Canada as a whole. As was the case for families of two or more people, the income of unattached individuals also rose in Ontario and Alberta, which respectively saw increases of 22% and 20% between 1996 and 2002. Compared to 2001, after tax income in 2002 remained the same in all provinces and did not see any significant changes.

Government transfers and taxes helped to reduce disparities between the different family types

In 2002, families of two or more people earned an average of $7,300 in transfers and paid $12,800 in taxes for a net contribution of $5,500. This amount was equal to 7.5% of their income before transfers and taxes. This means that the average family retained 92.5% of its market income.

Two earner couples with no children had the lowest proportion, retaining 83% of their market income. At the other end of the spectrum, this ratio was 147% and 120$ respectively for families whose main income earner was an elderly person and for lone parent families headed by women. In other words, these families received more in transfers than they paid in taxes.

Personal income taxes and government transfers reduce the income disparities among the various types of families. While average market income for elderly families was 56% of average market income for non elderly families, the ratio was 88% for after tax income. Average market income of lone parent families headed by women was 48% of the average market income of all other families, but rose to 62% after transfers and taxes.

Lowering the disparity among income quintiles

In 2002, families of two or more people whose market income was in the top quintile received $11.70 for every dollar received by families in the bottom quintile. After transfers and taxes, the disparity was down to $5.20 for every dollar.

The impact was even greater for unattached individuals. Those in the top quintile received $20.70 for every dollar earned by unattached individuals in the bottom quintile. After transfers and taxes, unattached individuals in top quintile received $6.80 for every dollar received by those in the bottom quintile.

Average after tax income for families of two or more people experienced virtually the same evolution in both the lowest and highest quintiles, which was not the case for average market income where there were greater differences. Thus, for the bottom quintile, average after tax income remained relatively stable compared to 2001 (-0.4%) at around $22,300 and much the same happened with the top quintile (-0.8%) where after tax income was $116,400 in 2002.

Since 1996, average after tax income in the first quintile saw a smaller increase (+17% or $3,200) than market income (+35% or $3,200). There was less of a disparity in the change in after tax income and market income in the last quintile, with after tax income increasing 20% (or $19,300) and market revenue increasing 17% (or $21,100).

For unattached individuals, the increase in after tax income in the first quintile was greater than for families of two or more people and rose 8.3% from 2001. In 2002, it was about $7,800. For the highest quintile, the after tax income for unattached individuals was $53,200 in 2002, virtually unchanged from 2001 (+0.8%). Unattached individuals in the lowest quintile had seen their after tax income increase by 22% (or $1,400) since 1996, while those in the highest quintile received an increase of 17% or $7,600.

Disparities between quintiles varied by family types

Since 1996, the disparity in the after tax income of persons in the first quintile and that of those in the last quintile increased but to differing degrees depending on family type.

In 1996, the disparity between the after tax income of the two quintile extremes for families of two or more people was $78,000. In 2002, this gap had widened to $94,100 or an increase of 20.6% in six years.

For unattached individuals, the disparity observed between the lowest quintile and the highest quintile climbed from $39,200 in 1996 to $45,000 in 2002, an increase of 15.8%.

Chart 6.1
Average after-tax income of families, Canada and provinces, 2002

Chart 6.2
Averages in market income, total income and after-tax income of families followed similar trends, 1980 to 2002

Chart 6.3
Change in average market income and after-tax income by family type, 1992 and 2002

Chart 6.4
Female lone-parent families earned only 33% of average market income, but 45% of average after-tax income of two-parent families, 2002

Chart 6.5
Single-earner two-parent families received 74% of after-tax income of dual-earner families, 2002

Chart 6.6
Transfers and taxes reduced the income difference between elderly and non-elderly families, 2002

Chart 6.7
Lower income quintiles families had larger shares of aggregate income, after transfers and taxes, 2002