Richest 100 Canadians have more wealth than bottom 6 million families combined. That’s a serious problem.
When it comes to inequality, politicians and the media often focus on income inequality — differences in annual earnings between high-income and low-income people.
But the much greater inequality in Canadian society is wealth inequality: the difference between how much is owned by the rich and poor.
Canadian Business’ rankings of the 100 richest people and families in Canada shows that, together, this group has a combined net worth (assets minus debts) of $261.7 billion.
Data on net worth of ordinary people is harder to come by, but the Statistics Canada Survey of Financial Security provides this information broken down by quintile.
Together, the two lowest quintiles by net worth account for 6.14 million Canadian households which have a combined net worth of $238.5 billion — more than $23 billion less than the richest 100 families.
To re-state, 100 families own more wealth than 6.14 million Canadian households combined.
This enormous gap in wealth isn’t just unjust from a moral perspective, but also has harms our economy and society in significant ways:
- Slower growth. Significant inequality slows economic growth for a variety of reasons. As low- and middle-income people have less money, they spend less in the economy and reduce their investment in education, limiting the supply of skilled workers. OECD research shows that growing inequality over the past few decades have reduced GDP growth by around 8.5%, costing us hundreds of billions of dollars each year.
- Lower social mobility. As inequality grows, those with more wealth are better able to prevent others from rising up the economic ladder through various mechanisms like inheritance and political lobbying to use policies to fortify their position. At the same time, those with fewer resources are less likely to escape poverty traps and afford an advanced education that can facilitate social mobility.
- Concentration of political power. As the richest few accumulate more wealth, they are able to exercise more political power. They do this both through direct mechanisms like funding campaigns and media, and through less direct channels like threatening to withhold investment or layoff workers if certain policies with which they disagree are enacted. Money is power, and when a small number of people have most of it they are able to make political decisions for the rest of us.
- Deterioration of trust and social stability. High levels of inequality breeds distrust within society, heightening tensions between various economic classes and reducing trust in democratic institutions. Social stability breaks down as inequality grows, a phenomena which can produce a range of unpredictable and unpleasant outcomes.
Wealth inequality — not just income inequality — is a growing problem in Canada, and if left unchecked will continue to erode economic growth, social mobility, and stability.
There are, fortunately, policies that can effectively reduce wealth inequality such as a wealth tax, inheritance taxes, or social ownership funds — all of these must be considered if we are to tackle this growing challenge.