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OTTAWA—The wealth advantage for Canada’s affluent starts at a young age, says a study released today by the Canadian Centre for Policy Alternatives (CCPA).
The study, by CCPA Senior Economist David Macdonald, dives into 13 years of Statistics Canada data to track changes in wealth between Canada’s wealthiest families and those families in the middle of the wealth spectrum while adjusting for age. It is a study in contrasts: the wealth gap between Canada’s affluent and middle class is not only growing, the benefits for the most affluent start early in life. Breaking out wealth by age reveals much more extreme gaps than are visible when all ages are mixed together.
“The wealthiest Canadian families in their twenties have an average net worth of over $500,000—more than Canadian middle class families manage to save over a lifetime,” says Macdonald.
Among the study’s key findings:
- Middle class families in 2012 had under $10,000 in wealth in their twenties and those in their sixties accumulated $470,000 in wealth by the time they start looking toward retirement.
- In 2012, Canada’s most affluent families in their twenties had $540,000 in wealth and peaked in their sixties with $3.4 million in wealth—seven times more than middle class families in that age group.
- Wealth for the most affluent families doubled in real terms between 1999 and 2012. The net worth for those in their twenties went from $280,000 in 1999 to $540,000 in 2012. Those in their sixties saw wealth rise from $1.8 million in 1999 to $3.4 million in 2012.
- Percentage growth in wealth for the middle class was smaller in every age group in 2012. Dollar change in wealth for the middle was dwarfed by what happened for the most affluent.
“The wealth gap has grown rapidly since 1999,” says Macdonald. “Wealthy Canadian families of all ages are worth twice as much as their counterparts were in 1999, with the exception of affluent thirtysomethings—their net worth grew by 33%. But even that more modest growth made those thirtysomethings millionaires in 2012.”
The doubling of net worth for almost all the affluent age groups was not due to inheritance, but was related to high returns on assets since 1999; higher income levels and; much stronger pay raises for the wealthy since 1999. The study attributes the increases for the wealthy in their twenties to parental aid in three key asset areas: the principle residence, secondary real estate, and family businesses.
“It seems unlikely that the tremendously well-educated middle class youth of today could overcome the half-a-million dollar head start that the wealthiest Canadian families enjoy in their twenties. It is time to re-examine measures like the 50% lower tax rate on capital gains that may, in some small measure, slow this growing gap,” Macdonald concludes.
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The Wealth Advantage: The Growing Wealth Gap Between Canada’s Affluent and the Middle Class is available on the CCPA website.
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