Good news: Canadians are becoming wealthier
Yes, gains were greater at the top, but even at the bottom, there were improvements, William Watson says.
Judging by Google News, most of the headlines about Statistics Canada’s report last week on changes in Canadians’ wealth between 1999 and 2012 focused on how wealth grew more at the top end of the income distribution than the bottom. The top fifth of families held 49 per cent of all Canadian wealth in 2012 vs. 47 per cent in 1999. I guess that’s where we are these days. Inequality trumps all. If a rich guy gets more than I do, that’s the only thing I care about now, even if I do OK myself.
To my mind, the more interesting and surprising thing about the numbers is just how much wealthier the country became over those 13 years. The average net worth of Canadians — the difference between what we own and what we owe — increased 73.3 per cent, which is almost six per cent a year. And that’s in real (inflation-adjusted) dollars.
The total increase in Canadians’ wealth was $4.2 trillion. Billions are hard enough to grasp. A thousand times a billion, which is what a trillion is, is basically unimaginable. There are 10 million bricks in the Empire State Building, apparently. It would take you 100,000 Empire State Buildings to get to a trillion bricks. That help?
If not, think of it this way. Canadian GDP, the value of the goods and services we who live and work in Canada produce in a year, is now roughly $2 trillion. So between 1999 and 2012 Canadians’ wealth went up by roughly two years’ output, which also happens to be two years’ income, since whatever we produce and sell in a year generates our income in that year.
So the big news from these numbers is big growth in wealth. Median income — that is, the income of the Canadian family exactly in the middle — went from $49,700 to $57,000 from 1999 to 2012. At the same time, median net worth went from $137,200 to $243,800, almost doubling. The ratio of its wealth to its income went from 2.76 to 4.28. Better if it had gone to 10. But a near doubling of wealth isn’t, if you’ll forgive more math, half bad.
It’s true, things were better at the top than the bottom. The median income within the top fifth of earners rose from $123,900 in 1999 to $149,500 in 2012, while median wealth in that bracket went from $424,900 to $879,100, which is actually a little better than doubling. The biggest increases in this fifth’s wealth came from housing and employer pensions.
In the bottom fifth, by contrast, incomes were up only five per cent (from $14,000 to $14,500) while wealth increased only 14.5 per cent (from $7,600 to $8,700). Again, those dollars are inflation-adjusted so they do constitute a real improvement, but obviously not nearly as big an improvement as at the top.
It’s important to realize, though, that in comparing population slices between years we’re not talking about the same people. Some Canadians who were in the bottom fifth of the distribution in 1999 were still there in 2012. But many others — students, young workers, recent immigrants, people whose luck improved after 1999 — weren’t. They will have moved out and up, building their wealth. By the same token, some other people will have moved in, both a new cohort of young people — 20-year-olds who were seven in 1999 — and some older folk as they retired from not very well paying jobs and drew down not very high savings.
In judging how fair our society is, we need to know more about how easily and how often people move up — and down. But for the time being, what’s clear is that between 1999 and 2012 both the economic pie and the five main slices from it grew.
Median income … went from $49,700 to $57,000 from 1999 to 2012.