- Income inequality in Canada has declined in recent years and fell sharply during the pandemic. Wealth inequality has dropped dramatically over the past two decades.
- But inequality still exists in Canada—women, racialized groups, new Canadians, and Indigenous people face tougher economic circumstances.
- The end of pandemic supports, high inflation, and high interest rates will put pressure on inequality. Lower-income households will suffer more under these circumstances.
Key Insights
Despite a popular belief to the contrary, inequality in Canada has diminished in recent years, thanks to the progressive nature of Canada’s income tax system coupled with government transfers to households. Inequality rose in the 1980s and early 1990s, but the distribution of market income has changed little in Canada since then. Income inequality stabilized in the early 2000s and has trended down since 2013.
The downward trend culminated in a large drop in 2020, when pandemic-related income supports, like the Canada Emergency Response Benefit, were created. Though these support payments are now over, other programs that have contributed to falling income inequality—like the Canada Child Benefit, Old Age Security, and the Guaranteed Income Supplement—persist.
But considerable income inequality still exists in Canada. Wages and salaries, capital gains, and investment income aren’t evenly distributed. We see large gaps in employment incomes between men and women, between top earners and most Canadians, and between racialized people and white Canadians.
Our relative performance in a number of socio-economic indicators suggests that we could do much better—particularly when compared with Nordic countries and other European nations. Moreover, broad measures of inequality, which typically separate incomes by quintile, can mask the inequality that affects women, racialized people, Indigenous people, and other groups.
Looking ahead, a number of factors are likely to challenge income inequality in Canada, like inflation, higher immigration targets, and the green transition. But there are ways we can reduce inequality and intergenerational mobility.
Read the issue briefing to get our full analysis.
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