On June 17, the Parliamentary Budget Office (PBO) released a technical report that substantively revises all previous estimates of what it means to be wealthy in Canada. The top 1% own a quarter of all personal wealth in the country, while well over half is held by the top 10 per cent.
These findings move Canada from the middle of the OECD pack, to ranking as the fourth most unequal advanced capitalist country, still well behind the U.S. but almost tied with the Netherlands and Germany. In the one competition where we should never want to be a contender, we are now a medal hopeful!
Where do these new figures come from?
To measure income inequality governments can access tax records. Measuring wealth is not so easy.
Statistics Canada conducts a survey of financial security (SFS) every three years and in 2016 a “representative” sample of 12,000 families were asked about their assets and liabilities. Fewer than three-quarters responded, so how representative this survey is remains a matter of conjecture.
Consistent with patterns elsewhere, our wealthiest families declined to participate. This became a problem for the PBO when it was called upon to assess the NDP’s wealth tax proposal. Based on the SFS, the PBO could not provide an accurate assessment, hence this report.
The PBO adopted the most widely-used method. They analysed the 100 wealthiest families according to Canadian Business and then created a “synthetic” database of 16,000 families to link these exceptionally rich people to those represented in SFS. In making up this data, the PBO applied the Pareto distribution, which holds that the top fifth of a population can be assumed to have four-fifths of the wealth, and national balance sheets (NBS), which establish the values of all the different types of assets and liabilities in Canada.
Because the available data date from 2016, to update to 2019 the PBO assumed constant growth rates in both values and people. Despite the booming stock market and the arrival of a million new residents, for three years the rich did not get richer, nor the poor poorer.
It also reconciled the survey data with the NBS by deducting $435 billion in financial assets and $845 billion in non-financial assets, while adding $294 billion in liabilities. As this suggests, in all likelihood, the PBO underestimates the wealth at the very top of Canadian society, all-the-more-so as no accounting was made for assets held off-shore to avoid or evade taxation.
What are the new estimates?
How wealth is shared in Canada differs markedly from what we have long been told. Not only does the wealth held by the top 1% almost double, these roughly 170,000 families now have a greater net worth than the middling ranks.
People between the 40th and 80th percentiles used to be credited with almost a third of the net wealth in the country; now they are revealed to be holders of only a quarter. The declines for those from the 99th to the 80th percentile increase as we go down the scale, but wealth has collapsed at the bottom, where their very limited assets have been halved.
The PBO’s estimates allow us to see for the first time the distribution of wealth within the top 1% where there is a very marked disparity. The top one per cent of this 1% — that is 1,600 families — each possess an average net wealth of $408.7 million, whereas the 79,800 families who comprise the bottom half of the top 1% have to get by on an average of $7.5 million each.