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Financial Security - Income Distribution

Relevance

The well-being of Canadian families depends on both their level of income and the distribution of income within the population. Differences in the distribution of income, or 'income disparities', are often considered a measure of a society's fairness. High income disparities are often associated with high unemployment but may also indicate that large numbers of people are in low-paid and low-skilled jobs.

Summary

  • National Picture —  Since 1995, the after-tax income of the top income group rose much more than the income of other income groups. Consequently, income disparities increased in Canada between 1995 and 2011.
  • Regions — In 2011, the highest income disparities between the top 20% and the bottom 20% income groups were in British Columbia, Ontario and Alberta. The lowest were in Prince Edward Island.
  • International Picture — The extent of income disparity in Canada was comparable to that of many G7 and OECD member countries.
  • Family-adjusted after-tax income — Adjusting after-tax income for family size and composition reveals smaller income disparities among income groups than for unadjusted after-tax income, although trends were similar over time.

National Picture

In 2011, the average after-tax income in Canada for the bottom 20% of family units (after-tax income of $24,700 or less) was $15,100, and for the top 20% (after-tax income of $93,000 or more) was $139,400. The difference between these two groups has increased in recent years.

Income disparities (expressed in 2011 constant dollars) rose between 1995 and 2011. While average after-tax incomes increased by 12.7% for families with incomes in the bottom 20% and by 23.2% for families with incomes in the middle 60%, it rose by 37.2% for those in the top income group. Consequently, the difference between the top 20% income group and the bottom 20% rose by 40.9%, increasing from $88,200 in 1995 to $124,300 in 2011. Similarly, the difference between the average income of the top 20% and the middle 60% increased from $58,167 to $85,900, or by 47.7% over the same period.


This Chart contains data for Average after-tax income, by income group, Canada, 1976-2011. Information is available in table below

Source: ESDC calculations based on Statistics Canada. Table 202-0703 - Market, total and after-tax income, by economic family type and after-tax income quintiles, 2011 constant dollars, annual, CANSIM (database).


Warning: This data table may contain very wide content. Horizontal scrolling may be necessary.

Average after-tax income, by income group, Canada, 1976-2011 (2011 constant dollars)
197619771978197919801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011
Bottom 20%13,00012,00012,70013,30013,40014,20013,80012,90013,30013,90014,10014,40014,60015,10014,10013,50013,30013,30013,40013,40012,90012,50012,40012,70012,70013,60014,00013,90013,80013,70014,30014,90015,30015,30015,00015,100
Middle 60%48,36748,90049,06748,66749,53348,83347,20045,56745,80046,43346,40046,13347,23347,93346,06744,03344,23343,33343,50043,43343,03343,13344,50046,03346,70048,40048,46748,40048,93349,73351,03352,63353,26753,43353,46753,500
Top 20%109,700104,500107,800105,900107,900106,400104,800103,600103,400105,100105,700105,200106,800108,500105,700103,100103,300100,300101,300101,600103,200105,100111,900115,100119,900124,700125,000123,400126,800128,000131,100136,600138,600138,900139,500139,400

Income disparities shown as ratios (i.e., the top income group divided by the lowest or middle income group) reveal that, depending on the year, families in the top 20% received between 7.2 and 9.4 times more than families in the bottom 20% in the period 1976 to 2011. In the same period, families in the top 20% had an income 2.1 to 2.6 times higher than the middle 60%. Income disparities increased in the mid 1990s and have stayed relatively high ever since. In 2011, the top 20% had an average income 9.2 times that of the bottom 20%, and 2.6 times that of the middle 60%.


This Chart contains data for Average income of the top 20% group relative to other groups, Canada, 1976-2011. Information is available in table below

Note: Average incomes were calculated using the average after-tax family income.

Source: ESDC calculations based on Statistics Canada. Table 202-0703 - Market, total and after-tax income, by economic family type and after-tax income quintiles, 2011 constant dollars, annual, CANSIM (database).


Warning: This data table may contain very wide content. Horizontal scrolling may be necessary.

Average income of the top 20% group relative to other groups, Canada, 1976-2011
197619771978197919801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011
Top 20% to bottom 20%8.48.6758.5127.9778.0697.4937.59787.7837.5637.4967.37.317.2197.4967.6497.7837.57.5777.5927.968.43899.0899.49.1828.9268.8819.1949.39.1659.1529.19.1229.2819.2
Top 20% to middle 60%2.272.1372.1972.1752.1792.182.2192.2752.2562.2662.2792.2812.2612.2622.2942.3412.3352.3162.3322.3392.42.4372.5142.4972.5682.5772.5762.52.5922.5742.572.5932.6042.6012.6072.6

Regions

Using the ratio of the top 20% to the bottom 20%, in 2011 income disparities were lowest in Prince Edward Island and highest in British Columbia. In Prince Edward Island, families in the top 20% had an income 7.2 times higher than those in the bottom 20%. In British Columbia, families in the top 20% had incomes 10.3 times more than families in the bottom 20%.


This Chart contains data for Ratio of the average income of the top to bottom 20% income groups, by region, 2011. Information is available in table below

Note: Average incomes were calculated using the average after-tax family income.

Source: ESDC calculations based on Statistics Canada. Table 202-0703 - Market, total and after-tax income, by economic family type and after-tax income quintiles, 2011 constant dollars, annual, CANSIM (database).


Warning: This data table may contain very wide content. Horizontal scrolling may be necessary.

Ratio of the average income of the top to bottom 20% income groups, by region, 2011
CANNLPENSNBQCONMBSKABBC
9.28.17.27.77.48.29.67.87.99.510.3

International Picture

Another way of assessing income disparities is to assign a value to disparity. This value is called the Gini coefficient. Commonly used worldwide, the Gini coefficient ranges between 0 (no disparity) and 1 (extreme disparity). (See Income Distribution for details.)

Using the Gini coefficient, income disparity in Canada had a value of 0.320 in 2010. Canada's Gini coefficient was the fourth lowest among the G7 countries and was slightly higher than the average for OECD countries. Among OECD members, the Gini coefficient ranged from 0.244 in Iceland to 0.501 in Chile. Canada's Gini coefficient was higher than those of many Northern and Eastern European countries, but was lower than those of the United States, Turkey and Latin America OECD members (Mexico and Chile).


This Chart contains data for Income disparity, G7 countries and OECD average, 2009 and 2010. Information is available in table below

Source: Organization for Economic Co-operation and Development (OECD). Income Distribution Database (via www.oecd.org/social/income-distribution-database.htm) [cited July 10, 2013].


Warning: This data table may contain very wide content. Horizontal scrolling may be necessary.

Income disparity, G7 countries and OECD average, 2009 and 2010 (Gini coefficient)
France (2010)Germany (2010)OECD-34 (2010)Canada (2010)Japan (2009)Italy (2010)United Kingdom (2010)United States (2010)
0.3030.2860.3130.3200.3360.3190.3410.380

Family-adjusted After-tax Income

A family's financial well-being depends not only on the level of income but also on the number of family members and family composition. Family-adjusted income is a measure that allows for comparisons free of differences in family size and composition among income groups. (See Income Distribution for more details on family-adjusted after-tax income).

In 2011, the average family-adjusted after-tax income was $16,000 for families in the bottom 20% income group, $39,833 for families in the middle 60%, and $87,100 for families in the top 20%. Income disparities rose after 1995. The difference between the top 20% income group and the bottom 20% increased from $49,300 in 1995 to $71,100 in 2011 (in 2011 constant dollars). Similarly, the difference between the top 20% income group and the middle 60% increased from about $31,400 to $47,267 over the same period.


This Chart contains data for Average family-adjusted after-tax income, by income group, Canada, 1976-2011. Information is available in table below

Source: ESDC calculations based on Statistics Canada. Table 202-0706 - Market, total and after-tax income of individuals, where each individual is represented by their adjusted and unadjusted economic family income, by economic family type and adjusted after-tax income quintiles, 2011 constant dollars, annual, CANSIM (database).


Warning: This data table may contain very wide content. Horizontal scrolling may be necessary.

Average family-adjusted after-tax income, by income group, Canada, 1976-2011 (2011 constant dollars)
197619771978197919801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011
Bottom 20%12,00011,70012,30012,40012,80013,10012,60012,10012,10012,80013,20013,40014,00014,30013,30012,80012,50012,60012,60012,50012,20012,10012,40012,90012,90013,80013,80013,80013,80014,10014,80015,50015,60015,50015,60016,000
Middle 60%30,56731,16731,43331,53332,20031,90031,00030,20030,60031,20031,40031,50032,36733,06732,10030,63330,86730,23330,53330,40030,36730,63331,80033,00033,70034,86735,00034,96735,60036,43337,13338,46739,16739,30039,36739,833
Top 20%62,40059,50062,00061,10063,00062,60061,70061,40061,50062,60063,20062,90064,00065,20063,50062,50062,60060,70061,40061,80063,00064,10068,20070,10073,90076,90077,30076,50079,20079,60081,80084,90086,70086,90087,20087,100

When taking family size and composition into account, income disparities were smaller. Yet the trends over time were similar. Compared with unadjusted income (see the National Picture section), family-adjusted after-tax income data show smaller differences among income groups. Moreover, income disparities expressed as ratios were much smaller using the family-adjusted income. In 2011, families in the top 20% income group received an income 5.4 times higher on average than those in the bottom 20% (compared with 9.2 for unadjusted after-tax income). Similarly, families in the top 20% income group had, on average, an income 2.2 times higher than those in the middle 60% (compared with 2.6 times higher for unadjusted after-tax income).

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