There is the illusion of wealth and there is something beyond. The rising cost of living being what it is, more and more of them are taking on a second job, or even working in the economy of “odd jobs” on demand.
From poll to poll… That of tax specialist H&R Block Canada points out that 28% of a representative sample of 1,501 Canadians say they accept on-demand work to increase their income. This percentage was only 13% in the 2022 edition of the survey. For 74% of these gig workers, it is a secondary activity in addition to their main job. Specifically, the survey adds that 20% have taken on gig work to supplement their income in the past 12 months, with that percentage rising to 35% among 18-34 year olds.
Everything is to be put in the perspective that “85% of Canadians fear that their income will not keep pace with inflation”.
In another poll conducted for TurboTax, it is said that 23% of Canadians add a small job to their main job; the majority of them being young people. ” More than half [52 %] of Canadians with a second job belong to Generation Z and 34% are millennials,” says the online tax specialist. In this survey, 85% of respondents (but 95% of Gen Zers and 91% of Millennials) with side jobs say the rising cost of living is a big factor in their decision.
To add to feelings about inflation, many cite a lack of understanding of the tax implications of gig work (23% in the H&R Block survey, 40% of Gen Zers in the of TurboTax). “The study finds that many of these gig workers are tempted not to report all of their income as the spiraling cost of living puts pressure on their financial situation,” writes H&R Block. Thus, 49% say they are ready to risk not declaring “all” their additional income, of which 44% would take the risk of declaring “none”.
Difficult financial situation
These claims stand in stark contrast to the data on the financial situation of Canadians. At least, on the surface. Thus the latest reading from Statistics Canada indicates that under the impetus of government transfers, the growth in household disposable income (+3%) was nearly double that of household consumption (+1.6%), which raised the savings rate to 6% in the fourth quarter. This is significantly higher than the 2.8% rate recorded during the fourth quarter of 2019, and above the average rate of 3.5% observed over the ten years preceding 2020.
But behind the facade, we observe that this increase in income has also made it possible to lower household debt on the credit market as a proportion of disposable income, which fell to 180.5% at the end of 2022, compared to 184 .5% at the end of 2021. This is still the highest rate in the G7. Importantly, while credit market borrowing in 2022 was 14.2% lower than in 2021, it was 79% higher than in 2019.
On the asset side, at the end of 2022, the net worth of the household sector was 4.7% lower than that posted in 2021. A third of the increases in wealth recorded in 2021 have melted, calculates Statistics Canada, reflecting in this decline in stock, bond and real estate markets. The total value of residential real estate alone was 6.8% lower than at the start of the year (but to still remain 32.8% higher than at the end of 2019, add).
This all has to be put in the context of a 400 basis point hike in the Bank of Canada’s key rate last year (from 425 basis points to 4.5% if we add the increase in January). Interest payments thus continue to increase rapidly.
The household debt service ratio, which is the total of obligatory principal and interest payments as a proportion of disposable income, reached 14.3% in the fourth quarter. It is expected that this weight will monopolize 16% of disposable income by the end of the year. A record! In the fourth quarter, growth in household disposable income before interest payments (+3.8%) was more than offset by another large increase in debt payments (+4.4%).
The federal agency retains that “interest payments increased by 14.1% from the third quarter to the fourth quarter, exceeding the record increase recorded in the third quarter […] Compared to the fourth quarter of 2021, they increased by a record margin of 45%. »
In a study published last month, Nathan Janzen, deputy chief economist at the Royal Bank, pointed out that while the excess savings of some $250 billion to $300 billion accumulated during the pandemic have not eroded, their distribution has become sharply asymmetric. It echoed Statistics Canada data indicating that average savings per household among the bottom 40% of people, already negative in the first quarter of 2020, were 12% lower than those levels in the third quarter of 2022 in due to the rising cost of living. By comparison, the savings of the 40% of people with the highest incomes increased by 28% during the same period.