This text is part of the special Personal Finance section
Wealth is distributed very unequally in Quebec, a province which has one of the worst scores in Canada, according to a recent study by the Observatoire québécois des inequalities. The research focused on wealth inequalities, that is to say, a person’s net worth, or all of their accumulated wealth minus their liabilities. On the other hand, on an international scale, Quebec and Canada are among the least unequal OECD states in this regard.
In an analytical note published in November and which will be the prelude to a series which will explore the link between wealth inequalities and social inequalities in health, the Observatory highlighted the fact that wealth inequalities were indeed more pronounced than those of income. According to the study, a family in the richest 10% has, on average, income before taxes and transfers nine times higher than a family in the poorest 40%. When it comes to heritage, the gap is even deeper, 76 times higher.
“The results surprised us, because it’s a huge difference,” explains economist Geoffroy Boucher, one of the two authors who believe that the data on wealth paint a more complete picture of the economic situation of ‘a person.
The data collected by the study reveals, among other things, that in Quebec, the 20% of the richest families hold 68% of the accumulated wealth. This heritage is made up of total assets, i.e. financial assets (money in the bank, investments, life insurance) and non-financial assets (housing, vehicle, copyright), from which we subtract the debt (mortgage, loans, credit card).
The median net worth of the top quintile, that is to say the 20% of the highest wealth, amounted to $1.3 million in 2019, compared to $2,600 for the bottom quintile made up of families less wealthy, which is therefore 500 times lower. Real estate assets constitute the main source of assets for families in Quebec. “Families who are owners in fact have assets 20 times higher than those who are tenants,” we can read.
Researchers find that government savings incentives (like RRSPs and TFSAs) disproportionately benefit wealthier families. “The top quintile,” write the authors, “holds 70% of the assets held in an RRSP and 55% of the assets held in a TFSA. » The wealthier a family is, the more diversified the composition of its assets.
The research team also looked at debt. “Debt is a double-edged sword, it can lead to impoverishment or enrichment depending on the person,” says the economist. This ability of households to borrow varies according to income level. “Like assets, debt is distributed very unequally within Quebec families. » If the amount of debt contracted by the least well-off families is significantly lower than that of the best-off families, the burden of debt weighs heavier among the former, according to the authors. For a family in the lowest net worth quintile, total debt represents 104% of the value of its total assets. Conversely, for families in the top quintile, debt represents only 6%.
Well placed internationally
On a pan-Canadian scale, Quebec is at the forefront of the most unequal provinces in terms of distribution of wealth. “In 2019, the Palma index was 19.1 in Quebec, compared to 15.4 in the Atlantic provinces. » However, compared to OECD countries, Quebec and Canada are positioned in the list of least unequal places. Countries like France, Italy and Japan show less good results. Spain, the United Kingdom and the United States are the three countries with the worst performances in this regard.
Researchers have identified in the literature certain possible solutions to reduce inequalities. One of them is to support the accumulation of assets among low-income populations by reviewing some of the rules governing financial assistance programs, such as the social assistance program. Another would be to make greater use of taxation, by reviewing the taxation of dividends and capital gains and the possibility of taxing inheritances. “Heritage can be transmitted to descendants and thus contribute to reproducing social positions from one generation to the next. Not everyone starts on an equal footing,” mentions Geoffroy Boucher.
A review of the rules of government measures to encourage savings could also be necessary in order to prevent tools like the RRSP or the TFSA from contributing to increasing inequalities. “The annual contribution limit for these programs could be lowered or a government contribution for low-income individuals could be considered. » The economist reports that the Observatory will hold a national forum on the theme of wealth inequalities in Montreal, on April 3, 2024, which will bring together a range of political and economic actors.
This content was produced by the Special Publications team at Duty, relating to marketing. The writing of the Duty did not take part.