1. The income gap was closing, until COVID-19 happened.
Statistics Canada has released new census data showing—surprise!—that government supports and transfers to Canadian households since 2015 have reduced the income gap in every province.
However, steady progress among low-wage earners between 2016-19 was effectively wiped out in a stroke as restrictions to slow the spread of COVID-19 were introduced.
Very high employment losses in lower-paid sectors, like food and accommodation, actually had the effect of pushing up median annual wages between 2019-20. But among the low-wage workers who kept their job, earnings fell by -10.6%, -12.8% for women and -8.4% among men.
2. The labour market is part of the problem
Market income inequality was higher in 2020 than in 2015 in most provinces (especially in Newfoundland and Labrador). That’s due to low-wage strategies in Canada’s labour market.
The national figure was slightly lower, reflecting a significant drop in both market (and after-tax) inequality in Alberta as record-low oil prices impacted salaries in related industries.
That said, in 2020, as in 2015, households in Alberta continued to have the highest median after-tax income among the provinces.
3. Government income supports and programs make a difference
On the after-tax front, the gap between the rich and poor narrowed as household income rose by 9.8% nationally, to $73,000 in 2020. That’s not a miracle—it’s the direct result of pandemic relief programs and successive increases in child benefits during this period.
Overall, there was a decline in after-tax income inequality between 2015 and 2020 in every province. As in 2015, government supports played the greatest equalizing role in provinces with historically lower household incomes (as measured by the difference between market and after-tax income inequality – shown below).
4. The pandemic changed everything
But 2020 was an unusual and very telling year for Canada to do a census on income. That’s because COVID-19 ushered in a massive round of income supports, the vast majority of which were paid for by the federal government (think: CERB).
The impact of those pandemic initiatives are unquestionable: income supports in 2020 were much more effective at reducing market inequality than in 2015—especially in western provinces.
5. Income inequality worse in Ontario, Alberta, and B.C.
The pandemic changes have not significantly realigned the order of provinces with respect to income inequality: Ontario, Alberta, and B.C. still hold the widest disparities in after-tax income. And Toronto, Calgary and Vancouver remain the most unequal cities in Canada.
But after-tax income inequality was down across the board (as measured by the Gini index and 90/10 income ratio)—notably in Calgary, Edmonton, Toronto, London and Vancouver.
6. Pandemic benefits prevented income inequality from blowing wide open
Pandemic benefits were the key to keeping income inequality at bay during the worst of the crisis.
Of the 30.3 million adults aged 15+, more than two-thirds (68.4%) received payments from one or more of the federal, provincial or territorial pandemic-relief benefits. Over one-quarter (27.6%) received federal emergency and recovery benefits, most often through CERB, and over half (55.9%) received top-ups to existing federal programs like the GIS and CCB.
These programs provided crucial support to low- and modest-income workers and students who experienced the greatest employment losses. Nine out of 10 people (88.2%) with total income between the 10th and 40th deciles (i.e., modest income earners) received some form of pandemic support. The share of middle-income adults in the 5th and 6th deciles receiving support was slightly smaller at 86.2%.
Breaking it down as the chart below does, modest- and middle-income adults were more likely than adults in other income deciles to have received federal emergency payments such as CERB, as well as top-ups to federal programs like the Canada Child Benefit or the GST/HST credit.
By contrast, only 30.2% of adults in the bottom income decile received pandemic support: 16.5% successfully applied for emergency benefits, while only 17.6% received a top-up to their existing federal benefits. This group was least likely to receive provincial or territorial benefits compared to every other decile group, including those in the top decile.
One of the reasons for this stark inequity is the fact that there are almost one million people over age 15 in the bottom decile who don’t report any form of income. That, and the fact that the bulk of pandemic support on offer was directed at offsetting employment loss and not other needs related to the crisis.
For the large majority of adults, pandemic benefits made a huge difference to their total income in 2020, including over one million people in the bottom income group. Nine out of 10 (88.7%) of those with income in 2019 and 2020 reported an increase in 2020 over 2019. Likewise, 82.4% of those in the 2nd to 4th deciles reported higher income and 67.5% of those in the 5th and 6th deciles.
Note: Figures include only those reporting income in both years. Total income refers to the sum of certain incomes before income taxes and deductions including employment income, investment sources, employer and personal pension sources; other regular cash income such as child support payments, and income from government sources. It does not include capital gains or one-time gifts or payments. Source: Statistics Canada. Table 98-10-0091-01 - Changes in income before and after the COVID-19 pandemic by 2019 income rank, age and gender: Canada, provinces