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The rich “won” the pandemic: Income inequality skyrocketed in 2021

New data shows what observers long suspected—the rich took advantage of the pandemic to fill their bank accounts

November 17, 2023

4-minute read

Canada is in a new gilded age. Many Canadians know it already. When asked whether, under capitalism, the rich get richer and the poor get poorer, Canadians say “yes” by a nearly two-to-one margin. Canadians support a wealth tax, and view inequality as a problem. But to what extent is it a problem today, if we look at the numbers?

New Statistics Canada figures show that it’s a big problem. In 2021, the top one per cent of tax filers saw a huge boost in their average total income—up 9.4 per cent to $579,100. The gains were even larger among the top 0.1 per cent: up 17.4 per cent, to over $2 million.

The more than 14 million folks in the bottom half weren’t so lucky. They saw their average total income decline by $1,400 to $21,100 between 2020 and 2021 as government benefit programs introduced during the pandemic wound down.

2021 proved to be a good year for the elite few who held onto their jobs and whose bank accounts were flush with pandemic savings. They were able to catch the run up in the stock market while they watched the value of their homes and cottages soar.

The top one per cent of tax filers reported a 12 per cent boost in salaries and wages, and the top 0.1 per cent reported double that (24.6 per cent). But the real prize came from investment income—the increase in dividend income and capital gains pushed this group of 300,000 people over the top, increasing their share of total income (including capital gains) from 11.5 per cent to 13.4 per cent in a single year.

That’s right—one per cent of income earners collected 13.4 per cent of the total aggregate income in 2021. More than one out of every eight dollars went to just one per cent of tax filers.

In 2021, the top one per cent took home an average of $811,800 after dividends and capital gains were tallied—a 40-year high. The previous peak was in 2007, when they made an average of $712,000. The top 0.1 per cent took home $3,230,100 after dividends and capital gains—and the top 0.01 per cent posted a stratospheric $12,542,100 in total income—a number too high to include in the chart below.

People in the bottom half of the income distribution reported—unsurprisingly—very modest capital gains income—think of seniors with some savings tucked away in an RRSP. Their average total income after capital gains was just $21,600, a scant $500 more than their pre-investment income.

Just to reiterate—on average, the top one per cent made an average of $223,400 in capital gains alone in 2021. The top 0.1 per cent hoovered up over almost $700,000 in capital gains. None of that money is from work—it’s simply the money that the rich collect because they already own things. It’s payment for being rich.

There were differences in income among the wealthy across the country. The average total income of the top one per cent varied from a high in Ontario and Alberta to a low in P.E.I. British Columbia takes top spot once capital gains are factored in and the Territories together sit at the bottom of this list.

Almost half of the tax filers in the top one per cent in 2021 were also in that bracket in 2017. This is a slightly lower share than the peak before the 2008-09 recession, which suggests slightly greater economic mobility today. A third of the top one percent group in P.E.I. were also at the top in 2017 compared to half of Manitoba’s one percenters.

Statistics Canada’s high income report also provides insight into women’s glacial march to the top of the income ladder. In 2021, women accounted for a slightly larger share of the top one per cent (at 26.1 per cent) than in 2020, their share of total income overall edging up from 2.1 per cent to 2.3 per cent.

Yet wage disparities persist, even at the top. Over $100,000 still separates men and women in the top one per cent ($500,800 versus $606,800). The gap is even larger if we just look at average wages and salaries ($256,900 vs $403,700).

Fun fact: There are 76,400 women in the top one per cent, and they are less likely to be living in couple families or to rely on the labour market for their income compared to men. That is to say, they are more likely to be single, older women with sizable (inherited) financial assets.

So what does it all mean?

In 2021, Canada’s financial elites rode a wave of high stock markets and real estate values to sizable profits. They scooped up rentier checks, and they watched the value of their assets boom. There’s no question as to who “won” the pandemic—the rich made out like bandits. The question is what to do now, as the rich pull away from the rest of us.

The Daily Bread Food Bank recently released its annual profile of food insecurity and poverty in Toronto. There were over 2.5 million food bank visits between April 1, 2022 and March 31, 2023. That is a 51 per cent increase year-over-year, the highest annual increase ever reported.

Food banks are the tip of the iceberg, as more and more low- and modest-income households—who don’t have investment portfolios and real estate to fall back on—increasingly struggle with an out-of-control cost of living crisis. Whether it’s food, transportation, or housing, people—especially those from marginalized communities—are struggling to make the rent and put food on the table.

As the federal government gets ready to deliver its Fall Economic Statement next week, and the provinces weigh in on their finances, we can’t turn away from desperate need in our communities. Will the government turn away from its responsibility to make a more just and fair society? This moment is a bellwether for what’s to come. Let’s hope the feds are paying attention.

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