Canadian Income Study: Rich Stay Rich, Poor Stay Poor Is The New Trend

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It’s getting harder for Canadians to move up the income ladder, but easier for the richest to hold on to their wealth, Statistics Canada says in a new study. | Hemera Technologies via Getty Images
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It’s getting harder for Canadians to move up the income ladder, but easier for the richest to hold on to their wealth, Statistics Canada says in a new study.

Income mobility — the ability of people to move up or down the income ladder — has been in a 30-year decline in Canada, the study found.

In the 1980s, three-quarters of Canadian tax filers moved up or down the income ladder in a five-year period, StatsCan said. But by the 2007-2012 period, only two-thirds of Canadians moved anywhere on the income ladder.

The study found upward mobility slowed down in the lower-income groups, while downward mobility slowed down in the highest income groups.

income mobility canada
In the early 1980s, three-quarters of people would move up or down the income ladder in a five-year period. By 2007-2012, that dropped to little more than two-thirds. (Chart: Statistics Canada)

At the same time, any income jumps people make are smaller — large jumps from rich to poor, or vice versa, are becoming less common.

StatsCan suggests this is making income inequality a larger problem in Canada.

“Income mobility and income inequality are closely related,” the study said. “Higher income mobility tends to mitigate the impact of inequality, since mobility may smooth income variations over time.”

income mobility canada
Making big jumps on the income ladder is harder than it used to be. In the early 1980s, a family could be expected to jump an average of 1.7 income "deciles" over a five-year period. By 2007-2012, the typical family could only be expected to jump one income decile. (Chart: Statistics Canada)

All boats lifted

The study does note a positive side to income mobility in Canada over the past 30 years: Canadians of all income groups have seen robust income growth.

“This trend toward less movement on the income ladder occurred against a backdrop of relatively strong growth in family incomes in the late 1990s and 2000s,” StatsCan says.

“For example, in the 1980s and early 1990s, the growth rate of family incomes was 2.1 per cent. Over the late 1990s and 2000s, after-tax family income grew by an average of 8.5 per cent during each five-year period."

Lower-income families saw stronger income growth than higher-income families over the past 30 years, StatsCan found. But for younger age groups, wage growth has slowed since 2000.

StatsCan cautions the study doesn’t reflect the entirety of Canada’s population — just those people who filed income tax returns. But the agency is confident it's a large enough sample size to get an accurate idea of what’s happening with income trends.

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