Canada’s wealth inequality issues are bigger than previously estimated – which really is something. The Parliamentary Budget Officer (PBO), a non-partisan office that advises the Canadian government, has created a new model to estimate wealth held by the country’s richest households. The new estimate shows Canada’s one-percent actually holds a much bigger share of total wealth than previously thought. On the flip side of that statistic, it means the share held by the bottom 80% of the population was overestimated.
New Estimates On Canada’s Super Rich
The PBO’s new model captures more wealth, and surprise – it largely belongs at the top. Originally the Survey of Financial Security Public Use Microdata File (SFS PUMF) was used to determine the breakdown. Unfortunately, since the super rich don’t do surveys, it left a lot of upper wealth unassigned. That meant they needed a new model to estimate it.
The new model is the high-net-worth Family Database (HFD), and it better captures the top end of wealth. The HFD draws data from the National Balance Sheet Accounts, and helps assign it. The result is, the wealth share of the top one percent rises by 12 percentage points, versus the previous model. Here’s how the country looks with this reassignment.
Canada’s Richest Families Have More Wealth Than Previously Thought
The new model suggests Canada’s super rich own a much bigger share of wealth than thought. The top 1% of households were previously estimated to hold 13.7% of wealth in Canada. Under the new model, that number rises to 25.6% of total wealth. The top 0.01% alone saw their estimated share jump from 0.4% to 5.6% of wealth.
Share Of Wealth Held By Canadian Households
The share of wealth held by households, using the old SFS PUMF methodology, and the newer HFD model.SFS PUMFHFD020406080Top 0.01%Top 0.1%Top 0.5%Top 1%Top 5%Top 10%Top 20%Middle 40%Bottom 40%Percent
| Family Quantile | SFS PUMF | HFD |
|---|---|---|
| Top 0.01% | 0.4 | 5.6 |
| Top 0.1% | 3.1 | 12.1 |
| Top 0.5% | 9.2 | 20.5 |
| Top 1% | 13.7 | 25.6 |
| Top 5% | 33 | 43.4 |
| Top 10% | 47.6 | 56.4 |
| Top 20% | 67.2 | 73.5 |
| Middle 40% | 30.5 | 25.3 |
| Bottom 40% | 2.3 | 1.2 |
Source: PBO, Better Dwelling.
Naturally, that redistribution of the pie means someone’s share of wealth was overestimated. Can you guess who? The middle 40% of households were previously estimated to have held 30.5% of total wealth in Canada. That drops to just 25.3% under the newest model. The bottom 40% went from 2.3%, to just 1.2% of wealth. In other words, 80% of families hold a little over a quarter of the wealth in Canada.
You Need Over $6.1 Million To Be In Canada’s 1%
The revised numbers mean a ticket to the one percent club is fairly steep. To be in Canada’s one-percent, you need a minimum net-worth of $6.1 million. The top 0.1% requires a minimum net-worth of $29.3 million now. The 0.01% has a minimum net-worth of $143.1 million dollars. Net-worth is defined as household assets minus liabilities.
How Much Do You Need To Be Rich In Canada?
| Quantile | Canadian Dollars (x1,000,000) |
|---|---|
| Top 0.01% | 143.1 |
| Top 0.1% | 29.3 |
| Top 0.5% | 9.7 |
| Top 1% | 6.1 |
| Top 5% | 2.3 |
| Top 10% | 1.6 |
| Top 20% | 1 |
| Middle 40% | 0.1 |
| Bottom 40% under | 0 |
Source: PBO, Better Dwelling.
The vast majority of people across Canada actually fit in the lower 80% of households. The middle 40% of households have a net-worth between $100,000 and $1 million. Below $100,000, and your household net-worth is in the bottom 40% of households. Just used all of your cash to make a 5% downpayment on a million dollar home? You’re in the bottom 40% of wealth.
The PBO’s new model reveals rich households have a much larger share of wealth than thought. This also means the share of wealth held by the majority of Canadians was massively overestimated. As one bank might put it, most of you are poorer than you think.