Paper reveals shows limits of survey data, strengthens role of age, questions trend narratives
Age differences are the principal factor behind wealth inequality across Canadian households, according to a new report that claims that generational stage, rather than policy or talent, largely accounts for gaps in net worth.
The refreshed version of the Fraser Institute’s research, Wealth Inequality Revisited, confirms that age continues to explain a large share of cross-household wealth differences. The characteristic hill-shaped pattern, with net worth rising through middle age and declining later, persists. In 2019, net worth for Canadians aged 60–64 peaked at $1.17 million, while the under-30 cohort held on average under $150,000.
"It's a natural phenomenon--younger people accumulate debt, begin paying it down as they enter the workforce, then begin to accumulate wealth over time," says Christopher Sarlo, professor of economics at Nipissing University, senior at the Fraser Institute and author of the report.
The concentration of older households in high wealth ranks is also notable with 77% of households in the top 20 percentile aged 50 or over, while 64.8% of households in the bottom 20 percentile were under 50.
But the report also emphasizes that age alone doesn’t explain everything. Other demographic shifts including population aging, dual-earner households, and rising assortative mating (where highly educated individuals increasingly partner), also influence inequality over time.
The report says that the Survey of Financial Security (SFS) data, used throughout the analysis, is likely understating true wealth among the richest households.
It cites adjustments made by Canada’s Parliamentary Budget Office (PBO), which added synthetic high-net-worth estimates to the survey base. These adjustments boost the share of wealth held by the top 1 percent, in one case from 13.7% (survey) to 25.6 % (adjusted).
As the report notes, “the SFS survey appears to fall far short of capturing the underlying extreme ‘upper tail’ of the wealth distribution.” Without accurate inclusion of the very top, there’s a risk of understating both the degree and trend of wealth concentration.
The paper further argues that the common claim of rising wealth inequality depends heavily on the top-tail adjustments. It also notes that many state-provided programs (such as public pensions or social security) are omitted from conventional net-worth calculations. If those entitlements were valued (for example, via present value), the gap between rich and poor would shrink to some degree.
"Wealth inequality is largely the outcome of millions of voluntary transactions in society, and for the vast majority of Canadians, wealth accumulates systematically over a lifetime," Sarlo concludes.
