The report, released Wednesday by Statistics Canada, measured the incomes of five different cohorts of children born between the 1960s and 1980s, as well as that of their parents.
It found that intergenerational income mobility — the degree to which a person’s income and wealth could move further from that of their parents — had declined across all of the cohorts.
Children born to the wealthiest generation, baby boomers, were more likely to remain in the highest earning income class. On the other hand, children born to the age group which saw a lot of that wealth skip them, Generation X, were even more likely to remain among the bottom wealth bracket of society.
Benjamin Tal, CIBC’s deputy chief economist of capital markets, attributes this increasing lack of wealth mobility between generations to what he calls “the largest wealth transfer in Canadian history.”
According to him, the children of baby boomers most likely saw the benefits of that wealth — like a better education or money to help pay a mortgage — aid them in earning as much as their parents. The same effect was felt even stronger by the generation of kids born from parents who were in the lowest income bracket, ultimately widening the income gap in Canada.
Statistics Canada’s report found that the probability of a child from the bottom 20 per cent of parental income distribution remaining there increased from 27 per cent from those born between 1963 to 1966, to more than 32 per cent among those born from 1982 to 1985.
Tal said that the already widening gap has been made even worse by the economic turmoil wrought by the coronavirus pandemic. Low-income earners, a majority of which were in the service sector, had their jobs wiped out by the pandemic while higher-earning career opportunities — that could be worked remotely or from home — saw a boom since the start of the health crisis.
“In addition, given that many wealthy Canadians are not spending because they cannot, but their income is still there — in fact, their income is rising and their savings have been rising and rising — they’re sitting on a mountain of cash, roughly $100 billion dollars of excess cash looking for direction and many held by wealthy Canadians,” said Tal.
“This means some of this money will be spent, some of it will be invested and some of it will go to the kids and will give them an even larger down payment on their house.”
According to Tal, the solution to such a complex issue lies in education — making sure people find the means to get a relevant education as well as breaking the negative stigma related with colleges and trades.
“Canada is the most educated country in the OECD, but Canada is also the number one country in terms of educated people living in poverty because we cannot transfer what we study into good jobs, because some people study the wrong thing that is not practical to the economy,” he said.
“For me, that’s the only solution.”