World of HR: Canada’s wealth gap is shrinking for the first time since 2019

Income inequality is a persistent issue in nations around the globe, and while few countries seem to have found a solution, one is showing signs of progress for the first time since 2019.

Where in the world? Prior to Covid-19, income inequality had been shrinking in Canada, averaging 45.1% from 2010 to 2019 in part because of childcare benefits introduced in 2016. During the pandemic, though, the gap grew, reaching a record high of 47% in 2022.

Statistics Canada, a government body, recently found that the income gap between the top and bottom 40% of Canadians decreased in the second quarter of 2023 and is now where it was pre-pandemic.

To determine the income gap, the department examined how many households have disposable income and found that 63.6% of the highest income earners have disposable income, versus 18.5% of the lowest earners.

The income gap has shrunk thanks to more government assistance for the bottom 40% of earners and less for the highest earners, according to Bloomberg analysis. Wage increases for the lowest earners and more retirement benefits for those over 75 have also played a role, reported Statistics Canada.

Despite the wage gains, people in the lower income brackets are still impacted by inflation and higher interest rates.

Satellite view. The US has also seen a glimmer of change in recent years, according to the Census Bureau. The before-tax income inequality gap decreased 1.2% in 2022, the first narrowing since 2007. However, it was partly because those in the middle and top earning brackets saw their wages decline from 2021 to 2022, while those in the bottom bracket did not experience a notable income change.

But make no mistake: Wealth inequality remains a persistent problem in the US, and the poverty rate more than doubled in 2022 in part due to the end of the child tax credit, ABC News reported.

Income is just one piece of the equality equation.