What to know
- The income gap between the richest 40 per cent and poorest 40 per cent of Canadians widened again in 2025, rising to 46.7 percentage points.
- Economist David Macdonald says the main factor was weak wage gains. In 2025, wages grew at only 2.3 per cent, which barely kept up with inflation, which sat at 2.1 per cent.
- He says the income gap can be reversed with government transfers (like CERB and CRB) and fairer taxation for the wealthy.
The income gap between the richest and the poorest Canadians widened again in 2025.
According to a report released Monday by Statistics Canada, the income gap, defined as “the difference in the share of disposable income between households in the top 40% and the bottom 40%” reached 46.7 percentage points in 2025, compared to 46.4 percentage points in 2024.
This widening gap is partly due to labour market conditions. In 2025, wages grew at a slower rate, 3.1 per cent, compared to 3.7 per cent in 2023 and 3.3 per cent in 2024.
Wages rose slowly or stayed stagnant in sectors that deal with mining, oil, gas extraction, agriculture, manufacturing, and producing services — such as “professional and personal services, transportation and storage, and information and cultural industries.”
The lowest income households also saw their disposable income rise at a slower rate compared to all households, at a rate of 2.6 per cent versus 3.8 per cent. This in turn lowered the amount of money these households were able to invest, reducing average investment earnings.
Main factors contributing to the income gap
David Macdonald, a Senior Economist with the Canadian Centre for Policy Alternatives, says the 2025 income gap is the “second worst year on record.” He points to 2005 as the only other year when the gap was wider, at 46.8 percentage points.
For lower income Canadians, he says the main problem was “weak wage gains.”
“Wages only went up 2.3 per cent, barely keeping pace with inflation in 2025 which was 2.1 per cent. This was partially offset by better income support from governments through social assistance and pensions.”
To keep the income gap from widening, Macdonald says government subsidies and transfers like the GST credit and the Canada Disability Benefit can definitely help.
He also says “keeping lower income wages rising has a lot to do with rising minimum wages and a tight labour market.” A tight labour market means lower unemployment.
Wealthier Canadians saw bigger gains in workplace pension payments and investment earnings due to a robust stock market. Macdonald says there are “a variety of tax loopholes that should be closed to reduce wealth income and fund better supports for lower income households.”
Can the income gap be reversed?
What would it take to reverse income inequality? Macdonald says it’s not impossible, considering it has been achieved fairly recently.
In 2020, as a direct result of government transfers like the Canada Emergency Response Benefit (CERB) and the Canada Recovery Benefit (CRB) that helped support unemployed Canadians, the gap fell to 39.7 percentage points, the lowest since 1999 — the first year this data was collected.
The poverty rate in 2020 also plummeted as a result.
“We can absolutely reduce the gap and we’ve done it quite recently. This was entirely based on better transfers to unemployed people, but by combining that with better low income wage growth and fairer taxation on the wealthy we could certainly return to the ratio in 2020 and best it.”
