The hole has been rising steadily for the reason that COVID-19 pandemic, exacerbated by inflation, labour market disruptions, and rate of interest fluctuations. Wealthier Canadian households had been in a position to climate financial uncertainty and spiking costs—and certainly, they proceed to develop their internet price—whereas lower-income households skilled losses and took on extra debt.
What’s the wealth hole?
On this context, the wealth hole, typically known as the revenue hole, is “the distinction within the share of disposable revenue between households within the prime 40% of the revenue distribution and the underside 40%.” Word that the wealth hole doesn’t merely take a look at family revenue, however at internet price—and the power to extend holdings over time, for instance by means of investments, actual property, and financial savings.
Majors drivers of the wealth hole
Listed below are some main contributors to the financial state of affairs at the moment affecting Canadian households.
Labour market circumstances
In early 2020, at the start of the pandemic, the unemployment fee spiked, creeping over 14% in Might. The variety of unemployed Canadians began to develop once more in 2023, with extra newcomers and younger folks becoming a member of the labour power and struggling to seek out work. These components continued by means of 2024, and as of June 2025, the unemployment fee is 6.9%.
In line with Statistics Canada information, lower-income households—these on the backside 20% of the revenue distribution—had been particularly affected. This group skilled declining wages, due largely to diminished hours.
Rate of interest adjustments
The pandemic additionally drove inflation, making all the things from groceries to constructing supplies dearer. In an effort to stimulate the economic system, the Financial institution of Canada raised its coverage rate of interest beginning in mid-2022. The speed peaked at 5% in July 2023 and didn’t start to fall once more till June 2024. The present coverage fee is 2.75%.
Charge adjustments have constructive and unfavourable penalties. Excessive rates of interest imply extra beneficial returns on investments, however additionally they spike the prices of borrowing—a stress that disproportionately impacts lower-income households. Now that charges have come down, the price of borrowing is decrease, however so are rates of interest on funding automobiles like financial savings accounts and assured funding certificates (GICs).
Investments
Decrease-income households “are inclined to have much less diversified funding portfolios that target interest-bearing devices slightly than different types of investments, similar to equities,” Statistics Canada stories. Decrease rates of interest imply much less development. In distinction, wealthier Canadians noticed sturdy development of their property, due partially to diversified portfolios.
