SOC 260 Wealth Inequality

Income

The money earned by an individual or household in a given period, typically through employment, investment, or business activities

• flow of a person’s resources like salary or wages

• Top 10% of Canadian income recipients account for ¼ of all income that Canadians earned 

Wealth

The total value of assets owned by an individual or household, including property, savings, investments, and other forms or assets

• intergenerational upward; can be accumulated over a lifetime and even across generations

• The top 10% of Canadian wealth-holders control about ½ of all Canada’s wealth; contributes to the class systems 

Net worth

A person’s total assets minus their total debts

• wealthy people own more than they owe 

Total assets 

Everything a person owns; liquid + non liquid assets 

• includes financial (money in savings/checking accounts)

• Non-financial assets (vehicles) 

In 2016, 17% of households in the lowest income group contributed to a registered savings plan, compared to more than 90% with an after tax income of $100,000 or more 

Total debt

Everything a person owes

• includes secured debt (home mortgages)

• Unsecured debt (credit card balances)

Isn’t inherently bad; is often required to generate wealth

Ratio of household debt to household disposable income has been steadily increasing

Negative wealth

When a household’s total debt exceeds its total assets

Characteristics of households with negative wealth 

• younger 

• Racialized

• Female

• Single

• Lower annual incomes

• Less likely to have a college degree 

• Less likely to be homeowners 

• Have lower health 

Income & Wealth Inequality

Gap between the highest + lowest income households at a record high

• between households in top 40% and bottom 40% grew to 49% in 2025 

The wealthiest accounted for 2/3rds of Canada’s net worth 

• wealth gap between top 20% and bottom 40% reached 61.4%

Race Wealth Gap in Canada

Filipino individuals had lower poverty rates than white individuals in 2020

• All other racialized groups have higher poverty than white counterparts 

Investment income for non-racialized Canadians is 47% higher than for racialized Canadians 

• first generation = tend to need to start out at a lower income area 

Gender Wealth among Older Adults

There is a persistent wealth gap; controlling for age, province, education, and marital status pronounces this gap 

Business equity (ownership value of a business) = big driver of the wealth gap 

• men have 5x more business equity than women, despite being only 1.5x more likely to have business equity 

Cumulative Advantage Model

Inequality is amplified over a life course because people accumulate different amounts of advantages or disadvantages over time 

• those that start off well, tend to increase their wealth over their life-time 

• “The rich get richer and the poor get poorer”

Disadvantage increases exposure to risk 

Advantage increases exposure to opportunity 

Personal capital approach

Skills, knowledge, and certifications increase earning potential

• human cultural, and social capital increases disparities in wealth 

• Connected to conflict theory 

Bourdieu’s cultural capital

Knowledge, skills, education as forms of wealth and reproduction of class

• That an individual acquires and uses to display social status + navigate society, particularly within the educational system 

• Helps maintain social inequity by favouring dominant cultural codes

• the passing of taste and preferences 

Structured disadvantage approach

Certain groups face systemic barriers in education, employment, housing, and financial services which contributes to the concentration of wealth 

Piketty’s theory of capital

Posits that when the rate of return on capital consistently exceeds the rate of economic growth, wealth becomes increasingly concentrated, leading to higher inequality 

• those who already own wealth accumulate it faster than the average person  can earn it, leading to wealth concentration at the top 

Has argued that a progressive tax on wealth or a global wealth tax could be used to reduce inequality + fund social programs

“R-g” gap

The difference between the rate of return on capital assets (“r”) and the rate of economic (“g”)

• when r > g, capital increases faster than the economy as whole; leading to a concentration of wealth at the top

Conspicuous Consumption

Practice of acquiring goods or other outward symbols of wealth to show others how much wealth one possesses

• both a practical and symbolic function 

• Prior to the 19th century; practiced only by the wealthy 

• Seen as social ill, harmful to the environment + society 

• Obtaining debt typically is the only way to continue this 

The Bewley Model

People save and accumulate wealth not only for consumption but also as a buffer against risk and uncertainty 

• saving to “self-insure”; precautionary saving

• Once people reach a comfortable buffer of wealth, they stop saving 

BUT in reality, the rich do keep saving aggressively → underestimates wealth concentration and the motivates 

Extensions of The Bewley Model 

• Heterogenity in patience; some people are just more patient; accumulate more 

• Inheritance & human capital transmission 

• Entrepreneurship & return heterogeneity; earn better returns on investments 

• Rate of return risk; not everyone has the sam risks + returns 

Factor Affecting Wealth Inequality: Housing

For many families, housing is their main asset

• housing wealth: home equity or the value of a person’s home minus any outstanding mortgage debts 

Factor Affecting Wealth Inequality: Financialization

Increasing profits come from investments and property, not wages

Factor Affecting Wealth Inequality: Automation of industry

Allowed companies to increase profitability while lowering labour costs

Factor Affecting Wealth Inequality: Government policies

Policies designed to support business growth and investment

Wealth tax 

Recurring tax on individual net worth rather than income 

• focuses on only those at the very top, approximately 1% of Canadians

• Proposed 1% wealth tax on net wealth about 10 million

Large support among Canadians, though no such policy has been implemented

Financial exclusion 

Lack of access to financial services or products 

• can range from access to a bank to credit cards

• 10% of overall Canadian population

Often due to low income, lack of identity, geographical isolation, or lack of trust in financial institutions

Unbanked

No mainstream financial institution, such as a bank

• no access at all to any formal banking 

Underbanked

Have a bank account, but engagement with the mainstream financial sector is limited

• limited in what they are able to access 

• Often rely on alternative financial services to manage their finances and fund purchases 

Fringe financial services

Services that offer financial products at interest rates much higher than mainstream financial institutions 

• any type of financial loan 

• Low income individuals are more pushed towards this 

Predatory loan

A loan where lenders use unfair or deceptive tactics to trick or pressure vulnerable borrowers into taking loans with abusive and financially harmful terms

• excessively high interest rates

• Hidden fees 

• Unrealistic repayment plans that benefit the lender but keep the borrower trapped in debt 

Payday loan

A short term loan that is paid back fro your next paycheque, typically within 14 days

• may borrow up to $1,500 and have up to 62 days to pay it back (with heavy interest) 

• Must pay some or all of the loan when next paycheque is received 

• Max fee is $14 per $100, annual interest rate of 365%

Preys on low income Canadians + more concentrated in low income neighborhoods 

• 4x more likely with tenant households + single parent households 

Cycle of debt

Pattern of taking on more debt than you repay

• taking out more debt to pay current debt 

• Most likely to occur when limited progress is made on repaying the debt

• Most likely to occur when wages don’t keep up with inflation, experience job loss, going through divorce, or medical issues (happens outside of the individual’s control)

Social effects of wealth concentration 

Results in it being more likely that a group will have a disproportionately large influence and control over resources 

• education

• Employment opportunities; elite shaping laws + labour rules

• Entrepreneurial opportunities

• Healthcare services

• Housing discrimination

• Criminal justice