THE GAP IN PURCHASING POWER BETWEEN HIGH- AND LOW-INCOME HOUSEHOLDS IN CANADA

The figure describes the difference, in the average real (inflation-adjusted) after-tax income, between earners in the top income quintile of Canadian households, and that of earners in the bottom income quintile of households. The difference represents the greater purchasing power of the top 20% of households relative to the bottom 20% of households ranked by after-tax income. In 1976, the difference was roughly $58,000 when measured in 2019 dollars. By 2019 this had increased to over $84,000. A difference in before-tax purchasing power between these two groups is to be expected. Gross earned incomes are not evenly distributed. Some people earn more than others because their skills and knowledge are in greater demand in the marketplace. The size of the after-tax income gap, however, is a result of public policy