September 5, 2017

Canadians on average owe $1.63 for every $1.00 they earn – or so we are told – could it be more?

Let’s take that statistic just a little further – the top 10% of (wealthy) Canadians owns more than 90% of all the assets in Canada.  According to Statistics Canada if you earn $80,000 or more you are in the top 10% of Canadian income earners.  Should you earn $150,000, or more, you are in the top 2% of Canadian income earners.

How likely is it that people who earn more than $200,000 per year, and are in the top 1% of income earners, are carrying large amounts of debt?  Perhaps, not very likely!  Stats Canada does not provide detailed breakdowns of individual income levels but according to their data more than half of all Canadians earn less than $25,000 per year.

Interestingly the people who are most likely to be in debt are at neither end of the economic spectrum – almost one third of Canadians earn less than $10,000 per year and would have great difficulty acquiring debt (credit) and it seems self-evident that the top 10% really don’t “need” much debt, unless they are very poor money managers.  We might extrapolate then that the greatest debt burden falls on the 20-30% of income earners that earn mid-level incomes and that notion was supported by a recent report.

So if the “average” Canadian debt load ($1.63 to every $1.00 earned) is based on dividing all ($1.5+ trillion) consumer debt amongst all Canadians it probably is not an accurate representation.  If we simply took out the top and bottom 10% the debt to income ratio would jump very significantly perhaps in the order of $10 or more for every $1 earned.

If someone would like to take a stab at the data and share their conclusions it would be very interesting to see the actual distributions.