StatsCan methodology flaws not reflecting wealth in Canada - why should non-profits care?

According to a new analysis, Statistics Canada’s way of measuring and reporting wealth may not fully capture the wealth that billionaires hold in the country. 

Social Capital Partners’ new report, Billionaire Blindspot, revealed methodological shortcomings in StatsCan’s Survey of Financial Security (SFS). The survey asks Canadian households across five income strata to report their employment, income, assets, and debts, including home ownership, car ownership, credit card usage, pension plans, and other demographic features. 

It divides the population into five strata, based on predicted net worth, said a representative from StatsCan, which are “constructed based on a statistical model using income data and socio-demographic variables.” 

According to Social Capital Partners, a non-profit that researches and advocates for inclusive economic policy, the top net worth strata, Very High, puts those with a net worth of a few million in the same category as those with billions in wealth. 

“To put this in context, for the 2019 SFS, the richest five per cent of Canadian families spanned 497,000 households, whose net worths started at about $2.4 million on the low end and climbed all the way to tens of billions on the high end,” the report said. 

“That means that families who owned a nice detached home in Vancouver – and nothing else – were put in the same wealth category as the Irving family,” one of the most affluent families in Canada and the wealthiest in New Brunswick.

Meanwhile, financial services firm Credit Suisse estimates that there are roughly 5,500 Canadians with a net worth of $50 million and up, only 0.01 per cent of the Very High Net Worth bracket. 

From a statistical analysis perspective, this categorizing method does not accurately represent the net worth of the ultra-wealthy, particularly those with hundreds of millions and billions of dollars.

“Canadians by and large are predisposed to console themselves in thinking about inequality compared to the U.S.,” said Dan Skilleter, director of policy at Social Capital Partners, who led the report’s publication. 

“We think things might be bad here but are much worse elsewhere. These misleading statistics that the government publishes play into that false sense of pride that we might have.”

This research should ring alarm bells for every sector, added Elizabeth Mulholland, the CEO of Prosper Canada, a national charity focused on economic empowerment and poverty alleviation. 

“There is a lot of clear evidence globally that the more unequal your society is, the worse your outcomes are for health, educational attainment, happiness, and opportunity for everyone across the income scale,” she said. 

Data structures and statistical methods do not provide the fullest picture

The SFS was last carried out in 2019. The questionnaire covered immigration status, Indigenous identity, education levels, employment, and how these demographic factors related to financial assets, debts and investments.

The survey excludes several population groups, including the three territories, Indigenous communities living on reserves, members of the Canadian Armed Forces, and senior citizens living in assisted housing and care. 

StatsCan also oversamples certain strata, which means it deliberately increases the sample size of some population subsets, which would otherwise be too low to be statistically significant. 

In this instance, it oversamples the Very High Net Worth strata, which would be the top five per cent of households by wealth across the Canadian population but represent the top 10 per cent of the total survey population. 

Oversampling is the right approach, Skilleter said, but the focus on the top five per cent, and not the top 0.1 per cent, is the problem. It does not provide an accurate perspective of the ultra-rich’s wealth because the methodology does not leave room for more granular data and insights.  

In an email follow-up with Future of Good, the StatsCan media team said that “the sample size of the SFS is insufficient to have a representative sample of economic families with very high wealth (i.e. top 1 per cent). It is not recommended to use the SFS to describe wealth concentration in top percentiles.” 

Wealth disparity alarming in Canada 

Few people in the federal government, if anybody at all, are focused on wealth disparity and data around that, especially in a post-COVID and inflationary environment, Mulholland said. 

More data is needed on the types and distributions of wealth and debt and how that varies across age groups, ethnicities, and income levels, she added.

Income disparity is more widely reported, she said, “but net wealth, not income, is really the most important determinant of financial security per household.” 

The federal government’s threshold for ascertaining what a household needs to be financially comfortable is “completely outdated,” Mulholland added. 

“It is based on a post-war model of having a job, having enough money and saving some of that money,” she said. “That is not true anymore in our labour market.” 

The rise of “contingent, non-standard work” means that more employees are likely to miss out on the financial benefits that a job traditionally comes with, such as access to a pension plan, health benefits, disability coverage and life insurance, she said. 

The Canadian tax system might contribute to wealth disparity in the long run despite being progressive, Mulholland added.

“If I put money away in an RRSP, I get tax credits. However, a low- or modest-income person might put money in a tax-free savings account because that is their best savings vehicle. 

“We tax income from labour at a much higher rate than we tax the interest on our wealth.”

In January 2024, StatsCan published research showing that home ownership is not only in decline but also that a parent’s homeownership positively correlates with their children’s likelihood of being able to buy a home. 

Wealth disparity is also a problem from a social cohesion perspective and often “fuels polarization,” said Derek Cook, director of the Canadian Poverty Institute at Ambrose University. “In our current system, we enshrine the right to property and wealth but ignore other fundamental human rights, such as the right to food, housing, healthcare and education,” he said.

Those at the higher end of the wealth spectrum also “create outsized political influence that serves to maintain the status quo,” Cook said. In tangible terms, this has affected home ownership, retirement savings and pensions, equally affecting younger and older Canadians. 

Understanding the concentration of wealth with targeted measures and policy instruments can be challenging to implement, Cook added. Statistics Canada could tweak the census by asking households to report on assets, debts, and property ownership. Data from the insurance industry could also be revealing, he said.

What does this mean for large donations?

More granular wealth data, mainly focused on the ultra-wealthy, would also be helpful to fundraisers, especially given that the pool of donors is shrinking while simultaneously becoming more concentrated on ultra-rich donors, Skilleter said. 

The data would also “help the government avoid policy decisions that can have unintended negative consequences on the [non-profit] sector’s ability to support communities,” said Lisa Davey, vice president of the Association of Fundraising Professionals (AFP) Canada. 

She cited the recent changes around the Alternative Minimum Tax, which ensures that high-income individuals pay a minimum tax despite qualifying for deductions and credits. An unintended consequence was that ultra-wealthy donors threatened to reduce charitable donations if the federal government didn’t change the policy. 

Vincent Duckworth, president and CEO of the non-profit consultancy ViTreo Group, highlighted that the concentration of wealth, while critical, is not the primary issue affecting the social purpose sector. 

Instead, because gifts from larger donors represent a larger fraction of overall giving, they can “disproportionately direct what the sector cares about.”

“Large philanthropy has its own aims,” Duckworth said. “These aims are concentrated in the hands of the few, and this has the potential to influence what gets solved and what does not. This is not healthy.”

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