Bank of Canada data show the top fifth of households are $14,006 ahead of their pre-pandemic trend while the bottom 60 percent are still underwater — and borrowed transfers are the only thing holding the floor.
Statistics Canada’s August report put headline inflation at 3.0 percent, the ceiling of the Bank of Canada’s target range. That figure tells Canadians almost nothing about who is actually falling behind. A Bank of Canada study by researcher Yaz Terajima measures what the price index cannot: whether each household’s income since 2020 has grown faster than its spending, relative to pre-pandemic trends. Hub contributor Charles Lammam distilled the findings in The Hub this week, and the verdict is blunt. Most Canadian households have not outgrown the inflation shock, and the ones that have are the ones who needed it least.
The national average looks fine. Over six years, income gains outran extra spending by roughly $900 a year per household. That surplus is a pandemic artifact: CERB and lockdowns padded savings in 2020 and 2021. The moment prices took off in 2022, spending overtook income, and by 2023 households were spending $2,398 more than their income gains covered. Averages flatter; the distribution does not.
In 2025, the bottom 60 percent of households by income were still running deficits against trend. The second-lowest quintile was $6,805 short, nearly 7 percent of its income. The top quintile banked a $14,006 surplus, 13 percent of its income, large enough to drag the national figure into positive territory on its own. The spread between those two groups exceeds $20,000 a year. That is the K-shaped economy in a single number.
Age tells the same story. Households under 35 ran a $4,249 deficit while every older cohort was in surplus, though the 55-to-64 group cleared the line by only $169. The reason is arithmetic: younger and lower-income families devote a larger share of their budgets to food and shelter, and both categories remained well above pre-pandemic price trends in 2025. Homeownership delivers the one surprise. Homeowners ran a $1,817 deficit; renters were down just $90. Owning a home has sheltered balance sheets, not budgets, and the study measures budgets alone.
The most uncomfortable finding concerns how the lowest-income households stayed afloat at all. In 2025, net government transfers — child benefits, GST credits, employment insurance, retirement benefits — supplied $533 of their $830 increase in disposable income, nearly two-thirds. Wage gains were weak and investment income fell. Ottawa financed that cushion with deficits in every fiscal year from 2020-21 to 2025-26, ranging from $35.3 billion to $327.7 billion and totalling $618.5 billion. Even with that support counted, the bottom quintile remained in deficit.
Balance-sheet data make the divide starker. Since early 2022, the top 20 percent has been the only wealth quintile to gain share; it now holds 65.5 percent of Canadian net worth, about $3.5 million per household, against 3.1 percent for the bottom 40 percent. The bottom 40 percent added $220 billion in new liabilities over that period, a 35.5 percent jump, just as interest rates climbed from near zero to 5 percent. Their net worth stagnated at $565 billion while the top quintile’s grew 12 percent to $12 trillion.
Transfers borrowed from the future are a bridge, not a destination. The households now being carried are the same ones who will eventually service the $618.5 billion that carried them. Closing the gap requires earnings that rise faster than grocery and rent bills, and that comes only from productivity growth Canada has not delivered. Until it does, the headline inflation rate will keep describing an economy most Canadians do not live in.