Live long and prosper

Photo: Fraser Institute

How old you are might influence your opinion of this story.

Wealth inequality is largely a result of age, a Fraser Institute study reveals.

Accumulation of wealth is a slow and steady process over a long period of time, the think-tank says.

"Most wealth inequality is explained by totally normal changes in our economic situation as we age – the 25-year-old with no wealth today will most likely be a 65-year-old with a net worth close to $1 million a few decades from now, and there’s nothing worrying about that," said report author Christopher Sarlo, an economics professor at Nipissing University.

Wealth, measured by a household’s net worth, includes the value of all assets – house, business, stocks, bonds, savings, etc. – minus all debts, such as the mortgage, a line of credit and credit card debt. 

The study found that in Canada, between 80 and 87 per cent of wealth inequality can be explained by stage of life.

Most young Canadians are in the early stages of their careers and may have student debts. By contrast, older Canadians have built equity in their homes and retirement savings. Indeed, the peak earning years for most are between 55 and 69, just before retirement. 

And, contrary to common misconceptions, wealth inequality has declined during the past 40 years.

Between 1970 and 2012, the gap in net worth between the most well-off and least well-off shrunk 17 per cent.

"The fact that wealth inequality in Canada has declined over the past few decades does not correspond to the narrative about growing inequality many people cling to," Sarlo said.