Canadian workers faced notably weak wage earnings in the second quarter of 2025 as a slowing economy limited employment gains mostly to part-time positions, according to new data from Statistics Canada.
The employment rate has been on a downward trend since early 2023, with household disposable income growing at just 3.9 per cent year-over-year, down from 5.9 per cent growth in the same quarter last year.
The weak wage performance hit workers in goods-producing sectors particularly hard, including those in mining, oil and gas extraction, and manufacturing. Service sector employees in trade, professional services, and personal services also saw sluggish earnings growth.
Income gap holds at record high
The income gap between top and bottom earners remained at a record high of 48.4 percentage points in the second quarter, unchanged from a year earlier. Statistics Canada defines this gap as the difference in the share of disposable income between households in the top 40 per cent and bottom 40 per cent of the income distribution.
The Bank of Canada’s policy rate reached 2.75 per cent in the second quarter, down two percentage points from a year earlier. While declining interest rates can ease borrowing costs, they also reduce returns on interest-bearing investments such as savings accounts, with varying impacts across income levels.
Net saving declines across all income groups
For the first time since 2022 when inflation hit a 40-year high, net saving worsened for households across all income levels. Weak wage gains failed to keep pace with household spending growth, particularly for necessities such as housing, transport, and groceries.
Higher income households saw the smallest decline in net saving despite weak wage gains. Their net investment earnings benefited from interest rate reductions, as they tend to hold balances on variable rate credit products such as lines of credit rather than fixed rate products like credit cards.
The lowest income households saw disposable income grow at 5.6 per cent, faster than the average. However, this growth came mainly from increased government transfers such as Employment Insurance, social assistance, and retirement benefits rather than employment income.
Youngest workers face affordability pressures
Households under age 35 increased their wealth at the slowest pace of any age group, growing just 2.1 per cent as they reduced real estate holdings. This age group has seen continually decreasing mortgage debt since the end of 2022 as rising interest rates and housing costs reduced home ownership affordability.
The debt-to-income ratio for the youngest households reached 178.1 per cent in the second quarter, down 5.3 percentage points from a year earlier. They were the only age group to reduce total average debt, declining 1.6 per cent, while their average disposable income grew at the slowest pace of any age group at just 1.3 per cent due mainly to a decline in wages.
Households with a major income earner aged 35 to 44 years had the highest debt-to-income ratio at 254.2 per cent, though this was down 2.4 percentage points from the previous year due to strong income gains that outweighed debt accumulation.
Wealth concentration increases
The wealthiest households accounted for almost two-thirds (64.8 per cent) of Canada’s total net worth in the second quarter, averaging $3.4 million per household. The least wealthy 40 per cent accounted for 3.3 per cent of total net worth, averaging $86,900.
The wealth gap between the top 20 per cent and bottom 40 per cent reached 61.5 percentage points, up 0.2 percentage points from a year earlier. The wealthiest households increased their net worth at the fastest pace (4.9 per cent) as they had the strongest growth in financial assets combined with relatively limited growth in mortgage debt.
The data covers the period from April to June 2025 and compares year-over-year changes to the same quarter in 2024.
