Wealth Inequality: Going from bad to (net) worth








Upon examination of the types of debt for the middle class, we find 80% of it comes from mortgage debt. In fact, the majority of the middle class’ assets are also related to real estate (which is not the case for the upper class). For the middle class, increased net wealth has been related to much more expensive houses being purchased with much larger mortgages. That is to say, the middle class is leveraging up in order to keep up (with the Jones’).

As the Americans learned, leveraging up is only a successful strategy if housing prices continue to appreciate. When a house goes down in value, the mortgage payments do not. Asset prices fluctuate while debt levels do not, which is why over-leveraging is generally a bad idea, particularly when mortgage rates in Canada are at all time lows.

David Macdonald is a Senior Economist with the Canadian Centre for Policy Alternatives. You can follow him on Twitter @DavidMacCdn.


  1. Not just leveraging. It’s probably also simply that in Canada our real estate bubble has not yet burst. Housing prices have continued to rise fairly sharply through most of the period you talk about, not so? So any homeowner would see their wealth “rise” without actually getting a thing, simply from the assessment of their home’s value going up. This price rise may camouflage a situation where in reality the top 20% have continued to pull away.

    By the same token, if values suddenly fell, even if this had no hard economic downsides (no rash of foreclosures etc), the middle class would suddenly look as if they had far less wealth.

    On the other hand, the value of many of the 1%’s investments is also fragile; another financial crash could see a lot of paper wealth disappear . . .

  2. I used to be the one complaining about the rich and then I realized that I wasn’t part of that group because I wasn’t working hard enough.

    I was blaming other people and feeling sorry for myself. If you’re in the bottom 20%, you’ll figure it out someday.

  3. Hilarious, TS! I always appreciate when people use sarcasm to point out inherent flaws in the “up by their bootstraps”, “self-made man”, “good things come to those who work 60 hours a week at minimum wage so quit your bellyaching” line of debate. Thanks for the giggles.

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