What is this metric and why is it important?
We present here the ratio between the mean total wealth of a country’s population versus the median wealth. This metric is a simple but overall effective measure of wealth inequality. The higher a country’s ratio, the higher the amount held by the most wealthy in that country.
How is Canada doing?
- In 2016, the ratio between mean and median wealth in Canada was 2.27, well above the median OECD ratio of 1.95, but below the mean of 2.57.
- This high OECD mean is driven by the incredibly high ratios found in the United States and the Netherlands.
- Of the 22 countries that report this measure, Canada has the 8th highest ratio. This means that our wealth distribution is more unequal than most countries, according to this measure.
Wealth is measured as the sum of physical assets, cash and investments minus debts. Median wealth refers to the wealth of an individual for whom half of the population owns more than this person and half owns less. On the other hand, the mean represents how much wealth would go to each person if it was divided equally. If the ratio between mean and median is over one, then more than half of the population has less than what they would have if distribution was equal. The higher the ratio, the more we know that wealth is concentrated at the top.
This is a very simple metric, and like all single numbers used to represent a distribution (for example, Gini) it lacks detail. For example, it leaves many questions unanswered, such as where in the distribution most of the wealth lies, and what characteristics do these people have when compared to the overall population. Unfortunately, the data required for a more detailed investigation is limited.