Modelling quarterly wealth distributions

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Starting in 2020, wealth distributions are estimated on a quarterly frequency. These quarterly distributions were developed to help better capture the impacts of the COVID-19 pandemic on household wealth, when households experienced large changes in their economic well-being over a relatively brief period of time. To provide more timely information about the economic impacts of the pandemic and the subsequent economy recoveryon different households, wealth distributions will continue to be estimated on a quarterly basis starting with 2020 as the reference year.

Based on distributions for liabilities as of the fourth quarter of reference year 2019 that are benchmarked to NBSA totals, quarterly projections of household liabilities are created using sub-aggregated data from Equifax Canada, a private consumer credit rating agency. Equifax credit registry include sub-annual data on the majority of household mortgage and non-mortgage credit transactions processed through more than 600 financial institutions across Canada (e.g., including banks, credit unions, mortgage financers, automobile dealers and financers, credit card companies, finance companies, and retailers), while coverage is relatively limited for alternative financial intermediaries (e.g., insurance providers, payday loan companies, etc.). Relative to NBSA benchmarks as of the second quarter of 2023, Equifax data represent 81.1% of total liabilities, including 82.1% of mortgage liabilities and 78.3% of non-mortgage liabilities.

Quarterly trends in household liabilities are available from Equifax Canada by type of credit product (e.g., mortgage, credit card, car loan, etc.) and demographic characteristic, including province, age of household head, generation of household head, and household composition. In contrast with the method used to identify household head within the DHEA, which is based on the major income earner (see section 4.3), a different method is applied for projections based on Equifax data. Due to the lack of income data within the credit registry, household head is determined by Equifax Canada by applying the following criteria:

1. The household member who has an active mortgage or home equity line of credit (HELOC). If multiple or none of the members have an active mortgage or HELOC, then;
2. The member who has the highest total credit limits for all credit products. If multiple members have equal total credit limits or none of them have credit, then;
3. The member who is the oldest in the household. If age is equal for all members, then;
4. The member who is listed first in the credit registry database for that household.

Relative to DHEA estimates for household liabilities as of the second quarter of reference year 2023, coverage for Equifax totals by province range from 58.2% to 98.6%, by age group from 54.9% to 113.5%, by generation from 70.0% to 105.9%, and by household composition from 70.4% to 127.8%.

To derive quarterly debt distributions related to income, including equivalized household disposable income quintile and main source of household income, a matching exercise is applied to link SFS and Equifax wealth distributions with households covered within the SPSD/M. Using the results from a special run of the SPSD/M (Statistics Canada, Social Policy Simulation Database and Model, COVID-19 glass box, version 3.0), sub-annual trends in disposable income by distribution category are derived from Labour Force Survey wage trends and administrative data on government Covid-19 economic relief measures. Further adjustments are also applied to ensure alignment with modelled distributions for government benefits (e.g., Canadian Emergency Relief Benefits from Employment and Skills Development Canada, etc.)

To ensure consistency with quarterly trends in household liabilities observed from the credit registry data with the associated trends in non-financial assets to which those liabilities relate, corresponding adjustments are also applied to quarterly real estate asset values using distributional information from third parties on the housing market from the Canada Mortgage and Housing Corporation and spending on consumer goods from the Bank of Canada.