If I had a million dollars
Or at least was in the top income quintile
I’m weird. My idea of relaxing while during “marking student essay season” is to play with Statistics Canada data. I’ve been puttering away on a piece (coming soon) looking at affordability of food and grocery store profits in Canada. Serendipity has reared its wonderful head. I’ve stumbled across something else interesting.
Do you remember the Bare-Naked Ladies song, If I Had a Million Dollars? It is a wish list of purchases – things the members of the band would buy if they had a lot more money. The song is economically imprudent; the list of things they would buy cost a lot more than a million dollars, but it sets out a kind aspirational list typical of Canadians. There is a combination of the humble practical and the wildly extravagant.
But the song raises the question: what would Canadians do with more money? How would we spend it? What would our priorities be?
If you dig hard enough into Statistics Canada’s data sets, you can answer this question. Since I’m weird but generous, I’ve done the work and will share it for free.
Specifically, we’ll look at two sets of data that can, with the hiccup of one year’s misalignment, tell us how much each income quintile (bands of 20 percent) receives and spends. The Survey of Household Spending lets us calculate the average household expenditure of each quintile on different types of things. The 2021 Census provides 2020 data on the average household income for each decile. This allows us to calculate the average for each quintile. You can see a problem. We’ll be comparing income in 2020 with expenditures in 2021. Not exactly apples with oranges, but maybe like MacIntosh with Granny Smith. But is should be close enough for our purposes, which is to satisfy idle curiosity.
Let us compare the income and expenditures of the poorest and most affluent quintiles.
In 2020, households in the lowest income quintile had an average income of $30,200. A year later, these households had average expenditures of $38,443.
In 2020, households in the highest income quintile had an average income of $236,800. A year later, these households had average expenditures of $182,410.
As a result, for every dollar Households in the lowest quintile earned, households in the highest quintile earned $7.84. For every dollar households in the lowest quintile spent, households in the highest quintile spent $4.74.
In 2021, households in the lowest quintile spent 27 percent more than their income a year earlier. Households in the top quintile spent 23 percent less.
Annual income twenty pounds, annual expenditure nineteen nineteen and six , result happiness.
Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Charles Dickens made this observation 173 years ago. The numbers have changed, but his point was correct. Surpluses build savings and equity. Deficits exhaust savings and create debt. For our purpose, there is more to the story. Buying something like a house can reduce future expenditures. A family living in a house they own - outright and mortgage free - will spend less annually on housing than one paying off a mortgage or renting. Needless to say, households with higher incomes are the ones most likely to have more property. This will distort our comparative analysis.
But let’s not get too deep into the methodological weeds and get back to the song. To paraphrase the Bare-Naked Ladies:
If I was in the top income quintile
I’d save and increase my wealth.
Yeah, I know. Stick to my day job. I’ve got no future in song writing. The point is that high-income households can (and do) accumulate wealth. Low-income households cannot (and do not).
But let’s set the question (and impact) of savings aside to focus on the here and now. As we’ve already seen, households in the bottom quintile of wealth spent an average of $38,433 in 2021. Those in the top quintile spent 182,410, or $4.74 dollars for every dollar spent by a household in the poorest quintile.
We can conduct the same analysis for different expenditure categories. For example, households in the lowest quintile spent an average of $4,929 on food purchased from grocery stores. Households in the highest quintile spent an average of $11,999, or $2.43 for every dollar spent by the poorer folk.
This allows us to complete sing the song:
If we were in the top income quintile,
Compared to the bottom quintile we’d…
I know, I know. That’s a terrible song. It’s probably lyrically as bad as the Bare-Naked Ladies would be crunching Statistics Canada’s data tables. But let’s add some lines:
Spend $4.74 on most everything
Spend $2.43 on food to eat
Spend $3.03 on restaurant meals that we didn’t cook
Spend $2.62 on a place in which to live
Spend another $2.62 on utilities for lights and heat
Spend $2.74 to talk and text our friends
Spend $3.63 on warm clothes to wear
Spend $3.86 on planes, trains and automobiles to get somewhere
Spend $2.75 on health care to feel fine
Spend $4.31 on recreation to amuse ourselves
Spend $4.01 to make ourselves smart, or at least get a degree
Spend $2.63 buying something to read
Spend $2.15 on being bad with tobacco, booze and pot
Spend $1.92 to gamble on winning a million dollars
Let’s take a break for a second. We can pretend a statistical observation is a chorus in the song. You will note that on all these things, those in the top quintile spent more than those in the bottom - on everything. But up to this point, their increased expenditure was less than that of the increase in their total expenditures. In the lines below, we can see what the most affluent spend a lot more money on than the poor folk do:
Spend $5.24 being nice by sharing my money
Spend $6.41 on nice furniture on which to sit
Spend $24.14 on insurance to protect me from the vicissitudes of life
Spend $64.84 rendering unto Caeser what is Caeser’s.
The question posed by the Bare-Naked Ladies was what we would do if we had a lot more money. The data tells us what the typical Canadian would do if they enough money to move into the top household income quintile.
If we had a lot more money
We’d put some in the bank
We’d spend more on everything
But mostly we’d pay the insurance salesperson and the tax collector.
Like I said. It’s a good thing I am a sociologist and not a song writer.
Thx Mark. Very helpful.