Canada’s K-Shaped Economy: Why Growth Isn’t Helping Most Canadians

Exploring how rising GDP and record profits can coexist with food bank lines, housing crises, and a shrinking middle class.

Mar 04, 2026

If Canada isn’t in a recession, why does it feel like one for so many Canadians?

In this episode of Classonomics from The Missing Middle, hosts Sabrina Maddeaux and Mike Moffatt dig into one of the biggest contradictions in today’s economy. On paper, everything looks great. GDP is growing. Corporate profits are strong. Stock markets are hitting record highs. Yet, for millions of Canadians, life feels harder than ever. Food bank usage has doubled since 2019. Young people can’t afford homes in cities where their parents once bought starter houses. And even full-time workers are struggling to make ends meet.

Sabrina and Mike break down what’s really happening beneath those rosy headlines through the lens of the K-shaped economy, where wealthier Canadians continue to thrive while everyone else falls further behind. The top 20 percent are seeing record financial gains from stocks and investments, while the bottom 40 percent are sinking under housing costs, stagnant wages, and shrinking purchasing power.

They explore how this divide is reshaping not only people’s bank accounts but also their trust in institutions, politics, and the very idea of upward mobility. When the data says the economy is strong, but your grocery bill says otherwise, frustration and hopelessness grow, and faith in the system fades fast.

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Below is an AI-generated transcript of the Missing Middle podcast, lightly edited.

Sabrina Maddeaux: Today on Classonomics, we’re asking the question, if Canada isn’t in a recession, then why are so many people struggling?

Mike Moffatt: Do you feel like our economic data doesn’t match your lived experience? If so, leave a comment.

Sabrina Maddeaux: On paper, the economy looks pretty decent. GDP growth is up. The stock market’s been doing well. Corporate profits are strong. But if you’re living paycheck to paycheck, watching food bank lines get longer or struggling to find work, none of that matches your actual lived reality. Economists have started using the term k-shaped economy to describe what we’re seeing right now.

But what does that actually mean?

Mike Moffatt: So obviously we have the letter K, which is two arms going in opposite directions. One up, one down. And that’s what we’re seeing in large parts of the economy. Some groups and sectors are doing really well - thriving even - while others are struggling or getting worse.

Think about it this way, corporate profits are up in many sectors of the Canadian economy; mining, finance, and a few others. Global stock markets have been on fire for the last couple of years.

If you’re wealthy, you own a diversified portfolio and work in finance, or certain professional services, you’re on that upward part of the K. But if you’re a middle or lower income household, if you work in manufacturing or a trade exposed industry, or if you’re just young and trying to get started, you’re on that downward arm. So, things are actually getting worse for you. Your wages aren’t keeping up with costs. You might be facing layoffs or reduced hours, and you’re getting squeezed harder every month.

Now, to be clear, it’s always mathematically true that with any measure of average growth, some groups or individuals will be above average and some will be below average, but what makes it k-shaped is that we’re seeing some groups experience declines on several measures. So, let’s talk about what this K-shaped economy looks like in practice.

Now, Sabrina, you’re someone who talks to younger Canadians all the time. What are you hearing about how people are experiencing this divide?

Sabrina Maddeaux: It’s not good. The wealthiest 20% of Canadian households control about two-thirds of the country’s total wealth. That’s an average of $3.5 million per household. Meanwhile, the bottom 40% hold just over 3% of total wealth. So, if you’re already wealthy, you own stocks and investments, and those have been booming. Your wealth is growing even though you’re not really doing anything. And that’s the experience for a lot of older Canadians. That’s really where that’s concentrated.

If you’re younger and you’re just starting out and you don’t have assets, you’re entirely locked out of that growth and not seeing any benefits. And worse, you’re actually feeling like you’re in a downward spiral. You’re watching housing prices that would have been considered insane a decade ago become normal. You’re seeing your grocery bill climb while your salary barely budges, and you’re being told at the same time that the economy is doing great, everything is fine. On an individual level, this makes you feel like you’re failing, when really it’s the system that’s not working for you. And then that leads to obvious frustrations and distrust in the system, because what you’re being told doesn’t match your actual lived experience.

I’d also like to talk about the income side of this, though, because it’s not just the story about wealth and assets. What’s happening with what people are actually earning?

Mike Moffatt: So the income gap between the rich and poor is at the highest levels in the Statscan data set. Now, that only goes back to 1999, but it is the worst we’ve seen in that almost 30-year period. And that level of income inequality, it really should concern all of us.

The lowest income groups were the only ones that didn’t see their income grow in the past year. Everyone else saw gains, with the highest earners experiencing the strongest growth. So the people who are already struggling are staying in place or actively getting worse, while the people at the top are getting richer and richer, pulling away from the rest of us. And that creates a cycle that’s really hard to break, because if you’re already doing well financially, you have money to invest.

When the stock market goes up more, you earn more, you save more. Your wealth compounds. But if you’re living paycheck to paycheck, you’re not investing anything because you can’t invest in anything. You can’t capture those gains. So this gap just keeps widening.

Sabrina Maddeaux: Now there’s another piece of this that I think is really important. I mentioned the bottom 40% only hold 3.1% of total wealth. Can you talk about what that wealth actually looks like for different income groups?

Mike Moffatt: Absolutely. And it’s not just about the amount of wealth, but it’s the composition of wealth, that the assets that are owned by the richest 1%, or 5%, are different in nature than those owned by everyone else. So for the wealthiest 20%, over half of their assets are financial assets. So that’s stocks, mutual funds, corporate equity, and pension plans.

These are things that generate ongoing investment income and grow when the market performs well. But the bottom 40%, their wealth is overwhelmingly concentrated in real estate. And for most people, that just means their primary residence if they own one. They don’t have diversified portfolios. They don’t have much in the way of significant pension assets. Most of their net worth is tied up in their home.

So when the stock market goes up, 10% to 15%, wealthy households get significantly wealthier. But when housing prices stagnate or decline slightly, as they did in 2025, the less wealthy see their net worth barely budge, or it even declines, because they’re entirely exposed to one asset class and they’re not benefiting from the financial market boom that’s driving wealth growth for the top.

Now, I want to be really clear about this: having home prices go up double digits a year, faster than the stock market, is not the solution to inequity. We’re basically just trading one set of problems for another set of problems. And in fact, I worry that we’re generating massive inequality where there are haves and have-nots based on parental wealth.

So if your parents have wealth and are willing to help you out with the down payment, you can take that great job in the GTA or Vancouver. You can buy a home, and you can generate more wealth, but if you don’t have that help, your options are really limited. So your success in life ends up largely being a function of who your parents are, rather than your own hard work or talent. Is this something that you think about?

Sabrina Maddeaux: Absolutely. And it’s something that I’ve seen in terms of my peers who have been able to afford homes. A lot of them had parental help of some form, whether that’s an inheritance from a grandparent passing away, whether it’s a gift after a wedding, or just even cosigning. It’s practically impossible to get into the real estate market these days if you’re under the age of 40 without some form of parental help.

That completely disconnects how hard you work, or no matter what job you have, from any actual, real, tangible improvement in life and adult milestones. It feels like you’re constantly on the hamster wheel. No matter how hard you spin it, you’re really not going to get ahead. So that leads to a sense of hopelessness and obviously anger and frustration as well.

You see it with colleagues who might have the same position as you and the same salary, but they’re just ten years older, and they’ve been able to build a fantastic life for themselves. They own a home, often a very nice one. They have multiple kids, they’re having vacations every year, and despite working as hard and meeting the same professional development success markers, you don’t have any hope of having that lifestyle at all.

So we are in the situation where your actual lifestyle and quality of life are completely divorced from your work ethic, your success, and that obviously creates a lot of hopelessness and frustration. And it’s very obvious. I think this became very obvious during the pandemic, where you had remote work, so you could actually see into people’s homes during work meetings, and you could say, Wow…just because of their age - and not to diminish the hard work that they do, but - they have a completely different lifestyle than everyone on the call under a certain age, no matter how hard they work. So that does create resentment.

We don’t want to be in a society where hard work is completely divorced from any sort of outcomes, right? Because then people are just going to opt out. And there’s going to be - rightfully, I think - a lot of resentment and frustration and jealousy, and that doesn’t put us in a good place.

Mike Moffatt: Yeah, I think you’re absolutely right. And I was one of those older people. I saw the other end, where you see your younger colleagues who are, in fact, more accomplished than I was at that age. Maybe even making more money than I was at that age after inflation, but not being able to purchase housing and certain things, because they become unaffordable.

So you get this middle-class inequality. But some of the issues are even worse than that. And you’ve covered how one of the most shocking indicators of inequality is food bank usage. So what are we seeing there?

Sabrina Maddeaux: The food bank numbers are absolutely staggering and getting worse.

In March 2025, there were nearly 2.2 million visits to food banks across Canada. That’s the highest number ever recorded. And it’s double what we saw just six years ago in 2019. But here is something that should really concern us: nearly 20% of food bank clients are employed. So when you read the reports coming out of food banks, their clientele is shifting.

Whereas it used to be those who are unemployed, the lowest of low income. But now we’re seeing a shift where who they’re serving is broadening quickly and drastically. So their clients have jobs, but often full-time jobs and even good jobs, but they still can’t afford to feed themselves and their families. And we’re seeing that percentage of employed food bank clients, up from about 12% in 2019 to nearly 20%. And on top of that, children now represent 33% of all food bank visits. That’s over 700,000 visits by kids in a single month.

So I think you do have to look at that number and say, Well, what are we doing here when so many kids are having to rely on food banks?

And what food banks Canada found is that housing costs are eating up a bigger and bigger share of income for low-income households, and in 2021, those in the lowest income group spent 49% of their disposable income on shelter, and by 2025, that jumped to 66%.

So when you’re spending two-thirds of your income just keeping a roof over your head, there’s nothing left for food. So the housing crisis is driving people to food banks and exacerbating the food crisis. We also now have, and this is all happening. While headline numbers say our economy is actually growing year over year, and everything’s just fine.

So the disconnect is massive.

Mike Moffatt: And I think that disconnect in those economic numbers is really important because you have regular Canadians who see GDP growth, booming stock prices, and politicians talking about how well things are going. Those same people, when they hear those things, are meanwhile struggling to make rent or buy groceries. What does that do to them psychologically?

Sabrina Maddeaux: Yeah, and often after they’ve had a university degree. After they have full-time employment, they still have to go to a food bank.

What it does is it creates this massive credibility gap. People feel gaslit, and rightly so. They’re being told the economy is fine, but their lived experiences are entirely different. They’re working full-time, sometimes multiple jobs, they have side-gigs, and they’re still falling behind. And this is part of why I think we’re seeing so much political volatility right now. When you tell someone who’s visiting a food bank, or living paycheck to paycheck while working full-time, that the economy is doing just fine - in fact, it’s doing great -they stopped trusting politicians and institutions and experts.

They stopped believing the numbers. They become open to more extreme political messages because the mainstream narrative doesn’t match their reality. So if one thing isn’t true to them, maybe everything they’re being told isn’t true. Now, though, both things can be true. The economy can be doing well for some people while also being terrible for others. And that’s exactly what K-shaped means.

The problem is, we’re not having honest conversations about this. We’re not acknowledging that strong GDP growth doesn’t mean much if the benefits are only flowing to people who are already wealthy.

I’m wondering from an economist's perspective, how you perceive that gap, what the economic numbers say, and how people are actually living. Are economists emphasizing the wrong numbers? Is this a communication gap? How does your field go about maintaining credibility and contributing positively to public policy discussions right now?

Mike Moffatt: Oh, okay. Sure, this is all my fault, but that’s okay. Not specifically me, just my profession.

There’s an old joke about a statistician who has one foot in a bucket of boiling water and one foot in a bucket of ice, and on average, he was comfortable. And I think that’s part of the problem when we talk about economic data, is that we’re often talking about averages. On average, home prices are doing this, or GDP is doing that. Unemployment or what have you. But, I think we need to focus more on those distributional aspects where we’re not just talking about the unemployment rate, but we’re saying, Okay, what is it for different groups?

Because if we look right now, the unemployment rate is pretty good for people my age. And it’s near three decades high for people in their mid 20s. So I think we need to spend more time not looking at averages, but looking at that distribution.

So I don’t know if it’s necessarily the wrong numbers, but just the way that we parse the data, which I think we need to focus more on distributional aspects. I think we do need to pay more attention to other indicators like food bank usage, which is not an official government indicator. It comes from these third parties. So I think it’s just having a more nuanced conversation rather than going, we’ve got to throw out one set of numbers and use a different set entirely.

Sabrina Maddeaux: So if we’re in this K-shaped economy where the divide keeps growing, is there anything that would actually fix it? What policies could you see helping?

Mike Moffatt: I think it’s about 80% housing.

If I look at what’s changed in the last 20, 25 years, it’s largely home prices. Not exclusively, but I think that would go a long way. I still think we need to look at things, like the temporary foreign workers rules. To me, it’s madness that we have these rules in place to say, once the unemployment rate goes under 6%, we’re going to loosen up the regulations, so you can never have a tight labour market, which helps those at the bottom. We treat that as a national emergency, and we allow corporations to do whatever they want.

I think a lot of it just comes down to building a stronger economy and competition. I think that’s how we get there in the long run. There are immediate patches we can use, like what the federal government’s doing with their GST grocery rebate, to try and help those who are struggling to get by. So there are immediate patches, but I think in the long run it’s this more structural reform.

I would start with housing and then look at competition in the Canadian economy, and look at not treating a tight labour market as a national crisis, but actually as an opportunity. That’s my take. I’d love to get yours.

Sabrina Maddeaux: Housing is foundational. Ultimately, if you’re spending half to two-thirds of your paycheck on rent or mortgage, that leaves very little for anything else. And if you then experience a layoff or an illness, that quickly becomes a disaster. So housing obviously needs to get fixed.

And also, yes, temporary foreign workers. We need to prioritize hiring Canadians and getting our young people employed, even when the unemployment rate goes technically above that threshold in a market or under that threshold in a market like it did recently. When you dig into those numbers, that’s because a lot of people stopped looking for work. So that doesn’t mean we actually have a healthy labour market where there is competition. People are very much still struggling.

We need to incentivize employers to hire young people and train them, especially as we see AI becoming more of a factor and encourage entrepreneurship and also stop overtaxing the middle class. Our middle class pays a lot of taxes, and they’re not even often living that middle-class or even upper-class lifestyle that corresponds to the tax bracket that they’re finding themselves in.

Thank you so much, everyone, for watching and listening. And to our amazing producer, Meredith Martin, and our editor, Sean Foreman.

Mike Moffatt: And if you have any thoughts or questions about how this is the economist’s fault, please send us an email to the Missing Middle podcast at gmail.com.

Sabrina Maddeaux: I know I’ll be emailing, and we’ll see you next time.