THE PLIGHT OF MEDIAN INCOME EARNERS IS A HOT POLITICAL BUTTON, BUT BY EMPHASIZING IT ARE WE IGNORING BIGGER ECONOMIC ISSUES THAT WILL LIKELY IMPACT ALL CANADIANS?
Much of the political rhetoric this year has been devoted to the struggles — real and perceived — of Canada’s middle class. Ever since Barack Obama rode a wave of support into the White House trumpeting his credentials as defender of this set of society, politicians across the world have assumed the role of middle class champion. Since we are so often treated to stories that focus on middle class challenges, it’s time to dig a little deeper. Are their troubles really that acute?
For the purposes of clarity, it should be noted that all figures are “real”, i.e. inflation-adjusted, to properly compare income levels across decades. Also, median is defined not as average, but as the middle of a distribution. In this way we can define and identify middle-income without skewing the data with very high incomes at the top end of the distribution.
Already solved
One side of the debate has the position that middle income earners in Canada have not seen real income gains in 35 years. And on the surface that is true. Real median incomes are not very much higher today than they were in 1980. But that broad comparison masks the fact that this period was characterized by a sharp decrease in incomes from around 1980 until the early 1990s, followed by a healthy expansion since then. So stating that “the middle class hasn’t had a raise in 30 years” describes a problem that was solved about two decades ago.
To use an auto industry parallel, it’s the same as saying that car sales barely grew between 2002 and 2013. True in broad strokes, the comment papers over a dramatic contraction in the early years followed by a very strong recovery in the second half of the period in question. Today we celebrate that car sales are at record levels. We don’t bemoan that they’re the same as they were in 2002.
The other side (normally governing parties) point to numerous studies and statistics that counter the story that median earners are getting a raw deal. Statistics Canada recently reported that median net worth is at an all-time high in Canada and almost double what it was 15 years ago. Another more recent study from the New York Times labeled Canada’s middle class as the richest in the entire world.
Perception versus reality
So, is the middle class is struggling to get by, or has the middle class never had it so good? Both positions are on the public record, and both have selective bits of data supporting them. Is it not possible that the truth lies somewhere in between? Can we not bring ourselves to introduce a little nuance into what is admittedly a highly complex discussion of policy and economics? There are real economic problems in Canada that need urgent attention from policy makers. We also have a very positive story to tell in Canada in many ways. Let’s not let the latter statement make us forget the former.
Real incomes have risen steadily for the better part of the past 20 years. Canadians’ main asset — their homes — has appreciated strongly in the same period. In fact, much of the increase in median net worth since the beginning of the century as found by Statistics Canada is attributable to rising real estate values. Critics point to this as evidence of a “housing bubble” that inevitably will pop.
The fact this hasn’t yet happened and shows no signs of doing so won’t stop alarmists from declaring that housing wealth is not in fact real wealth, despite all evidence to the contrary. Other assets have risen in value too: pensions, unregistered holdings, savings pots and other assets. On the whole, middle-class Canadians are richer than they ever have been. But that doesn’t mean we can declare all our problems solved and move on.
Provincial bankruptcies?
Parts of Canada suffer from very high unemployment. Some regions of Southern Ontario have seen total employment fall in the past decade with ever-rising populations; we have an employment “insurance” system that neither provides benefits to those that need it nor an efficient bridge back into the labour market; Atlantic Canadian economies that don’t have huge resource revenues are nearing a breaking point, and some provinces are now talking openly of bankruptcy. Quietly in Ottawa, department of Finance officials are most likely planning scenarios of provincial insolvency and federal contingency plans. The list goes on.
The problem is that when the economic agenda is hijacked by arguing over whether the “middle class” is in the soup or on the mountain top, greater and more specific problems miss the attention they urgently deserve. By all means lets aim for a prosperous middle class and lets not pretend that because the New York Times says so, all their problems are solved. But lets actually talk about those problems in the detail they deserve. Everyone in Canada — not just those in the “middle” — deserves this.
