After Trudeau’s warning, a look at income trends

How has the middle class fared?

by John Geddes

Justin Trudeau. (Graham Hughes/The Canadian Press)

Justin Trudeau. (Graham Hughes/The Canadian Press)

Much has been written about how the middle class is faring economically in Canada, and there will be plenty more as Justin Trudeau and his ascendant Liberals make this their core policy theme in the long ramp-up to a 2015 election.

The way Trudeau framed the issue in his speech to Liberals at their convention in Montréal last weekend was particularly grave, as he warned of a kind of class strife if the middle class doesn’t begin to benefit from the economic orthodoxy of our times:

“And to wealthier Canadians, I say this: the growth we have seen over the past three decades has been the product of a broadly supported agenda. Investments in education, fiscal discipline, openness to trade. All of which the middle class voted for, repeatedly. Here’s the point: The original promise of that agenda was that everyone would share in the prosperity that it creates. It hasn’t happened. That’s not a political point. It’s a fact. And if we don’t fix that, the middle class will stop supporting a growth agenda.”

If I heard him right, Trudeau was telling the rich that less prosperous Canadians won’t much longer support bedrock policies—notably free trade, the great economic mission of the 1980s, and spending restraint, the preoccupation of the 1990s—if they don’t start seeing a piece of the action.

So I went back to the stats. Thinking specifically of Trudeau’s reference to “fiscal discipline,” I wondered about the era of balanced budgets. Jean Chrétien and Paul Martin eliminated the federal deficit in 1998 (until  the 2009 recession forced their Tory successors in power to temporarily plunge back deep into red ink).

So what has happened since that watershed year? According to Statistics Canada data, the average two-earner family with children made $93,700, after taxes, in 2011, up from $71,400 in 1998. That’s an inflation-adjusted, after-tax raise of 31 per cent. Not bad. But was that a fair share of a growing economy? Perhaps just a shade light: Canada’s gross domestic product grew 37 per cent from 1998 to 2011.

Here’s that data, represented in a chart:

We might wonder how more vulnerable households have held up. The same Statistics Canada data shows, for example, that single-parent families led by a female saw their average earnings rise to $43,000 in 2011 from $31,500 in 1998, up about 37 per cent. Again, that’s adjusted for inflation and after taxes, so it’s what those moms really have to spend or save.

I don’t claim that these numbers tell the whole, complicated story. There are many ways to slice and dice income figures, and the real experiences of Canadians vary widely depending on factors like where they live, how old they are, what sort of education they have, and more. (Real experts have hashed this out in more detail here.)

But I do think that a straightforward reading of income trends does not support the notion that it’s somehow an indisputable “fact” that middle-class families in Canada have been denied the benefits of the smart economic decisions of recent times—let alone that their situation is so dire that they might be near the point of revolting against those policies.

UPDATE: I’ve been taken to task for using average rather than median income figures. For this debate, I don’t think it makes all that much difference. But for those interested: median after-tax income for a two-earner family with children rose to $83,600 in 2011 from $65,700 in 1998, or 27 per cent. In the same period, the median after-tax income of unattached individuals rose 22 per cent, to $25,800 from $21,100. (All this according to Statistics Canada data in the CANSIM 202-0605 tables, for those doing their own digging.)




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After Trudeau’s warning, a look at income trends

  1. Good points, but you are forgetting that Justin Trudeau thinks in other terms.
    To use your examples,
    The average two family earners with children saw an increase of $22,300 from 1998 to 2011,
    And.
    Single parent families headed by women saw an increase of $11,500 from 1998 to 2011.
    Trudeau doesn’t understand how great an increase this is, as it is not real money to someone with his wealth.
    Think about it…..would those numbers impress you if you could give a 30 minute speech to a charity and haul in $30,000 a pop?
    Trudeau trying to understand the middle class, is like someone from PETA trying to explain the best way to cook a steak.

    • Following your logic, only a doctor with cancer could be an oncologist.

      • You’re not following my logic……
        An oncologist can understand the impact cancer can have on someone, as he deals with it every day.
        Trudeau, is surrounded by wealthy sycophants, and he has been his entire life. The only time Trudeau is really concerned about the plight of people with less wealth than himself, is when he is looking for their votes.
        The promises Trudeau makes to the poor, or middle class are just about as big as the fence he surrounds his home with to ensure they never get onto his property.

    • It’s being reported that Harper has a net worth of 5 million – do you think he’s capable to relating to the middle class?

      • Considering he grew up in the middle class, and raised his family in the middle class….. yes. Harper wasn’t born into a million dollar trust fund like Trudeau was.

        • But no leader can share the same experiences as all groups of Canadians. By your logic, middle-class Stephen has no business running a government in charge of policies that involve corporations, large investment interests, etc. Not to mention women, farmers, etc…

          • Sure, you’re point’s all well and good if the question I was responding to wasn’t “Do you think Stephen Harper is capable of relating to the middle class”.

            Stephen Harper is also not an astronaut, nor a UFC cage fighter. Neither precludes him from relating to the middle class.

            Trudeau on the other hand has watches other people live middle class lives. I’ve watched a Polar Bear at a zoo one time, I’m not going to claim that I can relate to a polar bear because of that experience.

      • There is a difference between earning your wealth….and being born into it.
        Someone who has had to work hard for their money, actually appreciates it more. Trudeau has never had to work for anything he’s been given, including the current position he fills.

  2. The problem with “middle class” as a category is that it’s so subjective, and that the bar is constantly being raised for what defines acceptable economic success. If we can’t agree on a definition, then how do we assess the success or failure of policies designed to improve the middle class’ lot? Also, short of income tax cuts for a some band of average to middle income earners, how does one create broad economic policy that benefits only a select segment of the population?

  3. Averages suck. Bill Gates can walk into any room with up to 70 people in it, and all of a sudden the average net worth of everybody in the room is over a billion dollars.

    Percentages suck. GDP of 10,000,000 goes up by 10%. That’s $1,000,000. This is spread out so that each wage earner gets the same percentage increase – 10%.. as Geddes has found.
    So the manager earning 5,000,000 gets 10%, and the 500 guys working for him earning 10,000 each get 10%.

    That’s 500,000 for the big earner, $1000 each for the 500 workers.

    They’ve shared equally in that increase right?
    I mean, just because the big earner got HALF of the entire increase, and everybody else got 0.1% of the increase doesn’t mean it was shared unequally right? So what if the big earner’s increase on its own, never mind his original earnings, is almost 50x the entire wage of anybody else. That’s just fair, after all, no reason for anybody to feel they’re somehow being left out, right?

    Right?

    • I suppose if you live your entire life in jealousy of those who have more than you, then you’re right. But most hospital janitors don’t compare their wages to a doctor’s. Because it’s completely unrealistic. An honest janitor would acknowledge that the doctor is the only reason the janitor has a job in the first place.

      In the real world, people ask themselves “Am I better off than I was before”, and as Geddes points out here, most people are better off now than they were at the beginning of the century.

      • If you want to go real world, you should probably actually use studies from the real world.

        If you do, you’ll find that what people actually ask themselves is, “Am I as well off as my neighbor?”

        The studies have shown that financial discontent tends to happen most when people feel they are doing worse than their neighbor is. And conversely, financial satisfaction occurs when they are doing better than their neighbor is. (“neighbor” in this case meaning the people within their immediate social circle) The funny thing is, the actual level of financial stability is almost irrelevant. If everybody around you is poor, you will tend to accept being poor because that’s just the way it is. If everybody around you is richer than you, than even if you’re rich, you’ll tend to feel that things aren’t going well.

        • So, in effect, what you are saying is that Trudeau is going to play on the envy of those who think they deserve the same as their wealthy neighbour.
          yeah…I guess effort and hard work should come into play.
          You do however, clearly explain the reasoning for those who vote New Democrat.
          “you have more than me…..gimme !!

          • Hint: the “those” in question is general society. The studies noted no correlation to political leanings one way or the other.

            I’m sorry you don’t like the real world, but that doesn’t mean you should live in a fantasy one.

          • The studies don’t need to note political leanings….it’s pretty well a given fact that those who vote for the party promising to take from others’ and give to “them”……..tend to be non-conservative.
            It’s the Peter and Paul argument….and it’s still just as true today. The NDP depends upon such idiocy.

          • LOL.. in other words, “Stop using the evidence and rely on what I believe!”

            Thanks, but no.

      • Century…are you for real, most people I know are surviving on line of credit..debt. Obviously you don’t do grocery shopping, pay your utility bills or fill up you car

        • Actually, I do grocery shop, pay my utility bills, and fill up my car. And not a dime goes on my credit card (I have not accumulated ANY debt in 5 years). I do this by living within my means. This means I do strange, archaic things like survive with my iPhone 3GS, even well after the 5S has been released. I have one, reasonably sized flat screen TV, not 1 for each of the 7 bedrooms in my McMansion. I go to work for a reasonable salary. Obviously, I’d like more, which is why I work hard so I can make the case for a raise every once in a while. I don’t expect to get ahead by simply showing up to the office each day. I live with a roommate, even though I’m in my 30′s and had previously lived by myself. I’ve never gone on a winter vacation.

          In other words, I make sacrifices. In return for these sacrifices I’m able to not stress out about money. I’m able to sock away a few bucks each year in an RRSP, which also helps me fret less about the future. It allows me to “splurge” on things I love like golfing once in a while.

          Living within your means. It used to be a Canadian value. Now it seems to only be a Conservative value.

          • Yeah, we’ve noticed that Con value of a massive deficit and debt.

            Harpo having blown the surplus he was left……

    • Your analogy is idiotic.

      How about we pretend that Canada has, oh let’s say 30,000,000 people in it, instead of 70.

      Lets say the average Canadian takes home $100/yr. Meanwhile Bill Gates takes home $100,000/yr. (I’ve reduced the number of zeroes involved here to simplify the math for Liberals).

      If you take the average income of a Canada without Bill Gates, it works out to $100 per person, obviously. If you add in Bill Gates’ massive $100,000 annual income, guess what the average comes out to? That’s right…. still $100. This is because Bill Gates is what we call in statistics an “outlier”.

      Attacking people who make a lot of money will never end up with better results for those who make less money. Would the poor somehow be better served if we slashed doctor’s salaries in half? Would we have a more just society if everybody just stopped using high-priced lawyers and everybody went to legal-aid instead? Would the world be a better place if Bill Gates hadn’t revolutionized the entire way we communicate and share data?

      If you want to go back in time and live in 1995 for the rest of your life, go for it. I’ll take progress instead.

      • Meh, I didn’t attack anybody who was rich. Your hyperdefensiveness is as misguided as it is pathetic.

        Honestly, all I was doing was pointing out how the measures Geddes is using, percentages and averages, don’t actually mean anything when you stop looking at it as just a numbers game and instead look at the situations of the people involved.

        That you think I was attacking them is actually kind of funny because if you really didn’t think there was anything wrong with the situation, my comment is simply a statement of facts. It’s only when your gut goes, “That doesn’t seem fair” that you get that there’s some sort of attack in there.

      • Oh, and by the way, we both know that the real reason you reduced Mr. Gate’s worth is because his actual net worth supports my point, not yours.

        After all, when Mr. Gates comes to Canada, the reality is that the net worth of the average person in Canada increases by about 2 grand.

        • Are you attributing Bill Gates’ net worth as his annual income? That’s the only way you could possibly skew the number that much. I assure you, he doesn’t make that much money every year.

          • Learn to read.

          • OK, so you’re adding someone’s net worth into an equation calculating average Canadian incomes. Why not include the US government debt in the equation? it’s equally relevant.

          • Learn.
            To.
            Read.

            Here’s a hint: You’re the one who made the change in the example from Gates’ net worth to his income. Don’t whine to me that I didn’t fall for it.

  4. I’ve got to admit, I was fully expecting Gedde’s to be spinning whatever numbers he could find in Trudeau’s favour. Thanks for the honesty John.

  5. For a serious look at this issue, graph median after-tax income as a percentage of housing costs in cities.

    • That’s not a “serious” look, that’s a skewed look. Trudeau’s saying that Canadians are worse off. Just because somebodies housing takes up a larger percentage of their income, does mean that they’re worse off. It means they’ve decided to invest a larger % of their income in their home. That’s all. In fact, that Canadians would be willing to invest a larger % of their total income suggests that people would be feeling rather secure about their income. People don’t go and buy a bigger home when they’re scared they might lose their job the next day.

      • Serious question: are you twelve years old?

        • That’s your response to me debunking your skewed statistics? Should I assume that you’re 13 then?

          • Have you tried landscape oils? You’re not very good at the pretending-to-understand-economics-and-politics hobby.

    • Not if you’re talking about “the middle class”, as Trudeau has been.

      • that’s absurd.

  6. Yeah….you’re kind of missing the most important part.

    This isn’t about facts, its about feelings.

    • How many feelings do I need to buy a beer?

  7. Trudeau is lifting this campaign theme from Freeland’s book “Plutocrats” written in the US for an American audience. Like everything else in Trudeau’s campaign – it’s made in the USA.

    • As opposed to Harper’s completely home grown tactics and policies, right!

  8. That’s all well and good, but since we know inflation doesn’t account for all the factors regarding the actual cost of living, what I’d really like to know is whether Canadian incomes are keeping up with what it actually costs them to meet all their obligations.

    When you look at real estate, education and food costs for example, they’ve all risen faster than inflation, and these are all basic costs.

    I mean our comparison point here seems to be two income families, which means having daycare arrangements, and I can tell you that in Ontario at least, those costs have shot through the roof.

    I don’t know enough about all this to say for sure, but “income after inflation” seems like too little information to base such a criticism on.

    • Bingo. This is a poor post by JG’s usual high standards. Averages in the context of his graph mean almost nothing. Even more importantly presenting those supposed income gains without providing context on the debt that m/c Canadian families now carry, makes the debate pretty much pointless really. Even that statement has to be parsed. What degree of consumer debt is just getting by and what % can be said to to equity, principally in the form of home ownership? The case for the latter being a good signal of national wealth or consumer well being is also debatable, since real estate can so quickly become a bubble and interest rates aren’t guaranteed to remain low forever.
      http://www2.macleans.ca/2014/02/23/internal-government-report-calls-middle-class-dreams-a-myth/?utm_source=disqus-dashboard
      Here’s another poorly presented story. Do these numbers take inflation into account or not? I presume so. But If not, then m/c incomes have been largely treading water at best.

      • You are making the argument that everything costs more, which is different argument from the point of income growth. The latter is the one raised by Trudeau, in that the middle class hasn’t had a raise in 30 years.
        The analysis above suggests that Trudeau is wrong. Both median and average inflation-adjusted after tax incomes have clearly grown. However, it doesn’t mean the people aren’t feeling squeezed by after tax spending. Also, Trudeau’s prescription of increasing debt to promote growth is somewhat dubious, since it will most definitely mean higher debt-servicing costs down the line, particularly as interest return to historical norms.
        If that happens, we go back to the years when 40+% of government revenues going to pay interest alone.

        • Sorry but you’re quite wrong. I can’t point you at a specific speech or interview, but JT has made the connection between cost of living and stagnating m/c incomes on a number of occasions. He may even have mentioned it in his convention speeches. I was busy else where and still haven’t read the full texts yet. Part of Trudeau’s argument rests on the work of people like Miles Corak[he has a good blog site if you google him...progressive economics, or something similar] who posits that family incomes are pretty much where they were in the 1970s, even though the economy as doubled or more[?]
          Fair point about how he will pay for what he wants to achieve. My view is he’s kdding himself if he thinks it can be done without raising the gst – at least at some point when the economy starts to grow at a decent rate again. MOV is that real growth will only really return for us when it does for the US. No reason not to try and diversify our trade in any case. Hopefully that will be his focus.

          • You may be right that his position is more nuanced, but I have heard him say in interviews, or quoted directly in print, specifically that the middle class has not had a raise in the last 30 years.
            Perhaps he means that the cost of living is rising faster than middle class salaries, but we generally use various inflation to gauge cost of living, and the measures reported above include national inflation numbers.

          • But do you put any faith in them? I’m the farthest thing from a conspiracy nut, when simple human incompetence or confusion will do. But i find inflation predictions to be absurdly low across the board. In my defense i am an economics neophyte; simply going with a gut feeling on this one.

          • Predictions….no. But past comparison of salary levels relative to inflation is a reasonable way to determining if we are keeping pace with the consumer price index. This information is available for the last 30 yrs, or 15 as shown above, if we are to know whether the middle class is indeed lagging. Strangely, we don’t often hear what income levels constitute “middle”

          • On a separate point, I don’t immediately see why GDP numbers and individual salary numbers to keep in step. GDP is an aggregate measure of the value goods and services. We have had a huge influx of workers (particularly women) since the 70s which has contributed to GDP growth. GDP growth per capita is a more appropriate measure, which probably (I haven’t graphed it) lags after-tax income growth (due to income tax reductions in the late 1990s and 2000s.

            http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(real)_per_capita_growth_rate

  9. Talk about medians rather than averages, and you get the picture. Median income has dropped consistently for decades now. So has 40th %-ile and any other %-ile below that.

  10. In my opinion, middle class should be subjected to the generation.
    Immigrant’s middle class?
    3rd or more generation of middle class?
    Middle class of native American?

    Middle class is a subjective term to what target audience are.

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