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Middle-class incomes are stuck: Why it matters and how to fix it

Tax? Fight? Adapt, says Kevin Milligan.


 

My colleague Stephen Gordon challenges the notion championed by Liberal Leader Justin Trudeau that Canada’s middle class is facing hard times. Gordon correctly points out that total income, measured at the family level, has seen some growth over the last twenty years. Look at the data another way, though, and you’ll see more troubling evidence.

Read: To Justin Trudeau and Chrystia Freeland, RE: the middle class – by Stephen Gordon.

The chart below lays out median annual earnings — adjusted for inflation — over the last 35 years. The data show that, for males, median earnings started at $43,500 in 1976 and have progressed downward since. The economic booms of the late 1990s and mid-2000s failed to move the needle for middle class men. The pattern for female earnings, on the other hand, is quite different. Since women on average work fewer hours for lower wages than males, overall female earnings are lower than for males. However, female earnings have followed a clear upward trend over the past three decades, which reflects both more participation in paid work by women and growing wages.

Canada, median male and female earnings. Source: Statistics Canada.

These data suggest that the growth in middle family incomes is not widely-based. To continue the past decade’s family-level income growth, women would have to work still more hours and the occupations where women predominate would need to show continued wage growth. Neither is assured.

What’s gone wrong with the job market for men? Across rich countries, jobs featuring routine tasks — like assembly line worker or accounting clerk — have declined, while the number of cognitive, non-routine, and personal service jobs — think: health worker, or interior designer — has increased. The net result of these changes is a hollowing out of the labour market that has hit males hardest. Evidence of this is most abundant for the U.S., but Canadian trends appear quite similar in many respects. This job polarization seems to be related to global developments like technological change, trade patterns, as well as institutional factors such as the decline of unionization.

In my view, a society where big slices of the population don’t benefit from economic growth invites trouble. Some worry about fairness, and the implications of the concentration of economic power. But even if all you care about is an overall growing economy, stagnating middle incomes can be a problem in a democracy. Take the case of the B.C.’s rejection of the HST. A poll of British Columbians taken around the time of the 2011 referendum revealed that most respondents believed the HST to be a growth-enhancing tax structure, but they didn’t think the benefits of that growth would accrue to them. In order to maintain support for economic measures that grow the economy, the beneficial effects of growth need to be widely felt.

What can we do about this? There are three policy options: We can tax, fight, or adapt.

The first option is to harness the tax system to counteract labour market stagnation. Why not let the market determine wages and then redistribute some of those earnings around with the tax system? The problem here is the math — the number of people in the middle is too large to be paid out of revenues from higher taxes at the top. A six per cent increase to the top federal income tax bracket, for example, might bring in $1 or $2 billion per year — not nearly enough to compensate millions of middle-earners with stagnating wages.

The second potential solution is to fight the global changes affecting wages. We could try to hold back international trade and technological advance; freeze the economy in place by preserving jobs in existing industries. With this solution, we lose the great benefits that flow from international trade (a greater variety of cheaper goods) and the dynamism that comes from new technologies. Even if it were possible to halt change, we would simply lock in stagnation.

The third choice is to adapt to the world we have. Rather than striving to ossify our economy in some idealized previous condition, we embrace and adapt to the global changes we are seeing. We can build the labour force that is needed now and prepare for the one needed in the future. Demand for cognitive, non-routine, personal service, and creative labour remains high. A still-more educated workforce gives the next generation of Canadians the best chance at carving out their own well-paying niche. We can ensure our tax system encourages and rewards entrepreneurship and innovation so that new high-paying jobs continue to be created here.

Quick or easy fixes are elusive. Instead, the best approach is to focus on long-run structural measures — like education — that can build a sustainable framework for broadly-based income growth for the future.


 

Middle-class incomes are stuck: Why it matters and how to fix it

  1. At last the voice of reason!

    And adapting is something we need to do PDQ.

    Thank you for this!

  2. I don’t have a problem with this analysis or its prescriptions to adapt to the new global realities. But I do think you’re glossing over some of the damage bought about by shipping out or eliminating so much of the routine labour jobs. We see the results of this on our streets everyday; the homelessness, petty crime, mental illness. Not everyone has or can adjust. We’ve paid a huge price in gutting the market of well paying labour. Those jobs in the wood mill/ paper plant are tough to get now or non existent. The idea that we would all adjust and morph into computer programmers was always laughable. How long did it take for computer savvy folks to be working in $8-10/he sweat shops in the 80s? We won’t even mention all the other folks that never did adjust. I guess you can still find yourself a camp spot in Stanley park if you’re quick; all those cheap consumer toys had a higher price tag then we imagined.
    As to the fix – surely since we now know the true cost of all this advancement for some dislocation for others, it’s time to get busy on a limited form of guaranteed income? It’s better and cheaper than the alternative by a long shot.

    • Economic dislocation is a part of any upgrade….but since the govt is busy trying to return to the 50s…it’s not likely they’ll notice the major changes in the world and smoothe the transition….even though they’ve been warned about it for years.

      Hell, Mulroney proposed a GAI…but nobody listened.

      • I didn’t know that, good for Brian. I’m probably getting muddled but i think the notion of a GAI came up even earlier in Trudeau’s time. The need is surely even more pressing now.

        • Yeah I always liked it because it would be one payment, like a salary….and eliminate all the other things like food stamps, housing allowances…and all their variations across the country. Cheaper and more efficient.

          There was an experiment in Manitoba in the 70s I think using a version of this….it worked, but like everything else got shelved.

          • I like the idea proposed by Milton Friedman of having negative income tax. Under this system everyone would get a minimum amount of support from the government but would always be better off earning more because the amount contributed by the government would taper off linearly. This would satisfy the left and the right by combating poverty without providing disincentive to work.

            It does make much more sense to have a system that replaces all government branches that essentially do the same thing. This way you could give the money directly to the people you’re trying to help rather than having it get bogged down in administrative costs.

            The only potential problem with this system is that filing taxes once a year could mean going without any assistance for 11 months. If a system could be put in place that would cost a minimal amount of money to operate where incomes are reported more often it could work.

          • Yeah, there’s so much paperwork and bureaucracy in the 10 different systems in the country….needless running around….time-wasting…when the whole thing could be quicker, easier and more efficient. It could also get people retrained and back to work sooner as well.

            What we need is political will….the rest could be sorted out in short order. Trouble is, we always get caught up in the left/right stuff instead of what works.

          • Let me remind of an important nuance concerning “political will”.

            If by ‘political will’ one implies that the current system can be reworked into some new, less draconian system, I urge you to veer away from this insidious mythology. Hierarchies may be subsumed by networks in much the same way as television is being engulfed by the broader internet medium.

            “Political will” in any meaningful and productive sense must necessarily involve a network structure distinct from State. We see the start of this war vis a vis the matter of global currency (eg. Bitcoin, Litecoin, etc.) and it is assuredly, one way or another, only the very beginning of a global backlash against corporatist status quo that has effectively stripped Gen-Yers of any future.

          • Oh good lord……LOL

          • I didn’t see this before commenting about the Canadian experiment with negative income tax in reply to Emily above.

          • Negative income tax is a sensible idea but with the same hierarchical political structure it will never be made to work for the reasons I mentioned above. The internet has effectively ended the possibility to return to traditional capitalism without going back to the Dark Ages.

            Networks are inherently better at organizing and distributing resources than hierarchies (which are ironically antithetical to the democratic process we claim to honour anyway!).

            A negative income tax can only have a real chance of working in a *decentralized network* where a “free market” is expanded to include all values and issues. A kind of contributional marketplace created directly by the people which not only offers goods & services but allows legal codes to be modified by consensus, political issues to be solved by online collaboration and the sharing of open-source scientific research.

            State is in the way of all of this, I’m afraid to say. Nay, I am excited to say this. Bureaucratic politics has nothing to do with our future. It is decidedly the past now.

          • The strange thing is that so many conservatives don’t seem to like the concept. You’d think they’d love anything that reduced the civil service by a bunch.

          • True….I don’t understand the Senate thing either….you’d think they’d be keen to abolish an entire level of govt plus all the bureaucracy that goes with it. Yet here they want to elect the thing, which means more elections, more campaigns, vastly more money…..!

            Streamlining the govt seems like a no-brainer to me. LOL

          • I’m not a big fan of an elected senate either, just more money being spent on elections when we already have an elected house.
            Abolishing the senate altogether doesn’t appeal to me all that much either. Whenever I’ve watched senate committee debates on CPAC I’m shocked at how non-partisan, and intelligent the discussion is and the common senses fixes they suggest.
            I would be happy with term limits of 8 years and perhaps a reduction in size or cost. This, of course, combined with more oversight over senators (and MPs for that matter) expenses.

          • Yeah but the minute you make it elected….the calm rational common sense discussions go out the window and we just have another level of mud wrasslin’.

            Who’s going to take 8 years out of their career to be a temp in the Senate though?

            We can’t tinker with it….it just makes it worse

          • A cynic might think that protecting the western resources from the east is all they’re really worried about; but that ship has sailed long ago. These days the premiers do a pretty good job of protecting regional interests anyway. I’d like to see the senate function as a regional check on the more populist big House myself, but electing it without addressing its imbalances is plain dumb. Electing it at all is just asking for US style gridlock if you ask me. Which would probably suit the Harperites to the ground – no more national programmes. Eventually a complete rejigging of equalization payouts…nasty Trudeauvian socialist stuff eh! Holding all the big provinces back. Away with it all i say!

          • I’ve never understood the ‘regional’ thing myself….we have one country, not ten separate ones….but we don’t even trade with each other, and everyone has a separate agenda. Sharing is what we’re supposed to be doing. Otherwise, let’s all just separate and be done with it instead of constantly being on a cliff-edge. That’s very unstable.

            The HOC already represents all 10 provinces, and is more regionally balanced because of it than what the Senate ever was.

            I also agree on the gridlock….if it’s anything we don’t need it’s more blockages and delays. So TWO of those HOCs in effect would just make things worse.

            Ont’s been asking for years to get rid of equalization! Nobody was keen on dumping it before. It’s kinda like Ireland was with the EU….when the time came to kick in….suddenly it was a bad thing.

          • “The HOC already represents all 10 provinces, and is more regionally balanced…”
            Not really. In a country as large and as diverse as ours, straight rep by pop is not always a good balance. Needs of the less populous areas are often overridden in favour of the more populous. A (properly constituted) Senate can be the counterbalance needed to fix this.

          • I beg to differ. I believe it *appears* we have a country. Speaking of ships long sailed, so has national autonomy. We are joined to the hip with many countries, including most especially China.

            Accepting this, voting becomes fruitless since our local needs are not being paid any attention and they CANNOT in such a rigid and breakable hierarchical system. This is a rogue transnational economy now. We will never be able to rationally vote away THIS problem. In fact, I dare bet that the State will be the most clueless when an endogenous revolution without borders comes into full swing. The State, like God, is dead.

            The answer is a network of individuals, a collective free market without center. Quibbling about Canadian politics only wastes mindspace.

          • Oh I’d say yours is already wasted.

          • If you can, please respond to the matter at hand. The fact that you waste time making snarky comments shows that you’re easily threatened by a different point of view, no matter how artfully articulated.

          • Heh….you’re new here eh?

            For years I’ve talked about the 21st century, globalization and a planetary govt. So you’re wasting time talking futurism to a futurist.

            And it would help greatly if you gave up the ‘artfully’ for plain speaking.

          • Define “here”. Cyberspace has no locale, child. ;o)

            “So you’re wasting time talking futurism to a futurist.”

            As if the internet and open-source networks were the “future”. I’d say you’re at least 20 years behind. This is probably why you concern yourself with partisan politics despite the fact that GenYers already grasp how irrelevant it all is to not only their future but their _present_.

            And should one try to dumb themselves down to your unproductive manner of parlance, at least 100 IQ points would be shaved. Instead, try keeping up to at least *present-day* politics, not the 1940s. Thanks.

          • Ahhh another Ignoranti…..sorry, not interested.

            PS And the fall temp position has already been taken.

          • You should pluck your ear hairs, granny. Just a bunch of nonsense coming out of you this week.

          • LOL you’re the one wasting time writing crap on the web, sonny.

          • Abolishing senate is reactive nonsense unless you have a fairer process in mind. Somehow I doubt you do considering that you obsess on the details of these outdated politics that mean absolutely nothing to the average citizen in the real world. What do you have in mind as a replacement of all this? Suggestions would be productive. Anything less is hot air.

          • The experiment in Manitoba was with a negative income tax, which has GAI as a component, but offers much more promise.

            Negative income tax eliminates the stigma of presenting your case at a welfare office and then continually justifying your poverty, and instead of clawing back income earned at usurious rates, which is what provincial assistance bureaucracies do now, anything over the GAI just gets taxed at a normal rate.

            It was tried in Dauphin and Winnipeg, circa ’72 and demonstrated improved long term health status, higher education levels, and employment for participating families. Senator Hugh Segal is a current champion, but he isn’t getting much traction in Conservative or other circles because most policy makers cling to a punishment based system, like with EI, that tends to humiliate people who apply.

            Mulroney GAI, as I recall, simply proposed setting a level and qualifying people who were unemployable, but leaving the Welfare system in place for people considered employable.

            The real benefit occurs when you eliminate all the checking and investigating and disincentive to working (clawbacks) and trust that 97% of people want to improve themselves and the cost of chasing 100% of recipients to catch the 3% just isn’t worth the investment.

          • Ahh I remember both things, but not the details. Yeah, punishment seems to be a big thing, both in UI and welfare.

            Another area that needs to be overhauled top to bottom

          • (What makes you think that those 97% / 3% numbers, even if true, were to remain true, under such an unchecked & uninvestigated system?)

          • 1. I’m saying the supposed cheating doesn’t matter because the benefit of removing the stigma for the majority of deserving recipients, for their families and in program savings is huge
            2. It has been studied http://www.livableincome.org/rMM-EForget08.pdf

          • “I’m saying the supposed cheating doesn’t matter because the benefit of
            removing the stigma … huge”

            That does not follow. Any huge new government expenditure “matters” – both to the payees or to the payers.

            “It has been studied…”

            Where do you see forecasting slacking/cheating, let alone sustainability at scale, in any of that?

          • You’re the one who thinks it’s important so look into it.

            I gave you a link to a study that showed the elimination of poverty is possible without increasing social assistance costs. Health status education status and employment all improved using a Negative Income Tax approach. That’s where the promise lies, in eliminating armies of financial assistance workers and leaving social workers to do actual social work for people who want their help.

          • “You’re the one who thinks it’s important so look into it. ”

            OK then — but at least that’s a rather weaker claim than your earlier “97% this, 3% that, don’t bother enforce”. Thanks for climbing down.

            “the elimination of poverty is possible without increasing social assistance costs”

            Where did you see that? The report said in several places that the amounts budgeted for the experiments were way underestimated. Sure it may avoid increasing “social assistance costs” if you have a whole separate budget line item named “guaranteed income” (along with a golden-egg goose if possible).

    • The job loses are from reality economics. Something statism-liberals like to ignore is government is about wealth consumption and can not create wealth. Its why government can’t fix economic issues as they are the cause fo the issues.

      Hidden taxes and income taxes have driven up the costs too much for us to be competitive. You need higher wages than the entire world to live in Canada, because homes, cars, insurances, taxes, groceries, contain so much hidden high prices from high and often hidden taxes driving up the costs.

      This tax’em more and pandering with other peoples money to bailouts, welfare, money for nothing programs has a price, our economy gets too expense to compete. So we lose jobs if the companies can move.

      Also reduces job creating investments by people like me, a Canadian invesotr. All governemtn wants to do is screw us, take “Trusts” for example. Also add in bank returns for pensions and savers is well below real inflation plus taxes, TSX is losing money, why invest in negative value Canada?

      Government has made a huge mess with their tax greed. The only solution they know is more taxing government bloat, yet this is the cause of the job loss, too much government consumption the producers can no longer support.

      • Sorry, I know where you’re going with this, but it doesn’t do anything for me. Every time I hear someone complaining about the tax burden in Canada (no doubt there’s always room for improvement ) I wonder where all these wonderful libertarian low tax nirvanas are? Really, can you point out an example of a low tax economy that is truly free and democratic and progressive; one that has stood the test of time.

        • The society we have, our system of laws, and our core fundamental value of liberty is that low tax nirvana. Unfortunately, it is dying the death of a thousand cuts. For decades, so-called progressives have been nibbling away at our freedoms, the very freedoms that are fundamental to us, in the vain and faint hope of building a more just (in their eyes) society. But,, the lack of intellect on the political left does not allow them to see the injustices they create.
          Look at the Wheat Board, and the long, drawn out battle to toss it in the scrap bin of history. Statism at it’s finest, it was widely supported bu Canada’s left, even if the bulk of the farmers were hostile or indifferent. The irony of the pro-choice (on abortion) crowd being wholly against farmers having the choice of marketing agents for the fruits of their own commercial efforts was completely lost amongst denizens of the lib-left.
          Look at cars. I can’t choose to buy a car with no airbags,despite my belief in the statistically proven superior cost/benefit ratio of simpler seat belts. I can’t choose a car that only meets the emissions and safety standards of 1993, even though said car, built with 2013 tooling and technology would be several hundred pounds lighter, thus more maneuverable and fuel efficient than the actual modern equivalent, and considerably less costly. Why can’t I have a choice? Why does the state get to dictate where it lacks expertise? Why can’t automakers get a reprieve from burdensome regulations and let the market decide what it wants? Why not let Ford decide if it wants to build a lighter, more powerful, and more fuel efficient Taurus, while Nissan opts for lower emissions or greater weight at the expense of fuel economy, and let the buyers decide?
          This goes on and on. Why does the forklift at my place of business require a back-up beeper before the city gives us an occupancy permit? Why does a simple plumbing mod in our building require an inspection from city worker who clearly has little or no knowledge of the trade?
          Government creates no wealth. It merely redistributes it while skimming the cream from the top. Push government back to the corners of our society and let a freer and more vibrant marketplace create the very wealth hat goes so far to alleviating human misery.

          • Nice rant. Unfortunately you’re full of it. Whether was a limit on the freedoms of some or not, or call it a tyranny of the majority or whatever but the fact is the majority of farmers supported it over its lifetime.
            As for local bureaucracy and meddling, there I’m more in agreement. It’s a bitch and probably getting worse. It seems to be a price we pay for living ever complex and crazy busy lives. Sorry, I’m not much of a conspiracy fan, whether it be about big evil gummint of big evil business out to take away all our freedoms. The old days weren’t all so free or golden – cept in our memories.

          • I grew up with farmers, and still deal with them in business. I have never- NEVER- met a wheat board supporter who is also a farmer. Not one. The only wheat Board supporters I have ever met are employees of the board, or non-farmers.
            Here’s a question for you, though. How can any corporation take my freedom, outside of that corporation acting in concert with government? In that case, would it not still be government taking my freedom?
            Again, the logical solution would be to strip governmental authority and limit the ability of it to implement policies and frameworks that lead to such erosion. That said, I can’t honestly think of a corporation whoe actions have been deleterious to my freedom. I can, however go chapter and verse on serious losses of freedom due to the actions of the federal and provincial governments of this country.

          • You seem to be arguing for some sort of absolutist society where both ALL your freedoms and mine can be both indulged and guaranteed. I’m sure you know this simply isn’t possible. As Lincoln said you can’t please all the people all the time. Just take a look at the way our charter is worded; there are all kinds of references to when our freedoms can be legitimately limited if that can be justified.( that should bump up your blood pressure :)) I find the absolutist language of the US constitution by comparison to be noble, glorious and mostly unrealistic – something Disney could have come up with. It’s all academic anyway since US courts like ours routinely try to find room for compromise or a different emphasis – that’s life. We do the best we can and try to fix things when they obviously need fixing.
            The WB seems to be such an example. Everything I’ve read leads me to believe it was once popular with farmers – times change, that doesn’t seem to be the case anymore.
            I won’t jump willy nilly on to the gummint is evil or unecessary bandwagon. It’s never been perfect, but it’s better than a so called free and unregulated free for all. Then you’d see whether corps are so benign or not . How do I know that? The only way you can, because its happened before.

          • Yes, the Wheat Board was once popular, but when the only people affected by it wanted it gone, they were opposed by statist forces every, single step of the way. Every step. Therein lies the problem; that of getting the state to relinquish authority once granted, no matter how great or readily apparent the failure of that authority.
            If it’s not the politicians themselves reluctant to relinquish authority for political reasons, it will be the bureaucracy for philosophical and logistical reasons, and if not the politicians and the bureaucrats, then it’s the employees who will fight tooth and nail to preserve their jobs, right and wrong be damned.
            What’s the solution? Easy. Just don’t friggin’ go there in the first place.

            Look at the mess that is our Constitution. Imperfect as it is, it will remain effectively unamendable due to the idiot Trudeau’s impatience with process. The gravest flaw is the failure to entrench the property rights that I was born with in this very country. It also failed to entrench limits on legislative powers.
            You can’t square the American “Congress shall enact no law…” with our Charter’s very clearly implied limitations upon individual liberty. Our Charter very explicitly turns it’s back on the concepts of natural born rights as first codified in the Magna Carta, and the next 1000 years or so of English law that routinely and deeply instilled the idea of liberty as a profoundly British and profoundly vital ingredient to a great society.
            Most laughable is the constant hostility amongst Canada’s left towards the Harper government’s incremental efforts at shrinking the scope and reach of the state. Can these people honestly make the case that Sheila Copps and that worthless sack of dog excrement Chretien EVER had the overall best interests of the Canadian people at heart? No. What they and almost every Liberal has ever wanted is a Canadian state that was a wholly owned subsidiary of the Liberal Party of Canada. Trudeau, bless his Marxist heart, envisioned us as a client state of the Soviet Union, as has every NDP leader of the past 50 years, including Jack “187 Dundas Street” Layton. You think PET and Tommy Muldoon and Body Rub Layton didn’t cry themselves to sleep a few times after the Soviet Union collapsed, you’re on crack.
            What we on the right hope for, is that we can have an ostensibly conservative government long enough to dismantle enough of the state apparatus that it creates a more positive business environment that has enough staying power to facilitate decent economic growth for the next dark period when the Libranos and Few Democrats are busy feathering their nests with the sweat of those of us who actually pay taxes in this country.
            Again, I challenge you to make the case where a corporation has eroded your rights, or an expansion of governmental authority has led directly to greater prosperity and liberty.
            I’ll be digging up my Bigfoot pics in the meantime.

    • People are trained like Pavlovian dogs to avoid a simple question: What form of economy will replace traditional capitalism after the advent of computer technology?

      Where is the new economic theory we so desperately require to move forward?

      We keep sweeping this question under the rug but the Internet Age brings us face to face with an immanent crisis that, try as the media might, cannot be ignored.

      We have a fundamental *crisis of value*. What is value? Is it *just* capital? And where is the democracy in free markets if only the wealthy have access to them while the most desperate poor are too busy starving to death to ever be allowed a moment’s breath to participate in and benefit from it?

      Who left thinks we have democracy despite all this?? Wake up, think, react.

  3. Sadly, I have to disagree with each of your proposed solutions.
    As a brilliant economist interviewed on Moyers and Company the other evening pointed out, it is capitalism and it’s economic structures itself which have become the problem.
    The rules of capital, and the public markets, no longer serve broader society. What the solution to that is I don’t know, but it requires new thinking, not the tinkerings that you have outlined as solutions.

    • The new thinking on economics is part of the upgrade. Capitalism works well in an industrial society….but we need a different method in the knowledge economy.

      • The problem is that the banksters have captured the American system, and the financialization of the economy (socialism for the banksters and 1%, and capitalism for everyone else) is the main problem.

        The big American banks (and the 1%) have become too big to fail, and too big to jail, and have the Fed and the US government to bail them out of any mistakes they make and ignore the financial crimes they commit.

        The Federal Reserve has quadrupled its balance sheet since the economic crisis began (with no signs of stopping) and basically $3 trillion dollars have been printed via QE (in addition to holding interest rates at 0% for 5 year) and given to the banksters so they don’t have to realize the losses for their massive follies. The 0% interest rates represent bascially direct theft from savers and pension funds of ordinary people.

        The banksters, during the nineties and naughts, used low interest rates from the Fed to finance the offshoring of US manufacturing to Asia. Without the easy Fed money, this would not have been possible.

        There is nothing wrong with capitalism. But democratic capitalism has problems when the banksters capture both the government and the central bank.

        Financial profits have risen from there historic level of 10% of all corporate profits to 25% of all corporate profits in the last generation. Banking add no real value. It is merely a facilitator of economic activity. So that 15% represents a 15% financial tax imposed by one sector on the rest of the economy.

        And that, in short, is the problem. The trouble is NOT the transition from an industrial economy. The trouble is financlalization, the capture of the political system and the control of the economy by the (American TBTF TBTJ) banks.

        Other bankster taxes:
        1) LIBOR fraud unnecessarily forcing regular businesses and people to pay higher interest rates.
        2) Interest rate derivative fraud, which amounts to even more stealing from pension funds.
        3) Manipulation of the commodities markets brought about by Clinton, Rubin, and Summers and Congress deregulating the CFTC in the nineties and deregulating derivative trading, over the objections of Brooksley Born.

        Don’t believe the pleasant bankster stooges (like Chystia Freeland) who are sent out to blame everyone but the banksters for the economic challenges Canada and the world faces.

        • Could we have an end to the propaganda please….we all know the parties ideologies….and all of it is useless in this economy.

      • Capitalism is economic freedom. What kind of shackles are you proposing for the knowledge economy?

        • Capitalism is just a continuation of making change for a goat….there is nothing special about it, although it was very well suited to the now obsolete Industrial age. But it died when Communism and Socialism did….which is why the world is currently limping along and frequently falling down economically.

          The Knowledge economy is creating it’s own rules and system….it is quite different because it’s not based on scarcity, and location doesn’t matter.

          Far from creating ‘shackles’ it will depend on freedom and transparency.

          • “The Knowledge economy is creating it’s own rules and system….”

            Elaborate please.

            “it is quite different because it’s not based on scarcity”

            Sure it is: the scarcity of clever human effort.

            “and location doesn’t matter.”

            How do you imagine that having wider access to markets invalidates capitalism?

          • The ‘scarcity of clever human effort’??

            Most humans have about the same IQ, …..it’s why we have what we do….previous efforts, knowledge and invention for thousands of years.

            Further explanation is here:

            http://en.wikipedia.org/wiki/Knowledge_economy#Characteristics

          • “Most humans have about the same IQ”

            How on earth is that relevant? Most humans have about the same physical strength (tiered by gender), and yet industrial economy varied from place to place.

            This part of the wikipedia article is unsourced bafflegab, don’t bother cite it.

          • It’s quite relevant….there is no ‘scarcity of clever human effort’ as you claimed.

            Did you know the ancient Greeks had steam power? It was lost again till the Brits rediscovered it in 1750.

            Romans had roads early on that the Brits could only dream of.

            Knowledge, invention, discovery belongs to all human beings….it just varies with the times and events.

          • In the context of this discussion, it was clear we were talking about economics – ie. clever human effort **of value to someone else**. This will be of a limited supply within the context of a particular customer, and thus … scarcity.

            Time is scarce. Someone’s time for you (=> a service to solve your problem) is even more so.

            No one’s claiming that there’s no pool of freely accessible knowledge. Plain capitalist microeconomics already predicts near-zero pricing for such things. That makes them roughly irrelevant to those who are hoping to make a living from generating new knowledge.

          • Yes, economics….and there is still no scarcity of clever human effort.

            Capitalist micro and macro economics are irrelevant in the knowledge economy.

          • “Capitalist micro and macro economics are irrelevant in the knowledge economy.”

            That’s your claim, and I’m hoping to see some reason to believe it. Perhaps it would help your case to provide a specific example.

          • Not ‘my claim’ or ‘my case’….something countries and economists around the world have been working towards for some time.

            Paul Martin moved us to the G20, China moved us to the back seat, and the Basel Accords for global regulation, and the Swiss confessions of tax cheats moved us to previously unknown standards. Little by little we’re getting there.

          • “we’re getting there”

            OK, care to make a falsifiable prediction about what “there” will look like?

          • In the midst of the Agricultural Age, could anyone have accurately predicted the next age…Industrial….and what it would look like?

            But it’s taking shape right now….so we can tell some things about it….the outward shape of it….global, scientific, based on knowledge, robotics, AIs. education, space….credits not cash, and only one kind…no manufacturing, no wasteful things like war…..one world, one race-human, no borders.

            Much like Kirk’s Star Trek in fact….just sooner than the 23rd century

          • OK, if you’re basing your economic forecasts on science fiction, there is not that much common ground to actually debate. Enjoy your utopia when it arrives; in the mean time, pay your bills.

          • Sigh. Well that was an entirely predictable response,

            If you can’t cope with reality then don’t waste time asking people questions.

          • What *is* your IQ, by the way? I’m thinking “average”.

          • Then you’d be thinking wrong….as usual

  4. Okay. I’ll say it. We could cut a lot of the silly and short-sighted
    union bashing generated largely by the US “free-market” gerbils.
    Doesn’t help anyone.

    • We can’t continue with strikes and wage demands and bad management and constant conflicts either.

      • Obviously, but corporate-structured unions are hardly going to negotiate *for* us. Corporations (including unions) are always for the welfare of other corporations, period. Unions are just a ruse to deceive the worker into feeling as if they have a hope and a prayer.

        It is *collectivist* organizations that have any hope of making an impact, and not by *negotiating* with corporations either but by *replacing* them.

        Egalitarian networks when properly designed are self-managed and don’t require bureaucracies. Bureaucracies, afterall, are the human resources version of unrecycled waste, constantly piling up due to system inefficiencies between the lower and higher management.

        Using a union to fight for worker rights is like soothing a wound with battery acid.

        • Enjoy your long weekend didja?

          Thank a union.

  5. If we are going to continue to grow, what unique products/services Canada offer the global economy?

    • Well we invented the electron microscope, discovered snow on Mars, created 3 robots now for the ISS, discovered stem cells, created IMAX and pacemakers, developed standard time…..we have no shortage of brains suitable for the knowledge economy.

      • Knowledge economy is the best direction for Canada, I am not arguing against that. But
        there are many intelligent people around the globe with huge developing domestic markets and large government spending programs. What is unique about our “brains” or business climate that will give us an advantage?

          • You hit the nail on the head. We have no plan.

          • No, Canada just seems to muddle through, drifts about, waits upon events….very depressing. We are always ‘first at being second’….and if by chance we goof up and are first….we shush it up so nobody notices.

            I’d trade Cameron and his cabinet for Harper and his lot any day.

            You can’t get anywhere without a plan, and all Harper seems keen on is bashing Libs/NDP….very unproductive.

  6. This comment was deleted.

    • This comment was deleted.

      • We can also see why she’s an ex-girlfriend.

  7. Income stagnation isn’t really the problem. In fact, it is arguably inevitable as lifestyles can only rise to a certain point until we are living to the capacity of the planet.

    However, there are 2 problems that are ignored:
    – there may not be enough income in the upper levels to raise the middle class much but that’s besides the point. We should pursue policies that manage the overall wealth/income disparities for other reasons such as social cohesiveness
    – we work way too many hours. If we had a smarter economy, we could work much less but still have a similar standard of living.

    • It seems as though your two points contradict each other. If you wish to encourage but not mandate more slacking (“work much less”), then there will be those who prefer to work to provide more for themselves or their families, and thus increase “wealth/income disparities”.

      • I don’t consider it slacking to eliminate work that adds little or no value. I just consider it smart. Capitalism (as practised at least) is so enormously wasteful in terms of resources and people’s time, it makes my eyes roll.

        And working less doesn’t need to exacerbate wealth/income disparities. We have plenty of ways to control disparities – we just need to use them.

        • “eliminate work that adds little or no value”

          Work of little or no value is eliminated automatically, if left to the free market – people just stop paying for it. Or perhaps you mean something else by “value”, like “value as perceived by Canada_Dad”?

          “we have plenty of ways to control disparities”

          Within the context of your own scenario, how, if some want to slack and others want to work?

          • “Work of little or no value is eliminated automatically, if left to the free market ”

            lol if you believe that you are stupid.

            That’s not how the world works. Perhaps if you were a bit more scientifically educated?

            http://www.youtube.com/watch?v=PYmi0DLzBdQ

          • “That’s not how the world works.”

            Of course: work of little or no value is rewarded in certain corners, under the guise of social programs. By the way, that has apprx. nothing to do with the free market. Or did you have a different example in mind?

  8. There is an elephant in the room the size of China yet everyone ignores it.

    Almost all production has been relocated offshore to exploit cheap labour markets. It’s a wonder our economy has held up as well as it has.

    • Well those jobs are not coming back.

      Eventually robots will do all those jobs anyway, so we need to learn how to do without them.

      • By acknowledging that artificial intelligence will eventually replace human work, you acknowledge that we need an entirely new style of economy than the 16th-century one we now have.

        Hence, contributionism transcends both capitalism and socialism wherein the prosumer is rewarded in a decentralized free market by contribution that is most socially valued, as determined by the same group votes that we employ now in this very comment box.

        The jobs never disappeared. The market simply can’t acknowledge value beyond its one-category system of supply & demand. So it fails to value socially valued jobs (as per the 99%) and replaces them with the few system-valued jobs that remain (as per the fancy of the 1%). The new rebellion will be a technological one concerning “economic value” and what that really means **in the real world**. A new system must be forged that welcomes multiple categories of value, including pro-social and pro-environmental value, not just the traditional capitalist one which ironically enjoys a monopoly in this supposedly anti-monopoly capitalist (pseudo)theory.

        • Yup, said that first paragraph many times.

          Contributionism may well be a valid next step especially since we now have 3D printing.

          However I doubt we’ll be doing anything by a thumbs-up vote as ‘most socially valued’ is an iffy thing.

          Could end up in a world of Miley Cyrus clones and basketball that way.

          • “However I doubt we’ll be doing anything by a thumbs-up vote as ‘most socially valued’ is an iffy thing.”

            I wish you would digest what you read. I just said I support a *multi-value* system of contribution such that “most socially valued” is not necessarily the only possible attribute of a product or service (but it’s a generally important value for sure). Plural-value contributionism includes capitalism but transcends it as well.

          • Can’t…..makes me queasy.

  9. Another aspect of this is the role of government in eroding middle class incomes. if you go back 20,30 or even 40 years, you will find that almost all consumer goods- food, clothing, automobiles, electronics- cost considerably less in real dollars than they used to. For example, a 26″ color TV was a $600-$700 purchase in 1978, when a skilled trades job paid $12/hr. It took more than 50 hrs of pre-tax income to buy that TV. That $35/hr mechanic now only has to work 6 or 7 hours to buy a 32″ flat screen TV. Real costs of groceries are dramatically lower than 30 years ago. Nmae the product, and the private sector economy provides it for less than they did 5, 10, or 20 years ago. At the same time, our economic output per employee has grown at a tremendous pace. Having worked many years in manufacturing, I routinely experienced substantial advances in tooling that increased the productivity of existing equipment. These types of advances occurred all over the economy.
    Unfortunately, the black maw of government has constantly conspired to erode these advances before the citizenry gets a chance to enjoy them. There has not been a year in my adult life that the cost of government has not increased at a rate greater than inflation. Not one single year in 35 years. Every year, the cost of every level of government that I am compelled by law to support has gone up at a rate faster than inflation. When we acknowledge that everything the private sector makes costs less this year than it did last, what possible reason could there be for the inexorable rise in the cost of government beyond lousy management and over-regulation? The only other plausible explanations are rampant stupidity (not even remotely out of the question), a complete lack of respect of for the citizenry (seen it, felt it, pay several thousand dollars a month for it), or simply an innate desire within governments to grow at all times and at all costs.
    Not everyone has the opportunity to grow their own incomes every year. If their income growth matches inflation, then the growth in their tax burden will automatically reduce their disposable income. It is the social cost of socialism. Meanwhile, as our after-tax income slides year in and year out, those who “toil” in the public sector receive annual pay increases linked to years of service that are carefully edited out of public service contract announcements. Add to that the billions of dollars in unfunded pension liabilities that our governors have promised without deigning to consult those who are going to get stuck with the tab, and you will begin to understand the real reasons behind the erosion of private sector, middle class income.
    If you want the middle class to grow, then cut the costs of government until it hurts, take and Advil, then cut some more. Once you’ve reached a point where all levels of government are complaining that they can’t find qualified people to fill the job openings (as is happening all over the private sector), then you will have possibly made some headway.

  10. Wages companies can pay include all benefits, including CPP/EI. In the above chart, does not show the decline as the result of more employment taxes. More employment taxes and less for wages.

    But the real numbers are net wages. What you gross matters little. It is the net income and level of hidden taxes. Hidden taxes are now a record $40 billion for Ottawa alone, HST extra. And all these taxes create inflation, it is why we often pay more for less than do Americans and why so many shop USA.

    Fact is the middle class is dying from excessive taxation and gets the bottom money for nothings and top corrupt bailout buddies picking us over like vultures. We have more governemtn consumption than we can afford to support and this reduces jobs wages, reduces jobs and less wage competition.

    Taxation has become modern day slavery, the most expensive item in anyones life and we question it little. As government is quite literally over taxing the middle income people into oblivion.

  11. What can we do about this? There are three policy options: We can tax, fight, or adapt.

    These are statism options. One big viable option is missing. Slash governemtn waste by 60% and let the middle class keep most of the savings. As a middle class with more of their own money will create lots of jobs. Only option governemtn will ever know is taxing the slave classes more, but it isn’t the only answer.

    When Reagan was faced with his depression, he cut taxes to the middle class and 10 months later the economy was on track as people had more of their own money and less government consumption.

    Left, statism and government greedy need to know it is possible to have more government consumption than is good for us. Government too has a right size and right now it is bloated like never before.

    So I also submit the option of massive government cutbacks, no more bailouts, no more money for nothing programs, no transfers to subsidize waste and dysfunction, no defective F35s, cut back government to a lean government of only services equally and directly beneficial, and available equally to all.

    Its the option statism and government bloat types really want to avoid but guaranteed to work.

  12. It is time to raise the CPP, OAS and GIS. There are too many starving senior citizens in this very wealthy country!

  13. Law schools and teachers colleges (at least in Ontario) graduate loads of educated people who can’t get jobs, while geriatric teachers cash in on banked sick days and senior partners continue to bill at $600/hr. Part of the problem is people are living too long, but maybe forced early retirement for those with larger pensions than any other generation past or future will help prevent the crazy US style income disparities we are heading toward.

  14. This is why you go after union jobs at your peril… The rising tide of union wages and benefits lifts ALL boats. Did you ever wonder why you can buy a 50″ flat screen TV for $899.00? It’s because when they build the factory they know they can churn out and sell 50 million of these TVs all over the western world because there are that many middle class people to buy them. If you’re rich, you can afford 10 of them. Lucky you!.. But if the middle class is decimated through reduced wages and a declining standard of living, the factory is only going to sell 2 million TVs, and each one will have to be $15,000.00. Even if you’re rich, suddenly you can’t afford as many TVs!.. Boo Hoo!… That goes for any consumer product…. A microwave oven suddenly costs $2000. A Honda goes for $55,000. A set of golf clubs is $15,000. and airfare to Florida is $3500 per seat. The economies of scale of the middle class is what drives our entire society and has created the standard of living we’ve come to know and love.. Eliminate them and you eliminate everything you’ve grown up with and come to know. Henry Ford understood this … Do you?

    • It’s not as much about union bashing as it’s about acknowledging that governments and public sector unions (and private sector unions to a certain degree) have squandered the economic miracle of the last 3 or 4 decades. You’d be hard pressed to find a period of such tremendous growth in human potential in human history. Mass knowledge at our fingertips, abundant cheap energy, and a plethora of miracle materials, all readily available.
      But, the costs of governments and over-regulation have outstripped our ability to reap the rewards. Instead, governments and their employees have allocated the rewards of private sector initiative and ingenuity for themselves.
      Meanwhile, at the behest of their govt. union brethren, private sector unions have diligently tried to pull the tits off the cow that is private industry. At the same time, those of us outside of unions were feeding the growth industries, trading up front pay and defined benefit pensions for profit sharing and financial resilience.
      It’s our efforts that have been squandered. Manufacturing efficiencies have been overwhelmed by useless, mindless, and often pointless regulation. Productivity gains have been outstripped by the growth of unproductive government.
      Without real, legislated restraints on the abilities of governments to tax and to pay those who work in government, these kinds of questions and debates will be largely moot.

      • Bill… I agree completely with your premise… Well put…The public sector unions, and therefore the government, has exploited this economic miracle. Through poor management of their workforce, the various levels of government have provided their employees with the same benefits, but forgetting that the private sector provides these through efficiencies earned in the private marketplace. The governments simply taxed their way to labour tranquility but demanded none of the efficiencies created by the dynamics of a private marketplace. Therein lies the imbalance, and hence your valid position that the economic miracle created by the private marketplace has been squandered by inefficient and weak-willed governments at every level… It will end, and very badly for some. Look at Detroit. Thousands upon thousands of public sector workers are about to lose pensions and benefits granted by governments to appease them and keep the destructive public sector unions at bay. The chickens are coming home to roost. Look at Greece… You can’t keep stealing from your neighbours and not expect that one day a bill will be presented and restitution demanded.
        It’s gonna’ be ugly!

  15. The easiest way to fix it is to lower taxes and leave more money for productive people. Gross income isn’t spendable income. So what if you get a raise and ogvernemtn taxes it from you in the city/prov/fed/FN tax’em more statism greed.

    What really matters is after tax disopable income and how much value that has in purchasing power when the goods and servicves are inflated by and cost so much because of taxes.

    How many people know that basic food items are loaded with hidden taxes? Basic cloths too, even auto, dairy, CRTC media are all practicing cartels that raise your costs to feed the government bloat.

    Productive people left with more of their own money are highly efficient job creators.

    • Riiiiiiiiight, and it was unproductive people with less of their own money who burned down the house in 2007-2008. Don’t you guys ever get tired of spouting the same old counter-intuitive crud?

  16. What I learned from this article is that economists only care about the 1%, or the upper middle class who are practically 1% anyway. Guillotines anyone? Poverty isn’t some teensy weensy little problem. It is the source of all riots and wars. Beware and think real hard, people.

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