Catching up with the middle class

Making sense of a debate that could decide the next election

The scariest housing bubble


This afternoon I’m scheduled to be a guest on Cross Country Checkup to discuss the state of the middle-class in Canada. Ahead of that, I wanted to offer some of the more recent analysis from Maclean’s on the subject.

Liberal leader Justin Trudeau used his speech at the recent Liberal convention in Montreal to suggest that Canadians may turn their backs on policies like free trade and fiscal restraint if they don’t start to see more gains come their way. Here, John Geddes looks at income trends since the belt-tightening of the 1990s and argues that overall, families have actually enjoyed their fair share of the gains from the growing economy.

To which I made the point it really depends on where you live, since average incomes for two-earner families in Ontario have lagged far behind other parts of the country.

Back to Trudeau’s convention speech, Stephen Gordon put solid numbers to the experience of Nathalie, a fictional Montrealer Trudeau used to illustrate the struggles of middle-class Canadians. Turns out Nathalie’s been doing just fine, thanks.

In a guest post, Lucas Kawa argues that using after-tax incomes to analyze the state of the middle class fails to capture the fact that during the past decade the real-earned income of Canadians, before government redistributions, has been pitiful.

Tamsin McMahon looks at an important question that gets lost in debates about the middle class—who, exactly, is in the middle class in Canada? Our obsession with data about median incomes and whether they’re rising fast enough misses the point, she says. What we should be looking at is the amount of money a family has left over, after paying for essential items, for discretionary spending.

Finally, new figures from StatsCan last week measuring the assets and liabilities of Canadian families sparked debate as some on the left claimed it offered further evidence of a widening gap between the rich and the poor, while those on the right pointed to the rising net worth of Canadians as a sign everything is A-OK. Kevin Milligan says both sides got it wrong.

Needless to say, this debate isn’t about to go away.

Filed under:

Catching up with the middle class

  1. There’s nothing to see here folks. Canadian net worth is rising. Ignore common sense/reports from IMF indicating Canadian home prices are inflated and that most people’s major investment is their house.

    Ohhh, is that image Chinese housing? I forgot to add: fear the Chinese.

    • Yup, we have no problems atall, atall.

      All we need to do is go mining, and of course work in the oil fields and other 50s stuff…..and live in that tract housing shown in the photo. With our pensions cut back and shopping at WalMart we otta be fine.

      • You forgot to mention we could also work for the government for 100K$ a year, and retire at 48.

        • Con fantasies are always amusing.

        • I happen to know a couple people who work in government. Given the average age in a lot of public sector orgs is probably pushing high 40s or low 50s I’m not sure where you get the retire at 48 idea. For example, in Ontario, roughly 50% of the civil service is between the ages of 60-65 (straight from an HR Director’s mouth) and eligible to retire within the next few years. This retire at 48 notion wasn’t true for the boomers and it’ll be even less true for everyone that follows.

        • Why don’t you apply for one of those jobs?

          • Some people prefer to do productive things with their lives, not just go sit at a government desk and collect a paycheck. I know that Liberals think that’s the greatest achievement one can hope for in life, but the rest of us have higher aspirations.

          • Like what, being a roughneck and extracting the most polluting form of energy on the planet?

          • There are lots of jobs that don’t involve working in the oil industry or government, for your information.

            Also, in what regard do you think that oil is the most polluting form of energy on the planet? It’s not even close. My car runs nicely on gas though, does yours run on hopes and dreams?

          • Not all oil carries the same environmental footprint and not all government employees are freeloaders.
            You tend to reduce arguments to simplistic binary reflex responses to suit whatever narrative you are pushing.

          • You’ll notice I wasn’t the one inferring that one has to choose between working for the government and working in the oil industry. You seem to only criticize people for reducing arguments to simplistic binary responses when it shiuts whatever narrative you’re pushing.

          • For starters Rick, the sender (writer) implies and the receiver (reader) infers, OK?
            Hmmm… let’s see. Rick Omen says: Some people prefer to do productive things with their lives, not just go sit at a government desk and collect a paycheque That surely would seem to imply that government workers don’t do productive things with their lives, they justgo sit and collect a paycheque Or am I incorrectly inferring your meaning?

            I’ll give you your due for the thankless job of upholding the “right wing” views on this site, but this puerile attempt at mimicry screams more “JK” than “the Algonquin Round Table.”

      • That tract housing in the photo is a picture from China. I thought you said we should be emulating the Chinese.

          • Not sure the point of your link, but the picture up top is from China. It accompanied articles in both Reuters and Macleans about a year ago about the world’s “scariest housing bubble”, which was referring to China, not any western country. Sorry to disappoint you.

            And yes, many millions of North Americans live in row houses. I live in one myself. Quite a nice place, and the neighbours are great. It’s not row houses like the one I live in that are going to blow up. It’s the big suburban McMansions that aren’t going to find buyers in a few years.

          • i lived in a row house when I was 28. Traded up to a single when I was 31 and traded up again to a bigger one a few years ago. its what middle class people do. your obsiously not even close to middle class, your a low income looser. thats fine, but maybe don’t expect anyont to take you seriously. i tend to take advice from people who have achieved some modicum of success in their lives. that excludes anyone living in an attached dwelling. You should change your name to Raging Renter.

          • I love how people like you “trade up” or “upgrade” their homes. I have lived in my home with my family since 06, when I moved for work. I live 1 hour away from the GTA and paid much less for my modern bungalow than the average SFH in Canada. My home is 2BR and, with the basement, is larger than my parents’ bungalow that I grew up in. I could easily have “upgraded” my home to a larger one, but then I did the math. A bigger home brings higher property taxes, energy costs, more cleaning, larger mortgage and hence interest, and for what? To show my neighbours, family or friends that I live in a big house? How much land transfer taxes have you paid, more property taxes you pay now, realtor fees, lost income that could have been invested, moving expenses, etc? Your measure of success is living in a detached home? Could you survive a drop of value in your home of 10, 20, or 30%? If the value of your home does drop by this, do you expect the bank to renew a mortgage where the loan is larger than the value of the property? Smart “middle class” people don’t sell a home every 3 years. Smart middle class people live within their means, save money for retirement/rainy day/fun. The idea of being debt free is much more important to me than living in a larger home. When this real estate bubble finally deflates/cools/pops in Canada, the people who have massive mortgages are going to hurt the most. Few people know or remember the real estate crash in TO of 89-90. Oddly, few people think that what happened in the US, starting in 2006 leading to the collapse of Lehmans in 2008, could happen here. Pimco realizes the risk predicting a drop of 30% value in real estate holdings, starting in 2014 and continuing with a slow melt of equity. I know of plenty people who are house poor, who make less money than me and are in larger homes than me, and who think that when they sell their homes they will make a profit. To describe anyone who rents or anyone who don’t sell their house every 3 years to get in the biggest house that the banks will give them as a “low income looser” then you clearly have no idea of what wealth is. My guess is that you look at housing as an investment, but like many investments, they come with risk and can lose value. I’d rather be in the black thank you.

          • That’s renter talk, Comrade.
            Now go buy an over-priced crack-shack, and put in marble & stainless in the kitchen.

          • Sorry dude…I have no intentions or inclinations to be a poser. I am quite happy in my situation and home knowing that if my house does drop 10, 20, or 30%, I’m fine because I’m not going anywhere. Not a renter and could care less that you seem to think so. Just a guy who learned from his parents to buy things when you can afford it, pay it off to avoid interest, and stay married for happiness. My wife and I never fight over money issues because we’ve made smart decisions. That’s not always fun when you see your friends going south every year and sometimes twice, but looking back we are happier than ever.

          • /s stands for sarcasm.
            I’m with ya. My house is my home, not my nestegg, or my RRSP, or my patty to flip. You do sound like a threat to the system, tho…

          • sorry dude…so many internet things to learn. Don’t tell anyone, but I don’t even have a smart phone! $100 pay as you go flip phone. I may just bring it crashing down!

          • You mean you use it to talk?

          • Too funny…truth is I used to be the guy who knew everything tech and now, I couldn’t even text on that thing (the wife can, but it uses the older system of pushing the button 3 times to get let’s say a “c”)

          • I’ve been rebelling lately myself.
            No more selfies on the toilet.

          • The one true reason that deep inside I should join the smart phone revolution…FB pics of me on the can. It’s strange to see positive posters here. Cheers dude.

          • FB pics on the can is sooooo last year.
            If you want to be part of the club, now you have to do naked selfies on the Harley. :)

          • Which is why I ride rice.

          • I just read an article that naked pics on any motorcycle, replaces selfies in bars and random shots in random places.
            Okay… I didn’t.. but, you and anyone other rider for should fall for it and we will eventually take over the “duck face”.

          • If I can keep my helmet on, there is a chance. But how many others have such a unique bike with a unique helmet? I gotta try to blend in more…

          • What I found amusing is that he used the word ‘renter’ as a pejorative. I do rent my place – costs much less to rent it than to buy it. When the market corrects and the sillness ends, then I’ll buy, with a hefty down payment. Until then, lots of new-ish 3 BR townhome rentals in Ottawa for under $1500. That’s what I’m in now. Sure, I wish I’d bought in the early-to-mid-90s during the last housing crash. (7 years in a row of absolute price declines, across the country – it was a pretty sweet buying opportunity.) But I was a starving student back then, and buying a home wasn’t on the table. By the time 1999 rolled around, I already thought RE was getting too nutty. Suddenly everyone was buying a home. In retrospect, 99 would have been a good time to buy too, but I’m not sure that would have worked out. I might have become very much like Chillin above. Trading up every few years, and using my “home equity” to pay for vacations and the like. And be in debt instead of the opposite.I presume he’s from the Beaches neighbourhood in Toronto, so crapping on row housing is expected. He’s probably one of the residents who have been freaking out in recent years over the introduction of row housing and semis to the neighbourhood. Apparently they resent the changes this brings to the neighbourhood’s “cottage-like asthetics”. No doubt they’re panicked over their property values. If their home equity doesn’t keep increasing, they might not be able to afford that second resort vacation next year.

          • Amen dude…the next few years is going to bring a world of hurt for a lot of people in Canada. Young people who have debt that may never be paid off, seniors who are banking on their home equity for retirement, anyone with a large mortgage when interest rates normalize, etc. We made tough decisions over the past 8 years, but now we see the light at the end of the tunnel.

          • I hope that light is not a train.
            A good blog for this topic is The Greater Fool by Garth Turner.
            Real estate is a fetish in this country, and it is killing us.

  2. inasmuch as facts and sound statistics tell various and different stories, based on initial assumptions, facts, as the CPC has shown, have little power to influence anything anymore.

    It is what people perceive that influences their decisions.

    • Yup, it’s the perception of the truth, not truth itself, that matters.

      Diefenbaker used to say elections turn on things of the spirit.

      • Exactly, Justin knows, that most people, no matter how good their situation is, will always find a reason to complain.

        It`s too bad he`s not more interested in building a sustainable, durable Canada. Like our Prime Minister!

        • People will go for the leader that promises them a better life.

          That isn’t Harpo.

          • Bingo!!

            ”Vote for the man who promises least; he’ll be the least disappointing.” — Bernard Baruch

          • Cons…always keen to aim for second best.

        • Can you hear me laughing from the planet you live on?

  3. I don’t thinK I’ll be listening to Cross Country Checkup.
    The writer, Jason Kirby, probably makes a good 6 figure salary.
    There is no way that someone in that position can have any empathy with the rest of us making under $50,000 or with those on minimum income.
    I think my net increase in my OCP was about $5.00 over the year.

    • I listened yesterday. The only thing that rang true, repeatedly, was the idea that “middle class” is a fiction being sold to boomers to play on nostalgic emotion.
      The only ones who call themselves “middle class” are those about to retire & live off the serfs.

      • Amen, brother. And I suspect that Rex Murphy would agree with him.

        • He seemed to.

      • The middle class boomers will start suffering soon enough. Much of their money is tied up in a stock market that right now is seeing some lofty valuations, and is ripe for a correction. Ditto for the prices of their suburban McMansions, which many boomers have admitted they plan to sell to finance their retirement. The ones who are doing that right now may be OK. The ones who wait a few years, not so much.

  4. I think it’s more imporant in this debate not the argue about what is or is not the “middle class”, but rather, what should the middle class be? Should it be prosperous and growing? What should its income/cost of living/tax structure/debt load/employment look like? I think these are more important debates, at the risk of commiting sociology.

    • Yes, let us discuss a fantasy world where the government will dictate who makes how much for doing what job.

      what should the middle class be?

      Well, I’m pretty sure it should be a segment of Canadian society. But I’m open to hearing Liberals argue that the middle class should be a snow flake.

      Should it be prosperous and growing?

      Obviously not. I think it’s fair to say that every politician in Canada wants a failing and shrinking middle class. Because if the middle class is in fact snow flakes, that means less snow in winter, and that means happy voters.

      What should its income/cost of living/tax structure/debt load/employment look like?

      Thanks for raising these questions. It’s really too bad we don’t have a place in this country where our representatives meet from time to time to debate such issues. We could call it the “House of the Middle Class”, or maybe “Commons” so it sounds more olde tyme.

  5. Do you people really think there is a politician or an analyst or statistician on this planet that will really tell you the truth? They will all manipulate the numbers to make you believe what ‘they’ want you to believe. Thats why the world economy is in such a mess. No one can agree on what the facts really are and what they really mean. Never mind the left wing and right wing ideologies, get your facts straight, if you can actually find someone with all the facts, that is.

  6. It’s discretionary income that is the issue. After paying for housing, transportation, food, in some case bits of health care like prescriptions or dental work, a LOT of Canadians are squeezed like hell and can barely or plain not afford retirement and education saving, let alone vacations. Tax relief doesn’t address this issue when one’s income itself hasn’t risen enough in relation to inflation. And having a house worth twice as much as it was 7 years ago does nothing to address this either. Incomes have to rise beyond inflation, period. Record debt levels are one sign of this. What’s the solution? No politician has the answer no matter what party…

  7. Anyone making $80k a year (Trudeau pegged this income as middle class) is doing well, if they havent been irresponsible with going too deep into debt, no govt can fix personal irresponsibility
    Harpers policies are aimed at raising the $30k income to over $60k, through job mobility training.
    That imo is where the focus should be, where the actual struggle with finances are.

    • $80 k per year is not a great sum if you live in a city, any size of city, and you are paying off a home. And what is “job mobility training?” What kind of training does one need to move from one jurisdiction in Canada to another?

      • The problem is not so much the income but the massive inflation in housing prices. This was in part brought by the Conservatives own foolish mortgage insurance policies, but at least they’re trying to fix that now. They’ve furiously backpedalled away from every loosening of CMHC and OSFI rules they brought in, and are now making it even harder to get a mortgage than it was under the Liberals. Next up is changing the minimum down payment back to 10% – where it was until Mulroney changed it in 1992. A correction will happen at some point.

    • great point. also factor in the cost of products are going down. with free trade deals plus tax cuts many products are now cheaper.

  8. I wonder how many of those Chinese row houses are occupied.