Who belongs to Canada’s middle class?

That depends on how you define the Canadian dream

by Tamsin McMahon

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In an 1858 editorial in the Brooklyn Daily Times, Walt Whitman declared “The most valuable class in any community is the middle class, men of moderate means, living, say, at the rate of a thousand dollars a year or thereabouts.”

At the time $1,000 a year was considered to be the income cut-off that separated those who toiled in manual labour, earning just enough to survive, from skilled workers in the cities who represented the engines of economic growth. Since then, of course, most Western societies have progressed from an industrial economy to one driven by services and populated largely by a middle class that, many believe, is being left behind.

This has become a popular theme for federal Liberal leader Justin Trudeau, who has made the plight of the Canadian middle class the cornerstone of his campaign messaging ahead of next year’s federal election.

Exactly how well the Canadian middle class is doing is a matter of much debate. (Maclean’s has covered it extensively, including here and here and here.) But underlying that discussion is a deeper debate over exactly how to measure the middle class itself. And that has proven to be much harder today than it was for Whitman back in 1858.

On a global scale researchers generally define the middle class as the segment of society that earns between $10 and $100 a day. By that measure most Canadians are, at the very least, comfortably middle class. But being middle class in New Delhi is not the same thing as being middle class in Winnipeg. In the 1980s, MIT political economist Lester Thurow defined the American middle class as those who earned between 75 per cent and 125 per cent of the median income, which in Canada would mean families earning between $35,000 and $70,000 a year.

By that measure fewer than a quarter of Canadians are actually middle class, a proportion that has fallen from 31 per cent in the mid-70s. (By contrast, the number of Canadian families earning above that threshold has grown from 33 per cent in 1976 to 35 per cent in 2011, while the number who fall below it has jumped from 36 per cent to 40 per cent.)

Last year, William Galston, a former advisor President Bill Clinton and senior fellow at the Brookings Institution, updated the definition of middle class to include anyone making between two-thirds and twice the median income. In Canada, that encompasses families who earn between $32,000 and $95,000 a year. Even then, it represents just 40 per cent of Canadians.

Others who study the middle class have instead turned to a more consumer-oriented definition that focuses less on what the middle class earns than on how it spends its money.

Diana Farrell, managing director McKinsey and Company and former deputy director of President Barack Obama’s National Economic Council, has estimated that families could be considered middle class if they had at least a third of their income left over after paying for necessities like food, shelter and clothing. This leftover cash is referred to as “discretionary income” since families can choose how to spend or save the cash.

Scanning through Statistics Canada’s Survey of Household spending, it’s possible to sort out, broadly, how much Canadians spend on the essential items — food, shelter, clothes, taxes and other basic living costs — compared to non-essentials such as cars, phones and retirement savings. (Many people would argue that these are also essential expenses, another reason why it’s so tricky to measure the middle class.)

By Farrell’s measure, the minimum household income to qualify as middle class in Canada would be around $36,000 a year, since that’s the point at which households report having at least a third of their income left over for discretionary spending. In that case, the vast majority of Canadians are, in fact, middle class and that proportion has been holding steady for some time.

But perhaps the most accurate measure of the state of today’s middle class is one that Statistics Canada touched on more than two decades ago. In 1991, the agency staged its own attempt to gauge the number of Canadians who had significant discretionary income. Unlike Farrell’s income cut-off, Statistics Canada defined discretionary income as “the amount of money which would permit a family to maintain a living standard comfortably higher than the average for similar families.” In other words, the number of Canadians who were succeeding at keeping up with the Joneses.

It considered Canadians with discretionary income to be only those families who spent at least 30 per cent more than their friends and neighbours on non-essential items such as “vintage wines, stocks and bonds, [and] vacations.”

Using data from 1986, it discovered that the typical “discretionary income family” turned out to be the classic yuppies. They were married couples earning two incomes who owned a house and two cars, lived in or near a large city, ate out regularly at nice restaurants, took plenty of vacations, bought nice clothes, spent freely on alcohol, home renovations and new furniture, gave money to charity and still had enough left over for an RRSP.

Back then very few Canadian families actually looked like this— just a quarter of Canadian households met the discretionary income threshold. Statistics Canada determined that total discretionary income in Canada amounted to less than $29 billion, a significant sum, but hardly an engine of economic growth. But, the study noted at the time, marketers were keen to pitch their products to this small swath of the population since they held the keys to a lucrative pile of “spare cash.”

Flash forward more than 20 years and that definition of “discretionary income” looks suspiciously like the present day middle class ideal: A family who owns a house and a car (or two), lives near a big city, likes the occasional visit to a restaurant and trip to Disneyland, with enough left over to renovate the kitchen.

Statistics Canada hasn’t done any recent follow up studies looking at how many Canadians qualify as actually having discretionary income these days. But the 1990s were particularly hard on the average Canadian household. Incomes have been recovering since then, although the median income is still below where it was in the 1970s, in relative terms.

In the meantime, that romantic notion of “discretionary income” seems to have taken hold of a far larger segment of Canadians than the 25 per cent who were actually able to afford it back in the ‘80s. Cheap and abundant credit has helped an ever-larger share of Canadians gain membership to what was once a fairly exclusive club of those who actually had enough spare cash for the fun things in life. The fear now is that the days of artificial “discretionary income” might be coming to an end and the middle class will be faced with the reality that it was never really part of the elite world of Caribbean cruises, Ikea bathrooms and two-car garages.

This might be one reason why the Trudeau Liberals are so keen to shift the campaign rhetoric away from the stale political mantra of “working families.” They sound too much like the “men of moderate means” of Whitman’s 19th century Brooklyn than the purchasers of “vintage wines, stocks and bonds, and vacations” who make up today’s aspiring middle class.

What should matter most these days to anyone concerned about the plight of the Canadian middle class isn’t necessarily median income — or even income growth — but what’s happening to the piece of the pie left over after all the bills are paid. It’s here in the margins of “discretionary income” where today’s middle class dream lives or dies.




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Who belongs to Canada’s middle class?

  1. There is ‘lower middle-class’, ‘middle-middle class’ and ‘upper middle-class’. All middle-class but at varying levels. Hence the confusion in comparing oranges to tangerines.

  2. Serf’s up.

  3. Why doesn’t someone, say possibly a journalist, ask Justin Trudeau who he thinks the middle class is? He certainly likes to talk at them, why doesn’t he define who he think’s he’s talking to?

    • JT isn’t defining it…..Vance Packard wrote a book on it in 1949 which popularized the subject….and it’s been researched and taught and watched ever since.

    • he thinks the middle class is someone earning 40k, he said it himself. so hes goin after lower middle class. that means everyone who makes 50k and up a year can expect tax increases

  4. “What should matter most these days to anyone concerned about the plight
    of the Canadian middle class isn’t necessarily median income — or even
    income growth — but what’s happening to the piece of the pie left over
    after all the bills are paid. It’s here in the margins of “discretionary
    income” where today’s middle class dream lives or dies.”

    Amen. Apparently my family is in the top 10% of Canadian earners. An idea i find shocking if its true. We live in a very modest older house, have 2 vehicles of a combined 40 years of age, an oldish boat of no particular value, two dogs and two worthless cats…oh and one kid who’s just starting to get expensive. There are no major assets, a bit of a pension for one of us and thankfully very little debt beyond the house which we will be lucky to sell at any profit…zero if we move to a more expensive location at some point. We live a good life, but hardly an exorbitant life. And there rarely seems to be a lot of extra cash left over for much beyond living in moderate comfort. Like many people we still have to make choices between nice[read new] cars or longer holidays. Nice new clothes or good food and second hand clothes. It’s almost always the case we can have one but not the other.

    Fortunate as my family is i consider myself as nothing more than m/c, and barely more than working class much of my life. We could do better under different circumstances but basically we’re at the peak earnings wise at this point in our life.
    One thing that’s often missing in this debate is that very few of us are either well off, rich or working poor for ever…nothing is static for long, we all come from somewhere to get somewhere. And our circumstances can easily change. While it’s undoubtedly true many m/c Canadians are living as well or better than we’ve ever lived, so have the costs risen, the expectations, the potential for crippling debt that might quickly overwhelm us if things change. Which is one thing we can always be sure of. How does that old saying go…expenditure rises to meet income…and money talks, mostly it just says goodbye. Even when it says hello it isn’t for long either, for most of us middle class or not.
    I guess my main point is that expectations have changed dramatically for most m/c folks since the 70s if i’m any kind of example. You have to work harder and longer to keep up; you have more and you want more. Whether you can translate that as a straight across gain, one that will continue to be the case for most of us is highly debatable.

  5. How can $40,000/year be middle class when house prices are over $350,000 in my city and rents for a tiny 1 bedroom go for over $1500/month? There is very little discretionary spending when more than half an income is going to keeping a roof over the heads of a family.

    • You don’t buy a 350K house if you only make 40K….you shouldn’t pay more than 25% of your wages on shelter.

  6. This is all well and good, but there can be no useful discussion about how government can help the “middle class” without looking long and hard at making meaningful cuts to the size, scope, and cost of government at all levels.
    For example, some years ago, my family was well acquainted with another family unit that subsisted solely on social welfare allowances and supports. The net result was that my $50,000/yr earnings were only about $8000/yr more than the total of all the welfare supports this individual was reaping. That’s not a lot to show for working some 2400 hours per year and paying taxes.
    As one who is quintessentially middle class, there has never been a time in my life when the cost of government wasn’t the single largest drain on my income. When my rent and food amounted to about 20% of my income, taxes were 25%. i currently pay more in income taxes than I earned per year up into my 30′s. I switched jobs when I was 35 years old, in order to earn an additional $10K annually, only to find my take home income only increased by $240 per month. Due to the magic of “progressive” taxation, government confiscated 70% of the extra income that I had chosen to earn for myself, my wife, and our three children.
    Invariably, governmental efforts to “help” the middle class amount to increasing the number of government workers, and then ensuring that they are paid well. In our city, 9% or more of our civic workforce is in the top 5th percentile of income earners. The average earnings of that workforce is 50% higher than the average personal income in Alberta. There are scores of civic jobs that would pay $12-15/hr in the private sector that pay over $20/hr to start, and come with guaranteed annual increases and a lucrative pension.
    You can look at any level of any government across Canada and you’ll see the same situation. Overly generous social welfare benefits, overly generous pay packages (Can you honestly make the case that a socialist bureaucrat such as the head of the CBC should be paid 4.5 times the annual Canadian family income? Remember, he is a socialist, and the CBC is a socialist enterprise, so why should capitalistic compensation be part of the mix?), gross mismanagement of costs, and a healthy dose of occasional outright fraud are costing the middle class more than any efforts by way of more government are ever going to help us.
    You want to help? Start at the federal payroll and work your way down.

    • Cutting the social support network hurts the middle class. Cuts to government services, generally the same. The happiest, healthiest, and, yes, wealthiest, countries in the world have robust social programs and high marginal tax rates. But don’t worry, there are plenty of totalitarian plutocracies that are happy to offer low taxes for the rich, no social services, and the opportunity to enjoy a lifetime of abject poverty for all but a lucky few.

    • The govt isn’t ‘confiscating’ anything. You are paying for the services you get….healthcare, police, roads, education…..’member them? They don’t happen by magic or for free. You weren’t paying for your neighbour….you were paying for your own family.

      PS the head of the CBC was appointed by Harper

      • How is it not confiscation? If I were to unitlaterally choose to reduce my use of government provided services by, say, going off-grid and living in a log house heated by wood cut from trees on my own property and eating only what I grow on that property and eschewing the use of roads and public health care, I would still be obligated to pay property and income taxes without the right to “choose” to reduce my taxation commensurate with my non-participation in the greater society. Were I to choose to contribute a lower levy than that apportioned me by the legislative bodies, I would soon find myself accosted by armed officers of the Crown who would then deprive me of liberty and property for the crime of non-payment of taxes.
        When you say that I pay for the services I get, you are implying that I’m engaging in a consensual transaction. A consensual transaction requires mutual agreement on the the price and the nature of the services provided. There is nothing consensual about the kind of transaction whereby I, the purchaser, have no choice but to pay for the kinds of services offered at the price being charged.
        Emily, you are full blown, dyed in the wool, double digit, hardcore stupid. It frightens me to the core that people like you are allowed to vote, drive, and hold major credit cards.

        • Well Bill you do just that….go off in the woods and play Davy Crockett. Better yet, if you don’t like the deal…move to Somalia

          But if you want to belong to civilization…..pay your annual dues….without your usual cracker barrel bullshit.

          Libertarians always want all the things other people have worked for…..for free

          Buncha deadbeats.

          • No, dearie. Socialists are the ones who want a big boat like the neighbor has, without all the hassle of working for it. Socialists are deadbeats with a head office.
            What we Jeffersonia liberals want is quite simple; The biggest source of bad government is simply too much government. Reduce the number of opportunities for government to screw things up, and you’ll have less screw ups. Reduce the opportunities for those within government to abscond with and otherwise abuse the monies confiscated from the citizenry, and you’ll have less instances of corruption.

          • Like I said, you want all the things a govt can provide but you don’t want to pay for it.

            You are still expecting magic.

            And you have apparently never heard of the social contract….the contract you’ve agreed to just by living here.

            Canada is 90% empty. Unowned. Nobody would even know you were there. So you could go and live in the bush if you actually wanted to do so.

            Libertarian anarcho-capitalists……freeloaders

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