A short history of Nathalie’s family’s income

Economist Stephen Gordon imagines the fictional woman from Trudeau’s speech

by Stephen Gordon

Justin Trudeau’s speech to the recent Liberal Party of Canada talked about Nathalie, a fictional but representative member of Canada’s middle class:

She works hard. Maybe in an office in old Montreal. Maybe at a retail outlet along Sainte-Catherine Street. She makes 40k a year. It’s about what her spouse makes, too.

These numbers are roughly consistent with Statistics Canada’s estimates for the median income of a two-parent family with children and in which both parents work. We are given to understand that Nathalie’s family’s income has not seen much growth in the last decade.

Here are Statistics Canada’s estimates for Nathalie’s family’s income since 1976:

Chart1

(Data are series V25742573 and V25742789 in Cansim Table 202-0605)

A narrative in which Nathalie’s family was struggling along with stagnant or even declining incomes would have had real bite in the first twenty years of that sample. But their income has increased by almost 30 per cent since 1997 and by more than 10 per cent in the five years after 2006.

It is certainly the case that families higher up in the income distribution have seen even greater increases, and you might even want to say that you would like to see even faster growth at the median. But you don’t need to assert that median incomes have been stagnant to make those points.

[This was prompted by John Geddes' recent post">.]




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A short history of Nathalie’s family’s income

  1. Nathalie sounds like the perfect candidate for income splitting.

    • Nope. She and her spouse make the same income. Her next-door neighbour who works while her husband stays home with the kids would make out like a bandit, however.

      • “Make out like a bandit” as in “cease to be screwed.”
        Or Nathalie and her husband could return the up to $7000 per child daycare deduction. That’d be nice.

      • You’re right, of course. I should know how income splitting works, but for some reason I got it backwards. I don’t know where my head was, although I think it should have been in bed. Thanks for the correction.

      • Assuming her neighbour had the same household income, her neighbour paid approximately $4,500 more in federal income taxes. This is NOT including up to $4,100 more for child care deductions (the neighbour spends even more on childcare by staying home, but doesn’t qualify).

        Nathalie’s household is enjoying 10 to 20% more income after taxes because of the fact that progressive income tax is assessed on individuals rather than households.

        Yet households are clearly the relevant economic unit for families.

  2. Is she related to Julia?

    • Not sure if you noticed, but this article appears to be critical of Trudeau.

      Just thought I would point that out to you.

      • Are you related to Julia?

        Or just angry that they didn’t name her Gayle?

        • Wow. Clever.

          So clever that I almost did not notice your failure to acknowledge this goes against your paranoid conspiracy theory of media bias.

          (That’s OK, I didn’t really think you would acknowledge that).

          • So you do understand that this ‘Nathalie’ is a pure copy of Obama’s ‘Julia’? Good, glad you got that. Because, ya know, the Liberals always complain about the Americanization of Canadian politics until, well, they do it… ‘Hope and Work’. ‘Nathalie’, Larry Summers, what’s next: Justinacare?

          • Why would I care about that?

            I was commenting on how John here spouts on ad nauseum about how the media pick on his guy and praise Trudeau, even in the face of articles like this that does not, you know, praise Trudeau.

  3. When I look at the graph, and then I consider the argument Trudeau is making, it seems utterly ridiculous. Seriously, he’s trying to solve a problem that was fixed 17 years ago. It’s not a problem. It’s not even close to being a problem. It’s actually a success story. Is this what liberals mean when they say that garbage about being reality-based? Trudeau is noting but pure fantasy.

    • I don’t think Trudeau will actually do anything to address the issue, but…

      LIES, d*mn LIES, and FUN with NUMBERS

      “Canada’s middle-class is mortgaging its future to stay afloat, making the Canadian dream “a myth more than a reality.”

      “That’s the blunt assessment of an internal Conservative government report….

      ” “The wages of middle income workers have stagnated,” it says, referring to the period from 1993 to 2007.

      ” “Middle-income families are increasingly vulnerable to financial shocks.”

      Globe and Mail: Middle-class dreams a ‘myth’ in troubled economy: internal government report
      http://www.theglobeandmail.com/news/politics/middle-class-dreams-a-myth-in-troubled-economy-internal-government-report/article17056573/

      • The report cited in the G&M is not addressing the same thing Stephen Gordon is addressing in this post. They two are similar but not identical so it’s quite possible for both to be correct.

    • Mr. Gordon does not appear to take inflation into account. If that is true Justin is absolutely correct.

      • The data _are_ adjusted for inflation. That’s what the “2011 dollars” means in the y-axis label.

      • It says a lot that (a) you would claim that it does not take inflation into account, when a simple glance at the the graph would show that it does, and (b) even if it did not take inflation into account, you would also utter this claim even though it would still be false, since the growth shown in the graph, over 3% per annum since 1995, is larger than inflation, which has been less than 2% per annum since 1995.

    • FUN with NUMBERS

      “- The growth in real average (after-tax, after-transfer) family income from 1976 to 2010 was the smallest in the middle-income group, at seven per cent

      “- The top quintile (top 20 per cent) saw their family income grow by 27 per cent during that time (average after-tax, after-transfer family income of $135,500), compared to 14 per cent for the second-highest quintile (after-tax family income of $73,500)”

      National Post: Income growth for Canadian middle-class families lags behind other groups: report
      http://news.nationalpost.com/2013/07/09/income-growth-for-canadian-middle-class-families-lags-behind-other-groups-report/

    • AVERAGE family income has increased, not hers personally. Good try though.

  4. This post should come with several caveats:
    (1) Applies only to a specific demographic
    (2) Does not address wage stagnation
    (3) Growth mostly due to transfers from government
    There are probably a few more that can be added.

    • Numbers don’t lie, just their interpreters…

      • The interpreter isn’t the problem. It’s the people who misuse the interpretation that’s the problem.

        • Who’s misusing it? Trudeau or Gordon? Has the typical middle-class worker’s income increased 30% since 1997 in real terms? Or has real middle-class income only increased 7% since 1976?

          If there has been a significant increase, what exactly is driving it? How sustainable is it? You read the Conference Board of Canada and they say we need decent productivity growth to support rising real income. They also say, productivity growth (including MFP growth) is dismal.

          The problem with economics is that there are no standards. There are no established facts, unlike the sciences. Economists can interpret a select set of data to bolster a political agenda.

    • Another one for the list from Mike Moffatt on twitter:
      (4) “demographic effects likely playing a role with families getting older.”

  5. more FUN with NUMBERS

    “The middle class isn’t a constant though, which is why there’s so much confusion. Back in the early ‘70s, about 60% of all the income earned in Canada went to the middle of the pack. By 2006, that had dropped 7%, which is why we have the term “shrinking middle class.” Yes, it really is shrinking.”

    Money Sense: Are you in the middle class?
    The middle class isn’t fixed. It’s a moving target that appears to be getting smaller and smaller
    http://www.moneysense.ca/columns/are-you-in-the-middle-class

  6. This is just copying a page out of the Conservative’s 2006 game plan. Viewed as brilliant by the chattering classes and Harper book writers. Muttart’s baby.

    Is Zoe still in her downtown T.O. condo? Maybe you should check on her.

    • Actually Obama’s handlers are scripting every page that Trudeau writes. They are trying to copy the Obama 2008 campaign.

      • It was a successful campaign, don’t be surprised to see the same results.

        • It may have been a successful campaign but we all know the end to the story up here and it will all end in tears.

  7. This article would be smart had you not forgotten that the graph depicts median income. That is basically an average for all you math haters out there. Therefore it can still climb at the shown rate while middle class incomes remain the same or… are stagnant or… are falling… especially if the middle class is indeed shrinking. The top 5% of income earners drive that line WAY up.

    • The top 5% (or the bottom) don’t drive a median, only the very middle of the pack does. Go back to hating math.

    • No, ‘mean’ would be what we think of as average. ‘Median’ means ‘middle’. That level of income where exactly the same number of income earners are above and below.

  8. Sorry the numbers are wrong. The median according to the referenced table IN THE ARTICLE is $68000

    http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=2020605&paSer=&pattern=&stByVal=1&p1=1&p2=-1&tabMode=dataTable&csid=

    He is clearly using the average numbers which are quite a lot different from Median. The different shows the inequity by the way. See

    http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil21a-eng.htm

    A quick graph shows the difference in here:

    http://www.frpo.org/documents/Ontario%20Inc%20and%20Hsg%20Afford%20Trends%20May%202008.pdf

    • Click on the ‘Add/Remove data tab at the top. There are data for two-parent, two-income families with children. That’s what’s in the chart.

      Even if you stick to the economic families definition, you still get an increase in incomes starting at around the same time.

  9. Gordon, the author here, should have mentioned that the graph shows an AFTER-tax median income this year of $78K in Quebec, and yet Nathalie’s family income is $80K BEFORE taxes, or about $50K after taxes.

    So Nathalie’s household is WAY below the median, and maybe (even likely?) has not been experiencing the same degree of income uplift.

    • Nope. The chart above is for income after taxes and transfers. Income *before* taxes and transfers is in Cansim Table 202-0203 (market income). Turns out that Nathalie’s family doesn’t much in the way of personal income taxes.

  10. Shouldn’t we consider inflation?

    • The data are adjusted for inflation. That’s what the “2011 dollars” means in the y-axis label.

  11. It appears to me that Mr. Gordon did not take inflation into account in his graph. He shows after tax income but not after inflation income. If that is the case then his Justin Trudeau is absolutely correct. Canada’s high income earners are doing great even after inflation is accounted for.

    • The data *are* adjusted for inflation. That’s what the “2011 dollars” means in the y-axis label.

  12. Pingback: 7 charts on why Canada's middle class is doing so poorly

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