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Miles Corak, University of Ottawa
Miles Corak, University of Ottawa

MILES CORAK

The decline of the U.S. middle class is a Canadian story too Add to ...

The suggestion that the middle class is stagnating, the linchpin of Justin Trudeau’s economic platform – to the extent it exists – is an idea shamelessly borrowed from the United States.

Shameless it may be, but it is, nonetheless, true.

Clearly there are some ways in which we are all better off not withstanding what President Barack Obama tells the American public, and notwithstanding how closely Canadian political leaders listen to him.

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In 1980, a cell phone was something carried in a brief case; and a Sony Walkman – you surely recall the portable cassette player the size of a thick paperback that strapped “conveniently” to your belt? – was the cutting edge musical accessory.

But shops filled with more variety, and more quality, make us and our kids better off only to a degree, and not only because the power to blow your ear drums out has increased exponentially.

In 1980, middle-income Canadian families reported a total of $57,000 on their tax returns, and 30 years later ... well exactly $57,000.

Not only that, the last thirty years have not been particularly pro-poor. Inequality in the lower half of the income distribution has not improved at all. In 2010, about one out of every eight Canadians earned less than half of someone at the halfway point of the income distribution, no different than in 1980.

It’s not as if we are working less to take the time to enjoy all these extra things we can buy after thirty years of progress. We're pretty well working as hard as we did 30 years ago, and if the time spent punching the clock has fallen somewhat, it is as much due to involuntary unemployment as it is a choice for leisure to enjoy the other things that make a good life.

Pollsters tell us that our sense of economic security, and our sense of what the future holds, is no better, maybe even worse.

So if the typical family hasn't gained, and if the relatively poor have not gained, then where has all the money gone? After all Canada is now a much richer place.

Almost one half of every dollar earned in the country goes to the richest one-fifth. In 1980, 43 cents of every dollar went into the pockets and bank accounts of the top 20 per cent, a share that has slowly and steadily increased to reach a bit more than 47 cents. But even this understates the concentration of incomes since the underlying driver is the higher and higher proportion flowing to the top 1 per cent, who collected eight out of every 100 dollars earned in 1980, and 12 of every 100 in 2010.

At the same time the slice of the pie going to those in the bottom has not changed, while those in the middle have, indeed, experienced a decline in their share.

These patterns are remarkably similar to those in the United States. In fact, I have shamelessly borrowed the entire structure of this article from a recent piece in The New York Times by Eduardo Porter summarizing a report released by the U.S. Census Bureau.

Thirty years of economic growth; thirty years of incremental but steady increases in productivity; after major public policy initiatives, like free-trade with the United States and other countries beginning in 1980s, like the relentless and unforgiving pursuit of zero inflation that unleashed a major recession in the early 1990s, like slashing of government deficits “come what may” in the years that followed, like a major run up in commodity prices and expansion of the resource sector, partly subsidized through the public purse, policies conducted in the name of increased prosperity and a better future for all; and yet after all of this, the typical family now has no higher a standard of living than a full generation ago.

It’s quite reasonable to confidently ask why, even if this just might be the same question Americans are also asking themselves.

Miles Corak is a professor of economics at the University of Ottawa, and a visiting scholar at the Russell Sage Foundation during the 2013-2014 academic year. You can follow him @MilesCorak, and read the full version of this post at milescorak.com .

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