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A suburban area is seen from the air in Calgary, Alta., Thursday, July 11, 2013. (Jeff McIntosh/THE CANADIAN PRESS)
A suburban area is seen from the air in Calgary, Alta., Thursday, July 11, 2013. (Jeff McIntosh/THE CANADIAN PRESS)

Economy

A new high for middle incomes Add to ...

The focus of Canadian politics in recent years has been the middle-class voter, someone presumed in the rhetoric to be hard-working and struggling to make ends meet, worried about his or her place in the economy.

But a new study shows that middle incomes in Canada have surpassed those in the United States for the first time, putting Canadian median incomes near the top of global rankings.

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Can it be true that the Canadian middle class has never had it so good? And if so, what will it mean for the Liberals and NDP, who have focused their strategies on promoting the notion of middle-class decline under the Conservatives?

The new study, reported in The New York Times, shows that median per capita income in Canada rose by nearly 20 per cent between 2000 and 2010 to $18,700. Incomes in the U.S. barely changed over that period. The research was based on the well respected Luxembourg Income Study Database.

The Conservatives were quick to claim political credit. “This study would appear to confirm that our government’s approach to creating jobs and economic growth, while keeping taxes low, is working,” said PMO spokesman Jason MacDonald. “We’ll continue with our low tax plan, unlike the tax and spend Liberals and NDP, whose approach will only cost Canadian families.”

Employment Minister Jason Kenney also mentioned the study several times on Twitter while aiming a couple of jabs at Liberal Leader Justin Trudeau. Neither the Liberals nor the NDP responded to a request for comment Tuesday.

Economist Kevin Milligan of the University of British Columbia said the study does not show that Canada is leading the world, only that it tops the other countries in this study. Countries such as Norway, Switzerland and Luxembourg were not included, and all have higher median per capita incomes, according to OECD data. But this is still historic, he said.

“It’s worth being a bit proud about. This is something that has not been true before,” Prof. Milligan said. “We want to make sure we don’t fly the ‘mission accomplished’ banner and start slapping high fives. There are still challenges that we face when you look beneath the numbers to make sure growth is widely felt.”

Beneath the numbers, the growth is uneven, according to Prof. Milligan. Much of Canada’s success has been driven by its relatively larger natural resource sector and by the fact that more women are working and bringing home bigger paycheques. But at a provincial level, it’s clear that the provinces with oil have fared much better than those without. How do those struggling provinces such as Ontario and Quebec respond? The answer won’t be to find oil in Oshawa or add a third spouse to the family, Prof. Milligan said. Education is the best bet.

Despite the evidence of relative prosperity, some studies show fewer Canadians consider themselves middle class today. A survey by EKOS research found that the proportion of Canadians who identified as middle class dropped from nearly 70 per cent in 2002 to 47 per cent in 2013.

Douglas Porter, chief economist at Bank of Montreal, said the study reflects how deeply the U.S. economy sank into recession after the 2008 financial crisis. It was only last month that the U.S. private sector finally recouped its recession job losses, Mr. Porter said, something Canada achieved three years ago.

“The emphasis in the U.S. on low taxes and low social support tends to translate into strong relative median income gains when the economy is robust, but weak relative incomes when the economy is struggling,” Mr. Porter said.

The New York Times report attributed the decline of the U.S. middle class to three factors: Educational attainment has risen more slowly than in other countries, wages are more unequal and overall economic growth has slowed. Income is also not as broadly redistributed through taxation, the report said.

Incomes in Canada were also higher at the 30th and 40th percentiles, according to the study. From the 60th percentile upwards Americans retained the highest income levels, while the Netherlands had the highest incomes from the fifth to 20th percentiles.

Follow on Twitter: @FriesenJoe

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