This story is part of The Globe and Mail’s Wealth Paradox series, a two-week examination into how the income divide is shaping Canada.
Twenty-five years ago, a new word captured the middle-class angst of an era. That word – “McJobs” – was inspired by the employment offered at a certain fast-food behemoth and evoked a future in which low-paying service jobs dominated a rusted-out North America.
Back-to-back recessions and surging competition from an Asian juggernaut (back then it was Japan) had devastated manufacturing across this continent. In 1987, a bombshell U.S. study found that almost 60 per cent of American jobs created earlier that decade were low-wage positions in the service sector.
Talk of wage polarization, precarious employment and middle-class decline was rampant. Could an economy led by the service sector, rather than manufacturing, sustain middle-class lifestyles? Ottawa commissioned studies on the topic, but their hopeful conclusions did little to stop the foreboding.
Meanwhile, as North American factories closed, the continent’s stock markets boomed. Wall Street went on a tear, sparking an eponymous Hollywood blockbuster whose “greed is good” ethos epitomized the attitude of a new class of mega-millionaires who earned, rather than inherited, their fortunes.
The best of times for the 1 per cent seemed like the worst of times for the other 99.
“In a sharp reversal of the equalizing trend that had been under way since shortly after World War II, the extremes of wealth have grown further apart and the middle has lost ground,” Barbara Ehrenreich wrote in a 1986 New York Times Magazine article titled Is the Middle Class Doomed? “Some economists have even predicted that the middle class … will disappear altogether.”
One influential economist told Ms. Ehrenreich: “It’s incontestable that as a service economy we won’t be able sustain the level of growth required to maintain our standard of living.”
That assertion seemed as overwrought then as it does now. Though we were already deep into the information age – I bought my first personal computer in 1987, a Tandy 1000 with 256 kilobytes of memory – the cognoscenti still did not believe the service sector could ever create good jobs on a massive scale. Yet, in less than a decade, the Internet was doing just that.
Entire new job categories sprung up, post-manufacturing service jobs more akin to the work of lawyers or journalists than those manning fast-food cash registers. These allowed twentysomethings to become coders and webmasters, and out-earn their middle-class parents. In the decade before the 2008 financial crash, almost 20 per cent of Canadian manufacturing jobs disappeared, yet the median after-tax income of Canadian families increased in real terms by 18 per cent. Resources played a part in that. But the service sector was the main driver.
Since the recession, however, eighties-style hand-wringing is back in fashion. A global rise in income disparity, twinned with fears that robots are poised to replace millions of mid-level workers, has spawned gloomy predictions about what’s in store for the middle class. Experience should have taught us to guard against making such sweeping prognostications. While some innovations might destroy jobs, other as-yet-unknown technologies are just as likely to create even better ones. It has happened before – repeatedly.
To be sure, economic transitions are never entirely fair or painless. Globalization has deprived governments, businesses and workers of the near absolute control they once exerted over domestic economies. It has also enabled a lucky few to earn eye-popping (if not unseemly) incomes with the emergence of a global market for top talent. Combined with currently slow-growing salaries for the rest, the distribution of income has become more unequal in most developed countries. Restoring balance won’t be easy, as an aging population depresses consumption and economic growth, while emerging economies seek to move up the food chain by eating our lunch. But before we try to roll back the clock, as so many seem eager to do, we need to understand why we face these challenges in the first place, and why rising to them will make us all better off.
The middle-class myth
Fifty years ago, Canada’s self-image as a middle-class nation was more illusion than reality. In 1961, fewer than 15 per cent of Canadian households owned an automatic washer and only 6 per cent had two cars. In The Vertical Mosaic, his groundbreaking 1965 study of class divisions in this country, sociologist John Porter wrote that “Canada is still a long way from the generalized middle-classness of the popular image.” Indeed, the Canada of the early 1960s was a highly stratified society with limited social mobility; a place where “the top 1 per cent of income recipients received 40 per cent of all income from dividends.”