The most valuable class in any community is the middle class. – Walt Whitman, 1858
Depending on which party leader is speaking, which report you’re reading and which generational comparisons you’re making, Canada’s middle class is fretting anxiously over bills at the kitchen table, or growing wealth like weeds in their increasingly valuable suburban backyards.
The definition of “middle class” is conveniently malleable, and, hence, inspired campaign strategy. (They’re talking about us!) Nearly every campaign promise – from the New Democrats’ $15-a-day child care to the Conservatives’ increased benefits for education-savings plans and the Liberal promise to lower the middle-income tax bracket – is targeted to the average working Canadian family, especially the one with kids.
Nearly half of Canadians define themselves as middle class, even if they’re not, and another chunk aspires to get there. Politicians know this is the hard-working, solid-living, Canadian-as-poutine group to win over.
But who exactly are they? There is no universal definition of this mythical contingent.
Is it the amount on their paycheques? The value of their investments and the equity in their house? The fact that they even own a house? Maybe it’s not so much about money at all, but how they make it and what they do with it.
Maybe it’s about how people see themselves – you think you’re middle class, so you are.
In poet (and journalist) Walt Whitman’s day, there was far less confusion – the term was still new and specific, says historian Andrew Holman, head of Canadian Studies at Bridgewater State University in Massachusetts. His book, A Sense of Their Duty, explores the rise of small-town entrepreneurs and professionals in 19th-century Ontario, and describes these “brain workers” – doctors, lawyers and businessmen – as industrious and financially competent but also civic-minded and disdainful of the “idle” rich. They had evolved from the “middling sort,” as British writers had dubbed citizens who had risen above poverty and, although hardly upper class, were a clearly identified group with reputations to protect and moral standards to maintain. As Prof. Holman explains, “middle class truly meant something more concrete to aspire to … to be a contributing member of society.” Financial security mattered, but as the means to the virtuous life, not its definition.
Today it seems to be all about wealth. “Middle class” is almost always a stand-in for “middle income,” and membership is defined by material fixings – perhaps emulating the “idle rich” – more than civic enterprise.
Even then, there is no common yardstick. When pressed to define the middle class this summer, Bank of Canada governor Stephen Poloz described people holding most of their wealth in the equity of their home. Asked the same question in a recent interview with the CBC’s Peter Mansbridge, however, Liberal Leader Justin Trudeau went for the paycheque, describing the “typical” middle-class Canadian family of four as one with $90,000 in household income.
Three Canadian economists from across the land and across the spectrum watched Thursday night's Globe and Mail debate and graded Conservative Leader Stephen Harper, New Democratic Leader Thomas Mulcair and Liberal Leader Justin Trudeau on their performances.
Owning a television used to be a membership card, as did having a degree. But everyone has a TV these days, and it’s hard to draw lines based on education in a country overflowing with university grads – or by occupation, when a plumber can now earn more than a teacher.
Using middle class as a blanket term may be almost meaningless, if not politically dangerous, should public policy overlook the fact the group now includes so many different tribes at different stages in their pursuit of the Canadian dream.
If it was ever useful to talk in broad strokes about a huge swathe of the population, the convenient use of statistics has eroded the meaning of the term middle class – and, as this election demonstrates, made it a convenient tool for politicians of every stripe. Even if there were a consensus on the math (and there definitely isn’t), many of the most useful reference points shuffle around depending on context.
For example, Canada’s median income is the measurement used most often to determine who qualifies because it represents the midway point – half of Canadians earn more and half earn less.
A 2013 internal government document, entitled “What We Know about the Middle Class in Canada,” draws the lines more precisely, deeming the middle class as those whose after-tax income falls between 75 per cent and 150 per cent of the national median – which, using 2012 figures, would include any family taking home $54,150 to $108,300 a year.
“Family,” however, is a catch-all demographic that includes couples of all ages, with or without children, single or double-earners, and single parents. Single people are excluded entirely – one of the fastest growing groups in Canada and a big chunk of the middle class – whose income, using the same government calculation above, would fall between $21,150 and $42,300.
Geography adds more twists and turns. What ranks a family as middle-income in Calgary makes them top 10-per-centers in Leamington, Ont. An income of $80,000 a year goes a lot farther in Thunder Bay, where a single family home can be purchased for less than $400,000, than in Vancouver, where a similar house goes for $1.4-million.
Politicians can use the catch-all pitch because, different as we may be, we are generally terrible at assessing how well off we are compared with others (we don’t exactly go around sharing our bank balances). Today, the barometer for how well your family is doing isn’t only the next-door neighbour, but your Facebook friends, who – going by their rosy news feeds – take perfect vacations and have brilliant children. Our ever-widening frame of reference throws us off. Poor people tend to see themselves as richer, and rich people tend to see themselves as poorer. This is one reason why so many millionaires (44 per cent of those who responded to a recent survey by CNBC) outrageously define themselves as middle class when, in fact, once your personal income closes in on $200,000, you leap into the top 1 per cent of earners in Canada.
THREE WAYS OF MEASURING WHO’S MIDDLE-CLASS
1. BY MEDIAN INCOME
What it is: Median income is the measurement economists use most often and represents the midway point – half of Canadians earn more and half earn less. It’s a better indication of how most people are faring than average income (which a few billionaires can skew) and useful to show trends in the rise of fall of the statistical middle income over time.
What the numbers say: Like all income amounts, the median shifts widely depending on factors such as family size, location and age. Nationally, the median after-tax income in 2013 for a couple with children under the age 18 was $85,000, according to Statistics Canada. But there are big variations across the country. In Calgary, the figure is $123,000. Also, being a couple is a huge boost: the national median income, after taxes, for a single mother is $39,400 – $10,000 less than for a single dad. Over all, after falling steeply in the mid-1990s, median incomes are on an upward trend, helped along by rising women’s incomes, and huge gains – at least until now – in resource-rich parts of the country, mainly Alberta and Newfoundland.
2. BY INCOME QUINTILE
What it is: Statistics Canada breaks income into five equal slots, or quintiles. In this model, the middle three quintiles represent the middle class. Since the group is big, this is a good way to see differences within it, and to get a better idea who needs a hand up. The 2013 numbers include all households, from families with kids to singles. If you only counted those with two or more members, the figures would be higher.
Average income (before taxes and transfers) by quintile, all family types, 2013
- Lowest: Up to $13,000
- Second: $13,100-$37,000
- Middle: $37,000-$66,500
- Fourth: $66,500-$111,600
- Highest: $111,600 and up
Source, Income Statistics Division, Statistics Canada
What the numbers say: Income levels have fluctuated over the last four decades, with lasting growth concentrated among the wealthiest. In 2011, the incomes of the bottom three quintiles were still lower than in 1976, adjusting for inflation. The top 40 per cent had jumped ahead, with the largest gains made by the top 20 per cent. Compared with 1976, they were the only Canadian households who saw their share of income rise.
3. BY NET WORTH
What it is: Another school of thought holds that that measuring assets against debt is a better test of middle class status than income, since research shows that wealth is tied more strongly than a paycheque to civic engagement, good health and future financial security.
What the numbers say: Between 1999 and 2012, the median net worth of Canadian families rose nearly 78 per cent, from $137,200 to $243,800. Most of this wealth is concentrated in housing, especially for lower-income groups. This new wealth wasn’t evenly distributed, however. Gains were higher, the wealthier the family. While median net worth grew by 107 per cent for the richest families, for the bottom 20 per cent it rose just 14.5 per cent. Within the middle class, richer Canadians also did better – the upper middle income saw their worth grow by 90 per cent; the lower middle income by 60 per cent.
Anxiety has always plagued the middle class, and was at least part of what motivated that historic sense of moral duty identified by Prof. Holman.
And there are clear signs of a funk in today’s middle ranks. While about 47 per cent of Canadians call themselves middle class, according to a 2014 Ekos poll, that’s actually a drop in recent years from a high of 67 per cent; about one-third of those surveyed declared themselves working class. It’s not clear why this happens, but voluntarily dropping into what’s perceived as a lower income level certainly isn’t an indicator of optimism.
So how well are we doing, really? That depends on the statistics you use: income levels, debt, net worth, how fast the bottom fell compared to the rising top, and how worried you feel about it.
For example, despite his comment during The Globe and Mail leaders’ debate on the economy Thursday night that “I’ve never said things were great,” the Conservatives’ Stephen Harper has generally insisted that we’re faring pretty well despite a volatile global economy – and he’s not wrong.
On key economic measurements – income and wealth – Canada’s middle class, when considered as one big, umbrella group, is holding its own. Not villas-in-Spain rich, but certainly pay-the-bills cozy. “If you stay 10,000 feet up, you can tell people some really good stories,” says Jennifer Robson, assistant professor of political management at Carleton University. From that height, “middle-class Canada” is comfortably home-owning, awash in the latest technology and easily keeping pace with – or surpassing – counterparts elsewhere, including the United States.
Median middle incomes have been rising since the mid-1990s, and Canadians have also, on average, become a lot wealthier: The median net worth of families grew by 44.5 per cent from 2005 to 2012, to $243,800. Over the last decade, according to Statistics Canada, families were slightly more likely to get richer, and slightly less likely to get poorer.
And by global measurements, as The New York Times observed in April, 2014, mid-tier Canadians are rolling in dough.
But the sun is not shining on everyone equally. According to a recent analysis for the University of Calgary’s School for Public Policy conducted by former Statistic Canada economists Philip Cross and Munir Sheikh, lumping middle-class factory workers together with middle-class teachers – as politicians are wont to do – “obscures the truth about which members of that group are struggling to keep up.”
By every measure – assets, income and the share of earnings – the wealthiest Canadians have done better, while those in lower income brackets have fared significantly less well. This pattern also holds true within the middle class, where the gap between the top and bottom has widened.
In fact, that 2013 internal government memo (leaked from Employment and Social Development Canada) was downright gloomy. It described a middle class that was shrinking and falling deeper into debt, and “increasingly vulnerable to financial shocks.” The “springboard to higher incomes,” the memo suggested, was losing its bounce.
Since older workers earn more, and Canada’s population is getting old fast, you’d expect incomes to increase. And it’s true that, while median incomes have been rising, the graph going back for the last three decades is a steep U-shape. The story you tell depends on where you start on the U. Compare median household incomes to the mid-1970s, and they have stagnated. Track from the mid-1990s, and they begin to slowly rise, from $41,500 to $47,700 in 2011. But that’s hardly a huge gain, and these, again, are national numbers that throw everyone together. Slice by gender and, although women’s incomes have risen, men’s (measured in constant dollars) have actually slipped below those of the 1970s, and women still earn less than men.
Nearly five million Canadians were living in low income in 2013, or 13.5 per cent of the population, a share that was little changed from a year earlier. A new Canadian Income Survey from Statistics Canada shows 4.6 million people were considered low income in that year.
LOCATION, LOCATION, LOCATION
The trends in middle incomes, as University of Ottawa economist Miles Corak points out, also depend on where you’re looking. Incomes have barely budged in Quebec, and slipped in Ontario – the two provinces where most Canadians live. What fuelled the national increase were resource-rich Alberta, Newfoundland and Saskatchewan – the upswing that The New York Times captured. Now that oil prices have bottomed out, those provinces aren’t so steady behind the wheel.
The Times’s analysis also compared median individual incomes. But according to Prof. Corak, the “market income” for Canadian households in 2010 – that is, the amount before taxes and government transfers – was still below the 1976 level – $47,700 compared with $51,300. But taxes and transfers have lifted middle-income families. In the 1970s, they paid more in tax than they received in credits and transfers; now the reverse is true. Prof. Corak, a specialist in applying economics to public policy, wonders if this is sustainable in a more polarized job market.
And all that extra money that went to the middle class? Some came out of richer pockets, but some also, as the Cross-Sheikh research points out, was taken from the poor.
Mortgages and pay stubs are good for spreadsheet comparisons across generations, but don’t really reflect the fact that the nature of the families paying the bills has changed significantly. In 1976, according to Statistics Canada, 36 per cent of families with two children under 16 had two working parents; today it’s 69 per cent. The overall income trend for families looks even less positive, considering that most now rely on two incomes.
To adapt, Prof. Corak says, Canadians made economic adjustments. They crowded into universities to build their skills, delayed having children until they were more established, had smaller families, built a household around two full-time careers. Today, many are “running harder to stand still,” he says, while the bottom 40 per cent of income earners in Canada, which includes the lower end of the middle, have already slipped off the treadmill.
Arguably even more of a mediator of class than income is wealth – the value of a family’s assets once debts are subtracted – because it can provide a cushion if the economy slips, and determines the coziness of retirement. As Carleton’s Prof. Robson and David Rothwell, who teaches social work at McGill University, observe in the June issue of Policy Options, having wealth doesn’t just grant security, it allows for “productive risks,” such as getting an education, which in turn builds more wealth, and is linked more strongly than income to civic engagement, good health and security. They calculate that, overall, almost half of Canadians are “asset poor,” meaning they don’t have the means to cover basic costs for three months if they lose their jobs. According to their analysis, the gap in wealth – due to the soaring price of housing – has widened much faster than income. In 2012, for instance, the wealth of upper-middle-income Canadians was $506,074 – 13 times more than that of families at the bottom end of the middle income group. (In 1999, it was only nine times more.)
Some of this, certainly, is age-related: Young adult Canadians have had less time to acquire wealth. But their start today is more precarious than their parents’ was, and Mr. Sheikh and Mr. Cross suggest that the future is especially uncertain for those without in-demand skills and education.
Baby boomers are working longer than expected, debts are rising, and grandma’s housing bonanza is pricing her grandchildren out of the real-estate market, especially in big cities where the best jobs are increasingly concentrated. Paul Kershaw, who studies generational equity at the University of British Columbia’s School of Population and Public Health, has calculated that Canadians in their late 20s and early 30s will have to save, on average, five years longer to produce a down payment, and work one month a year more than their peers in 1976 to cover their mortgage. And according to a June report from the Canadian Centre for Policy Alternatives, thirty-somethings are the only age group with a lower over-all net worth in 2012 than they had in 1999.
LEG UP FROM MOM AND DAD
Middle-class families are on a new timeline: A decade ago, having a 28-year-old living at home was such a “failure to launch” that it inspired a movie (with that title) starring Matthew McConaughey. The parents in the film gather at a barbecue to commiserate over their plight; today, they seem more likely to lament if they don’t have room to take their children back.
One of the prevailing myths of the middle class is that your kids will do better than you. If a university degree (or two) is no guarantee of full-time work, if houses cost more, if starting salaries are lower, if retirement won’t be cushioned by traditional, defined-benefit pensions, then passing on the same – or an improved – standard of living becomes that much harder.
But maybe that’s a fallacy: Can every generation expect to surpass its parents? And if middle-income Canadians can’t afford homes, than perhaps the definition of middle class will morph to reflect this – just as it has morphed throughout history. (In countries such as Germany, after all, renting is the norm.) That’s the thing about a big tent: There’s a lot of shoulder room.
Despite all the complexity, the middle class remains a convenient brand during an election: happy couples with young kids are all the rage in the current campaign, although they represent only about one-quarter of middle-income Canadians. (Singles and seniors account for big chunks of the middle.)
But even if there is no truly homogeneous “middle” swathe of Canadians with common economic fortunes – at least not the way the idea has been packaged – there can be a shared intent to be nimble with tax and social policy and skills training, to adapt to the story inside the averages, between generations and cities and occupations, between the doing okay and the falling behind.
SOCIETY’S LONG-TERM LOSS
In the process, perhaps Canadians can recapture the energy of those small-town Ontarians who, 150 years ago, saw their class identity less as a ledger and more as a responsibility.
The signs are there. For Olive Dempsey, a 36-year-old Vancouver professional currently on maternity leave, being in the middle class means the ledger balances in your favour: You can pay the bills, save a little, a “go to the grocery store without worrying what you can and cannot afford.”
But she worries about her generation slipping behind – how, unlike her father-in-law, who once made enough in the summer to pay for university, many of her friends are hunkering down, pressured by student debt and high day-care fees.
And Ms. Dempsey sees a bigger down side. Her main concern for the future – heightened by this summer’s forest fires in B.C. and drought in California – is climate change. A middle class in survival mode, she says, loses the energy for solving larger issues.
“The more we are struggling to make ends meet,” she explains, “the less connected we become as a community.”
Erin Anderssen is a senior feature writer with The Globe and Mail.