News and Blogs

Take a closer look: the (real) state of the Canadian middle class


A widely-reported study by the New York Times shows that middle-class Canadians now have higher after-tax incomes than middle-class Americans, and that Canadian middle-class incomes, adjusted for inflation, have been rising significantly over the past decade.

The facts cited in the original article are not in dispute. The median per-person income in the United States (half earn more and half earn less) has stagnated for the past decade, and the income share of the top 1% in that country has continued to rise to record-high levels.

But this does not mean, as the Harper Conservatives and right-wing pundits have been quick to claim, that all is well with the Canadian middle class.

The United States and Canada have been moving in roughly the same direction, but the timing of the story is different.

The median after-tax income of all Canadian families in 2011 was $50,700, up only very slightly from $49,500 more than thirty years ago in 1980. (These figures are adjusted for inflation.) Middle-class living standards have been more or less stuck for over thirty years.

The difference is that median income in Canada fell sharply in the 1980s and 1990s before staging a modest recovery after 2000. The resource and housing boom, plus a milder recession, boosted real incomes after twenty years of decline for all but the most affluent Canadian families.

If we look at the distribution of after-tax income between Canadian families, we find that the share of the middle class (defined as the middle one-fifth or quintile) fell from 18.3% in 1980, to 17.5% in 1990, to 16.5% in 2000, to 16.3% in 2011.

Meanwhile, the after-tax income share of the top 20% rose from 40% in 1980, to 41% in 1990, to 44% in 2000, to 44.3% in 2011.

So, we see a troubling long-term trend towards middle-class decline and a rising top income share which stabilized after 2000 but has not reversed.

As in the United States, though not to the same degree, the rising share of the top 20% has been mainly driven by the rising share of the very highest income groups. The after-tax income share of the top 1% of individuals has risen significantly, from 5.8% in 1982, to 6.4% in 1990, to 8.7% in 2000, to 9.7% in 2007, but then fell during the recession to 8.6% in 2011.

The share of the ultra-affluent top 0.1% in Canada, one person in every one thousand, has doubled from 1.5% in 1982 to 3% in 2011.

Canada is not the United States. Our middle class is still larger, poverty is not at such high levels, and our top 1% have a lower share of all income. The structures of our two economies are quite different.

But the fact remains that the Canadian middle class have been treading water for thirty years in terms of living standards as the income share of the richest Canadians has risen at their expense.

Sources: Statistics Canada CANSIM Tables 201-0605 (median after tax income); 201-0703 (after tax family income shares by quintile); 204-0001 (top income shares).

Photo: goodncrazy. Used under a Creative Commons BY licence.