Canada's Middle Class among the Wealthiest in the World: Report

Wednesday, July 2, 2014

money clipIn April 2014 the New York Times and some outside economists crunched some numbers collected by LIS, which runs the Luxembourg Income Study Database. It found that the Canadian middle class was wealthier than the American middle class, and in fact the wealthiest middle class in the world. What are the findings of this study and what are the factors that have been presumed to be responsible for the conclusion?


  • Median per-capita after-tax income in Canada has risen by 19.7 per cent since 2000, compared to a rise of 0.3 per cent in the United States. This matches Britain, and is ahead of Germany (Leonhardt & Quealy, 2014). 

  • Median per-capita after-tax income in Canada matched that of the Americans in 2010 at $18,700 (U.S. dollars). Local Canadian statistics suggest that it has since surpassed it. Since this includes children, it translates to roughly $75,000 for a family of four (Leonhardt & Quealy, 2014).

Reasons:

  • The Canadian private sector re-hired all its workers that were re-trenched during the recession by 2011. The U.S. private sector managed this only by March 2014. In fact, the U.S. manufacturing and construction sectors still employ two million fewer people than they did in 2007 (Babad, 2014).

  • Some experts believe that the U.S.'s economic focus on low taxes and low social support for its needed gives rise to high earnings during good economic times, but it does mean that even the middle classes struggle heavily during poor economic conditions (Babad, 2014). For example, if an employee's wages were temporarily reduced to pull a company through the recession, given that the recession pre-dated the new health care plan, that whole family would have had to go into substantial debt to pay its health expenses. Canada has a higher minimum wage, stronger unions to negotiate for better wages and lower pay for executives.

 

  • While the U.S. and Canadian economies are growing at an approximately equal pace, Canada is distributing the wealth to its middle class while the U.S. concentrates it among the wealthy. If this is true, a recent OECD report that shows Canada to have the steepest rise in economic inequality among industrialised countries should make for some uncomfortable reading (Kilgour, 2014).

  • Educational attainment among young people in the U.S. is far behind that in Canada, Australia, Japan and Scandinavia. 

The study excluded countries that have always been considered to have wealthier middle classes than Canada, such as Norway, Switzerland and Luxembourg. So, Canada may in fact have only the fourth wealthiest middle class in the world (Babad, 2014).