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It's Time To Bring Back The Term 'Working Class,' New University Of Calgary Report Says

03/19/2015 11:00 EDT | Updated 03/19/2015 11:00 EDT

Who are these middle-class Canadians that politicians talk about so much?

The odds are you’re one of them.

The term “middle class” is so nebulous in Canada that it can include people earning less than $20,000 a year or someone who earns $100,000 a year, depending on which statistician or political party you ask.

The question of whether the middle class is making strides is also a matter of perspective.

Not surprisingly, the experience of those at the top end of the “middle class” is very different from those at the lower end of the spectrum, who are truly struggling, according to a report released Thursday.

“In reality, anxiety over the state of the middle class and its future is actually about the working class,” wrote authors Philip Cross and Munir Sheikh of the University of Calgary’s School of Public Policy.

Cross, the former chief analyst and Sheikh, the former chief statistician at Statistics Canada found that inequality before taxes and transfers grew by 13.5 per cent between 1976 and 2011, but growth was a more timid 4.3 per cent once those government measures were included.

“What emerges from a review of the array of definitions and data sources is that the politicians and voters can at least partly justify their angst,” they wrote.

Cross and Sheikh found that those at the lower end of the “middle class” grouping, who have lower skill and education levels, are actually faring worse than they were 30 years ago. Much of the deterioration, they said, is due to the decline of the manufacturing sector, which once was known for good jobs that paid a living wage.

Meanwhile, many people at the top level of the “middle class” definition are doing quite well.

The shrinking middle class phenomenon is due as much to upward mobility among people at the higher range of middle class as to those in the lower sphere moving down.

“Broad claims that the whole middle class is in crisis, provoking unjustified anxiety among many of the vast majority of Canadians who self-identify as middle class, ignores that large portions of it have prospered,” Cross and Sheikh said.

“It also distracts from focusing on the very real erosion of incomes and wealth for low-wage factory employment and low-skill services.”

incomes canada

Politicians are misdirecting resources and obscuring the true issue of who is really in need by continuing to promote policies aimed at a broad group, they said.

Tax breaks have been focused on the “middle class,” but they have come at the expense of transfers to low-income Canadians, the report said.

High-income Canadians paid 37 cents in taxes for every dollar earned in 1980, of which 26 cents went to the low-income group and 11 cents to the middle class. By 2010, the contribution rose to 48 cents. But the government directed just 17 cents to the low-income group and a whopping 31 cents to the “middle-income group.”

“These developments raise serious policy issues for which there are no simple answers,” the authors wrote, adding that throwing even more tax breaks to the middle class would be too costly.

They add that focusing on education and training for “middle class” workers on the lower end of the income spectrum might be a more effective public policy.

Many Canadians identify with middle class concerns as house prices and household debt levels sit at all time highs, while the job market continues to flounder and education and childcare costs continue to rise.

For years, a steady 60 per cent of Canadians defined themselves as middle class, but after the 2008 recession battered the job market, especially blue collar manufacturing jobs, that figure fell to 47 per cent. Meanwhile, the share who identified themselves as working class rose from 20 per cent to 31 per cent even amid massive layoffs in the manufacturing sector.

Just six per cent of Canadians said they considered themselves high income.

The broad nature of the middle class makes it a vote-rich demographic that politicians are likely to target in the lead-up to October’s election.

The Conservatives’ new family tax credits, which take effect just in time for campaign season, are a prime example of public policy aimed at the middle class.

Their controversial income splitting program, which allows a higher paid spouse to transfer $50,000 of wealth to a lower paid spouse, would see 68 per cent of the benefits go to families earning as much as $120,000 in 2015, according to internal Finance Department documents gathered by The Canadian Press.

While the Conservatives suggest that families with pre-tax annual incomes of $120,000 are part of the middle class, the New Democrats focus on the middle 60 per cent of income earners and the Liberals have an even looser definition: Liberal Leader Jutin Trudeau declined to give an income range, but said anyone living off their income (instead of investments) is middle class.

Economists, sociologists and statisticians have been unable to agree on where the upper and lower boundaries of the middle class lie and use a variety of gauges to define it.

Some methods use pre-tax income, while others say after-tax is the true measure; some focus on household wealth and others on what individuals earn.

The most common method finds median household income and selects a range around it.

Charles Beach, an economist and Queen's University professor emeritus, has written about the problems with defining the middle class.

One conventional measure he cites is using those that earn between 50 per cent and 150 per cent of median income to arrive at a range of between $14,500 and $43,500 in after-tax 2005 household income. In that case, all one needs to be considered middle class is to work a minimum wage job for 35 hours per week.

Another common method of calculating middle class is using the middle 60 per cent of earners, which excludes the top and bottom 20 per cent of earners. Applying that method to 2011 census data gives a higher range of $25,170 to $87,500 in after-tax family income, the authors note.

Some economists simply pick an income range that seems to encompass where a Canadian middle class family should be. Each approach yields wildly different conclusions about who is included in the middle class.

Cross and Sheikh also suggest another way of thinking about classes might make for a more useful discussion.

“It may be worthwhile for research to explore reviving the distinction between the middle class and the working class that existed a century ago.”

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