Canada’s families are stuck in neutral.
StatsCan’s latest analysis of income trends among families of two or more people found that 2011 “was the fourth consecutive year without significant change in after-tax income.”
Over the four years from 2007 to 2011, median income for families grew a tepid 1.9 per cent, to $68,000 from $66,700. That’s a growth rate of less than 0.5 per cent per year.
That period covers the “Great Recession” of 2008-2009, but income growth did not pick up significantly in the recovery period.
Two-parent families with children fared slightly better, seeing their median after-tax income rise to $83,600 in 2011 from $81,100 in 2010. Couples without children saw their median income drop by a statistically insignificant $300, and there was no significant change in income for other family types, StatsCan reported.
StatsCan's measure of family income looks not just at wages (which have been showing some middling growth) but at what families actually take in, after taxes and adjusted for inflation.
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The news has significant implications for Canada’s economy. While median after-tax income grew 1.9 per cent in the 2007-2011 period, household mortgage debt grew 24 per cent during the same period, to a record high.
House prices grew about 5.5 per cent during that period, also to near record highs relative to income.
That suggests consumers could soon reach the limit of how much more they can spend, absent the return of income growth.
“Canadian consumers were the lynchpin of the economic recovery, contributing more than half of total GDP growth in 2010 and 2011,” RBC said in a report this spring. “Unfortunately, a good chunk of that consumption was fuelled by debt, making it unsustainable.”
The report predicted Canada will see years of economic growth below the rates seen in the U.S., as Canadian consumers start to spend more cautiously and pay down their debt.
Part of what appears to be keeping Canadian incomes stagnant is declining transfer payments from government. StatsCan’s data found that the median amount of money transferred from the government to families -- things such as the child tax benefit, unemployment insurance, or welfare -- fell to $6,000 in 2011 from $6,700 in 2010.
Seniors saw their median government payments drop by $600 over the year.