04/30/2014 12:48 EDT | Updated 06/30/2014 05:59 EDT

Canada's Middle Class Shouldn't Celebrate

It was fascinating last week to hear a chorus of commentators chattering effusively about a recent New York Times analysis of deepening income inequality in the United States. In particular, middle incomes in America appear to have stalled between the year 2000 and 2010.

Given a decade of such U.S. stagnation, it's little wonder that the income gap between previously affluent middle-class Americans and their counterparts in other countries, like Canada, has narrowed. But there's not a lot of satisfaction to be found in our "catching up" mostly because our southern neighbours have fallen back. Celebrating such relative positioning is a bit hollow.

It doesn't change the fact that median after-tax family incomes in Canada (your typical middle-class take-home pay) has increased over the past 30 years by only about 14 per cent -- less than half a percentage point per year on average.

It doesn't change the fact that household debts have ballooned to 164 per cent of disposable incomes.

It doesn't change the fact that three-quarters of all those working in the private sector don't have access to a decent pension, and no real prospect of getting one.

It doesn't change the fact that the typical 35-year old Canadian today is able to save less than half of what their parents did at that age.

It doesn't change the fact that about two-thirds of middle-class parents truly doubt they will be able to afford any significant post-secondary education for their children.

It doesn't change the fact that youth unemployment continues to run at serious double-digit levels. There are some 230,000 fewer jobs for young people today than before the recession, and job quality has deteriorated.

It doesn't change the fact that in more than 40 per cent of "empty nester" households, their adult children have had to move back home because they haven't yet been able to make a go of it on their own. The housing and other start-up costs confronting them are far more formidable than their parents had to face.

It doesn't change the fact that a majority of parents are worried that their kids may not actually do as well as they did. Expectations are deflating. Intergenerational progress and upward mobility can no longer be taken as "given."

Three things are required in Canadian public policy to address this malaise.

First, get past the denial that there's a problem. Taking refuge in international comparisons is a mug's game. Regardless of how well or poorly the middle-class in other countries may be doing, our focus must be Canada-specific.

Is mediocre long-term income growth averaging about 0.5 per cent per year good enough for Canadians? A thriving middle-class is integral to a successful economy (not to mention a healthy democracy), so we need to be more ambitious about Canadians doing better.

Secondly, there's an appetite for something more substantive than wedge politics, attack-ads and character assassination. These are the tools of smallness and defeatism -- if you can't build yourself up, then tear the other guy down. In the end, the whole political process is stained, good people walk away, and there's never serious attention paid to important issues. Canadians seem ready for a more constructive, optimistic approach that pulls people together and rallies their energies to build a stronger country.

And third, we need a clear agenda for sustained and sustainable economic growth. That's what will lift the middle-class and all those working so hard just to get there. Growth will also help ensure that federal budgets are balanced and stay balanced on a durable, long-term foundation.

Yes, we need disciplined, prudent management. We cannot afford waste, like half-a-billion dollars squandered on pointless, tax-paid government advertising. But at a time when Canada's trade balance is mostly in deficit, consumer demand is sluggish and business confidence is uncertain, we also need smart federal investments in the underpinnings of future growth and productivity.

Rolling back excessively high Employment Insurance payroll taxes would be a good place to start, along with accelerated investments in public infrastructure, science and innovation, and far greater access to all forms of post-secondary education and training (universities, colleges, technical schools, apprenticeships, on-the-job up-skilling ... the whole gamut).

We should seek to boost the proportion of our population with higher skills and learning from 50 per cent, where we sit today, to 70 per cent within this decade. That would be a sound investment in middle-class opportunity.


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