Middle-class dreams a myth: Government report

By Special to MoneySense on February 24, 2014
Estimated reading time: 4 minutes

The reality is the middle-class is in debt and mortgaging its future to stay afloat.

OTTAWA – Canada’s middle-class is mortgaging its future to stay afloat, making the Canadian dream “a myth more than a reality.” That’s the blunt assessment of an internal Conservative government report, an unvarnished account of the plight of middle-income families that’s in contrast to the rosier economic picture in this month’s budget. The document was prepared last October by experts in Employment and Social Development Canada, the department that runs the employment insurance fund and other income-support programs. The Canadian Press obtained the report under the Access to Information Act. “The wages of middle income workers have stagnated,” it says, referring to the period from 1993 to 2007. “Middle-income families are increasingly vulnerable to financial shocks.” The document, drawing on three years of “internal research,” was prepared for the department’s deputy minister, Ian Shugart, shortly before the resumption of Parliament last fall. “In Canada, political parties are making the middle class a central piece of their agendas,” notes the presentation. A department spokesman, Jordan Sinclair, said in an email that the research “was not linked to the parliamentary schedule or topics raised within the House of Commons.” The authors say middle-income families have seen their earnings rise by an average of only 1.7 per cent a year over the 15 years ending 2007. “The market does not reward middle-income families so well,” says the report. “As a result, they get an increasingly smaller share of the earning’s pie” compared with higher-income families. Shugart was also told middle-class workers “get lesser government support for their work transitions,” referring to a sharp fall-off in employment-insurance benefits compared with other economic groups. The analysis stops short of the 2008 global recession, though other analysts have noted the economic crisis wiped out many well-paid manufacturing jobs in central Canada that have supported middle-class prosperity. The report also refers to debt, saying “many in the middle spend more than they earn, mortgaging their future to sustain their current consumption.” “Over the medium term, middle-income Canadians are unlikely to move to higher income brackets, i.e., the ‘Canadian dream’ is a myth more than a reality.” Current Conservative messaging emphasizes a million new jobs created since the recession; Canada’s relative economic stability compared with other industrialized countries; and various tax cuts provided to “average” families since 2006. A spokeswoman for Employment Minister Jason Kenney said the report reflects “the period of time under the previous Liberal government,” from 1993 forward. (The report also covers 2006-2007, the first two years under the Harper Conservatives; the department says an updated report is “not available at this time.”) “Our government has reduced taxes and made life affordable for Canadian families,” Alexandra Fortier said in an email Sunday, adding a “typical” family of four enjoys tax cuts of $3,400 a year, thanks to Conservative policies. That “typical” family includes working parents who together earn $120,000 a year, with two children. This month’s budget acknowledged the need to create jobs and provide workplace training, but the budget documents never refer explicitly to the “middle class.” The term “middle income” occurs just three times in the main budget, and once in a news release. Since becoming Liberal leader in April last year, Justin Trudeau has frequently cited the plight of the middle class, a theme repeated at the party’s weekend convention in Montreal. Research from the Library of Parliament shows that since Jan. 1, 2013, Trudeau has used the phrase “middle class” 52 times in the House of Commons, compared with twice for Prime Minister Stephen Harper and nine times for NDP Leader Tom Mulcair. None of them used “middle income.” Toronto Liberal MP Chrystia Freeland commended the public servants who produced the report, saying that for the Liberals “it was like getting a good grade on your homework.” “This is a very strong, non-partisan, data-driven report, focused on Canada, which confirms our assertion, which is at the centre of our policy, that the middle class in Canada is being squeezed and that we have to do something about it,” she said in an interview from Montreal. “The public discourse has been lagging — we’ve been in denial.” Freeland, who won a November byelection and now is the party’s trade critic, is author of the 2012 book Plutocrats, which argues that wealth distribution has favoured the ultra-rich and left everybody else behind.