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Canada’s middle class richest in study of big nations

Posted on 24 April 2014 by admin

Canada’s middle class appears to be the richest in a new study of incomes in several big countries.

The in-depth report published in The New York Times, which looks at about 20 nations, indicates that Canadians have bumped Americans out of the top spot they have long held.

“Middle-class incomes in Canada – substantially behind in 2000 – now appear to be higher than in the United States,” the report says.

“Median income in Canada pulled into a tie with median United States income in 2010 and has most likely surpassed it since then,” it adds.

The New York Times backs up its findings saying they’re based on 35 years of surveys and compiled by LIS, which runs the Luxembourg Income Study Database. The findings were also studied by LIS researchers, along with colleagues at a New York Times website, and outside economists.

The findings show that median per-capita income in Canada, after tax, matched that of the Americans in 2010 at $18,700 (U.S.), However, as the report noted, it has probably increased since.

(As economics professor Anke Kessler of Simon Fraser University pointed out, the current numbers did not take into account countries that have traditionally been ahead of Canada, such as Norway, Switzerland and Luxembourg. Indeed, according to one of the researchers involved in the study, Luxembourg is higher.)

“Because the total bounty produced by the American economy has not been growing substantially faster here in recent decades than in Canada or Western Europe, most American workers are left receiving meagre raises,” the New York Times report says.

“Finally, governments in Canada and Western Europe take more aggressive steps to raise the take-home pay of low- and middle-income households by redistributing income.”

Douglas Porter of BMO Nesbitt Burns noted that commodity prices, and the Canadian dollar, were strong in 2010, and, of course, the country had an exceptional rebound from the global recession compared to most other countries.

“And, historically, of course, Canada’s going to be up there, in any event,” he said.

Median income in Canada has climbed by 19.7 per cent since 2000, according to the New York Times report, matching the pace in Britain, ahead of Ireland, the Netherlands, Spain and Germany, and far ahead of the meagre 0.3 per cent in the United States.

Wealthy Americans, of course, still come out on top.

According to BMO’s Mr. Porter, the report offers some confirmation of what anecdotal and other evidence have suggested.

“I would attribute some of this divergence to the much deeper recession the U.S. suffered through, especially on the employment front,” he said.

“U.S. private sector employment finally recouped its recession losses in March, something Canada had accomplished about three years ago. And, payrolls in both U.S. manufacturing and construction are still down about 2 million jobs each from pre-recession levels, both industries that represent relatively well-paying, middle class jobs. In a nutshell, I believe that some of this weakening in the U.S. middle represents the lingering hangover of the most savage U.S. recession in the post-war era.”

On top of that, he added, America’s emphasis on “low taxes and low social support” oft means stronger income gains in good economic times, and soft incomes in poor times.

According to Statistics Canada, median income in 2010 was just shy of $30,000 (Canadian), while median family income was $76,000.

That, of course, masks the vast differences across the country and across income groups.

Deputy chief economist Benjamin Tal of CIBC World Markets cited the widening income gap in the United States over the past 15 years, and, at a slower pace, in Canada, which he believes is a huge issue.

“It is not that we are doing great (we are not), it is that the U.S. is doing much worse,” Mr. Tal said.

“In my opinion, the widening income gap in the U.S. is the number one economic problem facing the U.S.”

Given that, many manufacturers are now targeting the middle class in emerging economies as that group in America is a “shadow of its former self,” Mr. Tal added while warning about Canada, as well.

“I do believe that the growing income gap in Canada is an important and a significant problem with real macro economic implications,” he said.

“The debate about employment quality and skill mismatch is part of this picture. The fact that we are doing better than the U.S. does not mean that we have to relax about this issue. The opposite is the case.”

Average weekly earnings across the provinces rose last year to $910.74 from $894.71, lowest in Prince Edward Island at $753.58 and highest in Alberta at $1,108.01.

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