This weekend the Globe and Mail published a feature on Canada's middle-class. In a piece authoried entitled "The secrets of Canada's world-leading middle-class success," Doug Saunders examines how Canada is a global exception. Where most countries have seen a shrinking middle-class with a growing polarization between the wealthy and the poor, Canada's middle-class has actually grown and not simply because the rich are getting poorer, but rather because the poor have climbed into the middle-class. Below, you will find the article in full as I believe it is well worth reading it in its entirety.
I have to say that it has always been my dream of joining the middle-class. I grew up on a farm in northern Alberta. My childhood consisted of playing on the farm, picking rocks in the field, helping with the livestock and exploring some of the junk piled up here and there. We were not poor, but we certainly did not fit into middle-class America. If anything, a lot of redneck jokes applied to the world I grew up in.
The article is correct in that a growing middle-class needs the support of the state. If one day I join the middle-class, I can only thank the Canadian state which made it possible for me to get an education at a reasonable price with student loans. Most of the people that I grew up with went on to pursue their studies and become nurses, dentists, accountants and teachers. This in spite of the fact that for many of us our parents did not even graduate from high school.
In fact, the region where I grew up in northern Alberta has shifted from a relatively poor working class region to an increasingly rural middle-class collection of villages. Those that do stay in the region usually do so after a stint in the city (Edmonton) where they did their diplomas and degrees before returning to their home region. They build homes that are typical suburban homes that would not be out of place in Edmonton or Calgary or Toronto and they too shop at Costco and the malls of Edmonton when they visit.
A lot more work must be done to combat poverty in Canada, but I am optimistic. We have achieved a lot, though me must work to do even more.
The secrets of Canada's world-leading middle-class success
DOUG SAUNDERS
This long weekend, as Canadian highways fill with lakeside-bound cars and airports with resort-bound families, it is hard to believe that we are anything but a middle-class nation.
After years of full employment and impressive economic growth, you'd think the entire country had been elevated into the secure world of home ownership, retirement savings and weekends on the dock. There's some truth to this vision – but it's a lot stranger than you'd think.
The middle class, around the world, is in trouble. As my articles from India in the past two weeks have shown, poor countries are seeing stunning growth without producing the sort of big, sustainable middle class that leads to peace and long-term stability. There are too many barriers to prevent people from leaving poverty.
But what about countries such as ours, which have had big middle classes for decades? Here, we see a surprising version of the same effect – with notable exceptions. A comprehensive look at the workings of the world's middle class has just been published by Steven Pressman, an economist at Monmouth University in New Jersey. In his The Decline of the Middle Class: An International Perspective, Canada plays a fascinating role.
Were all these people disappearing from the middle class because they got rich? Or had they failed to find a place on the economic escalator and slipped to the ground floor?
“There was both upward and downward mobility,” Mr. Pressman told me, “but downward mobility exceeded upward mobility by around two to one.”
But there are exceptions to this trend. Switzerland's and Germany's middle classes stayed roughly the same size. And two countries – Norway and Canada – saw their middle classes grow substantially. In Canada, it grew to 37 per cent of the population from 33 per cent, the equivalent of a whole mid-sized province joining the station-wagon brigade, moving Canada into the league of Scandinavian nations in the size of its middle class.
Some of this came from wealthier Canadians being humbled: During the same 20 years, the upper class shrank by 1.9 percentage points, to 33.3 per cent of the population. But more came from poor families moving up. Canada is a middle-class success story, especially compared with the slouching United States. But the story doesn't end there.
Mr. Pressman set out to learn what is making the middle class collapse in many countries but expand in others. Some have attributed these changes to an aging population, the number of working women or divorce rates. He used statistical methods to remove age and gender from the picture, but the patterns remained the same.
Then he looked at unemployment: Were countries with rising employment rates experiencing a growing middle class? Nope. Britain has far lower unemployment than Canada, but a shrinking middle class: “While jobs were being added, households were not moving into the middle class.” In the Netherlands, unemployment fell dramatically, but the middle class declined.
Then Mr. Pressman took his data and subtracted everything except salary and wage earnings. That is, he looked at what would be happening if people lived off only the money paid by their employers.
Suddenly, everything changed. Canada's great middle-class boom turned into an enormous decline: If people were forced to live off their earnings alone, our middle class would have shrunk by a staggering six percentage points. The same was true in Germany. In Britain, the middle class would have contracted even more dramatically.
What had Mr. Pressman subtracted? In short, government: All the handouts, tax benefits, subsidies and rebates that transfer money into middle-class pockets (not including pensions). Without government help, Canada's middle class would be endangered.
In a modern economy, Mr. Pressman told me, “I am not sure that the middle class can be self-sustaining. It seems to require active government policies. The market tends to produce great inequalities in income; these inequalities seem greater in a global economy.” Contrary to earlier economic belief, the countries that are most competitive in a globalized economy are those with the most robust tax-and-spend programs. But they have to be aimed at the right places.
Many Canadian families wouldn't be middle-class if it weren't for government handouts. One key example is the thousands of dollars that Ottawa reimburses parents for child-care expenses each year: Without it, many women wouldn't be able to work, so their families would be deprived of one income and may slide into the lower-class bracket. Tax-funded aid for education savings, first-time home buying, retirement savings plans and medical coverage add up: If you gave up all these breaks, would you still be in the middle class?
I compared these findings to information on the money governments actually spend on different classes and got a surprising result: The countries doing well are the ones that don't just help out the middle class, but do so at the expense of the poor.
Canada hands a comparatively paltry 22 per cent of its spending to the poorest three-10ths of the population and a generous 64 per cent to the middle four-10ths, according to the Organization for Economic Co-operation and Development. Germany, one of the few other countries with a non-shrinking middle, gives only 22.3 per cent to the poor.
Compare that with Britain, whose Labour government spent the 1990s changing social programs so that the money went to the poor rather than the middle class; in Britain today, 34.7 per cent of social spending goes to the lowest-income third – and yet the British middle class has shrunk. In Sweden, where almost 30 per cent of spending goes to the poor, the middle class was clobbered.
(An exception is Norway, which spends a record-breaking 43.8 per cent on its poorest third and saw middle-class gains even bigger than Canada's. But Norway's economy consists largely of oil revenues, allowing taxes and spending levels that, in other countries, would probably destroy the very economy that makes the welfare state possible.)
However, countries that saw middle-class gains also tend to be ones that don't tax the poor heavily. Sweden, surprisingly, does. Canada doesn't. Arguably, governments gain more by making middle-class life easier than by simply aiding the poor. The poorest third are doing a lot better now than they did 20 years ago; unlike the middle class, they saw formidable income gains. But not enough to shift many of them into the secure middle.
It may be that traditional welfare-state programs do more to keep people in poverty than to guide them out – a criticism that has been levelled from both the left and the right. Or perhaps there's a new sub-class of “precarious” casual workers, who never are quite poor enough to qualify for welfare or prosperous enough to earn the state benefits of the comfortable middle. Such workers, key to our new national wealth, could be in serious trouble.
Herein lies the paradox of the modern middle class: Its existence is reliant on a thriving and open market economy, but its size and sustainability are equally dependent on the tax-and-spend mechanisms of the modern welfare state – which, it turns out, are even more important in globalized, high-competition economies.
The countries that are doing best are those that spend serious money on cultivating and maintaining a middle class. Many poor countries, despite having developed booming economies during the past 15 years, fail to join the middle-class club because they can't afford to erect government-supported stepladders to success. And countries such as Canada, which can and do spend that money, have done the best at surviving the social turmoil of our age.
