Middle class richer in Canada than U.S.: report
A Canadian flag attached to a ski pole is waved on Parliament Hill in Ottawa on Monday, April 15, 2013. (The Canadian Press/Sean Kilpatrick)
A report published in the New York Times on Tuesday reveals Canadians – not Americans – now boast the richest middle class.
“After-tax middle-class incomes in Canada – substantially behind in 2000 – now appear to be higher than in the United States,” says the report.
Canada is tied with Britain for the most growth in middle-class earnings since 2000, and has now pulled ahead of the U.S. to boast the wealthiest middle class in the world. Canadian middle-class earnings have gone up nearly 20 per cent, while American earnings have remained virtually the same since 2000.
The New York Times has been gathering income data for the last 35 years. The last report, released in 2010, saw Canada tied with the U.S. Now, for the first time in the history of the study, Canada is on top.
The study measures after-tax cash income to determine how much each country’s middle-class workers are earning.
Douglas Porter, chief economist and managing director for BMO Nesbitt Burns, said the rise of Canada’s middle class should be viewed in relative terms.
“It says as much about how badly damaged the U.S. economy was during the recession as it is necessarily a positive mark for Canada,” said Porter.
While most countries have displayed some measure of middle-class growth, the economic recession that began in 2000 has essentially paralyzed middle-class earnings in the U.S.
Porter said the hit to the U.S. construction and manufacturing industries was particularly damaging to the American middle class.
“It was a classic boom-bust, although in their case it was almost like a couple booms and a couple busts-- the second worse than the first,” Porter said.
That bust has let other countries catch up, including many European nations. Britain, the Netherlands and Sweden have all drawn closer to the U.S. in middle-class earnings.
The report also shows families with below-average incomes in Canada, Sweden, Norway, Finland and the Netherlands now make significantly more money than Americans in the same range. “Thirty-five years ago, the reverse was true,” says the report.
But Americans at the top of the pay scale still earn more than the rest of the world, with the U.S. a full 20 per cent ahead of Canada at the highest income bracket.
Porter said the U.S. maintains the strongest top-end earners because that’s still where the world’s most-talented executives, athletes and celebrities choose to live.
“Basically, talent, ability and fame benefit tremendously,” he said.
The U.S. once led the pack in almost all income brackets, but since the first study in 1980, earnings in America have steadily eroded until only the richest remain on top.