Just 59 per cent of Canadian millennials were found to have attained middle class status by their 20s, compared to 67 per cent of their boomer parents
With a federal election coming later this year, expect politicians to be talking non-stop about the middle class and its importance to the country.
The problem is, according to a new report, the middle class is shrinking — squeezed by high housing and education costs, displaced by automation and lacking the skills most valued in the digital economy.
And faring particularly badly are millennials, who are less likely to reach middle-income levels in their 20s than their baby-boomer parents, says the Organization for Economic Co-operation and Development analysis.
The picture is as bad or slightly worse in Canada as in the average OECD country, said the report, which calls for various government measures to tackle the problems.
“Our analysis delivers a bleak picture and a call for action,” said Gabriela Ramos, the organization’s chief of staff, who oversaw the project. “The middle class is at the core of a cohesive, thriving society. We need to address their concerns regarding living costs, fairness and uncertainty.”
The report defines middle class as 75-to-200 per cent of the median income in each nation. For Canada, that means a person living alone would have an income of about $29,432 to $78,485, it says.
Across the organization’s 36 member countries, the portion of citizens considered middle class fell to 61 per cent from 64 per cent between the mid-1980s and the mid-2010s, says the report.
Middle-class shrinkage was sharper in Canada than the OECD average.
Coupled with the contracting centre was a surge in the number of upper-income earners — those making more than 200 per cent of the median — who also cornered a greater chunk of their nation’s wealth, says the report. The middle-class slice of the financial pie fell even faster than the number of people in that bracket.
And those people still classified as middle class saw their purchasing power stagnate or decrease.
Between 2008 and 2016, real median incomes grew by an average of just 0.3 per cent a year, compared to 1.6 per cent in the mid-90s to mid-2000s, the OECD review found.
At the same time, people in the top 10 per cent saw their real incomes grow at three times that rate, the report said.
To make matters worse, housing costs have risen at twice the rate of inflation, so the middle-income earners spent almost a third of their pay on accommodation in 2015 — 29 per cent in Canada — up from 25 per cent in 1995.
One result is that it appears to be getting tougher to realize the dream of middle-class status.
Just 59 per cent of Canadian millennials — born from 1983 to 2002 — made it into that sector by their 20s, compared to 67 per cent of baby boomers, defined as those born from 1942 to 1964.
“Today the middle class looks increasingly like a boat in rocky waters,” said OECD secretary-general Angel Gurria.
The report attributes some of the slippage to the rise of automation, estimating that in Canada, one in five middle-class workers is at risk of losing their job to a machine — slightly more than the OECD median.
And while having high-level skills is not as much of a guarantee of financial success as it once was, being in a high-skill job still greatly increases the chances of making more money, says the report.
The authors list a number of recommended actions, from middle-class tax relief, measures to increase incomes and help with education costs, to programs that encourage workers to improve their skills.
The task is crucial, said Ramos.
“A strong and prosperous middle class is crucial for any successful economy and cohesive society,” she wrote in a preface to the report. “Societies with a strong middle class have lower crime rates, they enjoy higher levels of trust and life satisfaction, as well as greater political stability and good performance.”