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The middle-class myth? Report claims we are actually prospering

Last Updated Sep 28, 2016 at 9:21 am PDT

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Summary

The Fraser Institute claims families are doing better today compared to the 1970s

One expert admits that family sizes have been shrinking since the 1970s

VANCOUVER (NEWS 1130) – Forget the struggle to pay for housing, feed your family and maybe try to set a few dollars aside for your savings, a new report claims the stagnation of the middle class isn’t quite true. The right-leaning Fraser Institute says many economists have been ignoring some of the realities for Canada’s families, which are actually prospering compared to the 1970s.

“Official data really need some improvement. When you look at them more carefully, you discover that ordinary Canadians have actually thrived over the past four decades,” says Don Boudreaux, a professor of economics at George Mason University and a senior fellow at the institute. “For example, the data used by people who tell the stagnation story do not adjust for changes in the tax burden and changes in government transfers [such as the GST credit and child benefit payments].”

Boudreaux claims many studies also overestimate the effects of inflation, and do not account for the fact that the typical family is smaller today than in the past, meaning a family’s income now gets spread across fewer people.

He also points out that Canadians have to work fewer hours today in order to afford similar and often higher quality household goods like TVs and microwaves. “I believe that when you look at the data more carefully, you discover that the tale of middle class stagnation is indeed just that — a tale,” he tells NEWS 1130. “Ordinary Canadians, on average, have indeed prospered. Our estimates — when you make these simple, straightforward corrections to the data — show that ordinary, middle class Canadians’ real income over the past 40 years has grown by more than 50 per cent. That’s a significant increase in real, material standards of living over just four decades.”

But Boudreaux’s figures don’t sit well with everyone. “I think the economic reality for Canada’s middle class is a lot less rosy than the Fraser Institute report paints it,” says Senior Economist with the Canadian Centre for Policy Alternatives Iglika Ivanova. “We know from polling research that a quarter of all Canadians lack emergency funds and almost half of employees report that they wouldn’t be able to pay their bills if their salary is delayed just one week.”

Considering the growth in Canada’s economy over the past 40 years, Ivanova says people are not as well off as they should be. “It’s interesting that the Fraser Institute has chosen to look at the prices of items like household appliances, which actually haven’t gone up as much over time. They haven’t looked at the very expensive prices of housing, tuition or childcare, which have gone up considerably faster.”

Using the Fraser Institute’s figures on wages over the past four decades, Ivanova says the average Canadian would have to work 106 hours to pay for a year of tuition compared to 230 hours in 2011.

“For housing it’s the same thing. Even the average Canadian housing price has jumped much higher than wages over time. In 1976 it took about 10,000 hours at the average wage to pay for a home. Now it’s 15,000 hours.”

The burden is even higher in Metro Vancouver.

While Ivanova admits that family sizes have been shrinking since the 1970s, she says half of the Fraser Institute report’s results were produced by adjusting inflation to be lower than what official data indicates. “That’s where some of these increases come from, their adjustment of the Consumer Price Index, which I don’t think most economists would agree with.”