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2017 Pre-Budget Tour: The State of the Middle Class

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Minister Jean-Yves Duclos provided a pre-budget briefing to the media on the state of the middle class.

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2017 Pre-Budget Tour: The State of the Middle Class

  1. 1. PRE-BUDGET TOUR: THE STATE OF THE MIDDLE CLASS
  2. 2. Growing and helping the middle class • Our government is committed to grow the economy and the middle class. • Canada’s middle class is facing real challenges and feeling the effects of a technological and global economic change. • Our government’s measures will spur growth and deliver tangible results to meet the needs and expectations of middle class Canadians. 2
  3. 3. Why is the middle class important? Middle Class GrowthTrust Investments/ Human and Physical Capital Expectations / Mobility 3
  4. 4. Drivers of growth y = f(A,K,L) Innovation (A) Private and Public Capital (K) Labour/Human Capital (L) 4
  5. 5. 5
  6. 6. Inflation-adjusted wages have stagnated since the 1970s, particularly for men… Annual Median Gross Wage Income of Canadians, 1976-2016 (2016 constant dollars) $30,000 $35,000 $40,000 $45,000 $50,000 $55,000 $60,000 1976 1981 1986 1991 1996 2001 2006 2011 2016 $ 2016 Median wage income of men Median wage income Median wage income of women 6 Note: Figure are for full-year, full-time workers (persons who usually worked 30 hours per week at their main job). For the years 1976 to 2011, data was sourced from the Survey of Consumer Finances and Survey of Labour and Income Dynamics. For the years 2012 to 2014, data was sourced from the Canadian Income Survey. Figures for 2015-2016 were imputed by applying growth experienced over the 2015-2016 period in weekly wage income of full-time workers, sourced from the labour force survey and converted to real dollars using the Consumer Price Index. Source: Statistics Canada; Department of Finance Calculations.
  7. 7. 1.0 1.7 2.5 3.0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Bottom 90 per cent Top 1 per cent Top 0.1 per cent Top 0.01 per cent …and income growth has been concentrated at top income levels… Notes: Based year for growth rates is 1982. Growth for top 1, 0.1, and 0.01 per cent is based on individual real after tax after transfer income of Canadians tax files from the Longitudinal Administrative Databank. Growth for the bottom 90 per cent is based on real after-tax, after-transfer household income (adjusted for family size) from a combination of the Survey of Consumer Finance, the Survey of Labour and Income Dynamics and the Canadian Income Survey data. After-tax, after-transfer income is the sum of all income from market and government sources, minus income tax. Source: Statistics Canada; Department of Finance calculations. Average Annual Growth in Inflation-Adjusted Family Income, 1982-2014 Per cent 7 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0
  8. 8. … not only in Canada but in many other countries. Top 1% before tax and transfer income shares, Canada and selected countries *2014 or most recent year available. Sources: The Top Incomes Database for U.S., U.K., Sweden. The Canadian series uses taxation data from Statistics Canada's Longitudinal Administrative Databank. 8 U.S. U.K. Canada Sweden 1982 10.3 6.9 7.6 4.1 2014* 22.0 12.7 11.6 8.7
  9. 9. Many Canadians feel the next generation's standard of living will be lower Perception on Future Standard of Living Source: Nanos Research, February 12, 2016 9
  10. 10. Certain groups remain particularly vulnerable to poverty, and are remaining in poverty longer 30.2 23.7 22.5 20.7 20.3 8.8 0 5 10 15 20 25 30 35 Unattached people 45- 64 Single parents People with disabilities* Indigenous people off- reserve Recent immigrants All people Low Income Rate for Selected Sub-Groups (2014 or most recent year available) Per cent Persistence of Low Income for Vulnerable Groups, 2005-2010 (in low income for at least 3 out of 6 years) 5.9 9.9 15.816.217.3 24.2 0 5 10 15 20 25 30 35 All peopleIndigenous people off- reserve Single parents People with disabilities Recent immigrants Unattached people 45- 64 *From 2012 Canadian Survey on Disability **Sources: From the backgrounder on the Poverty Reduction Strategy; Statistics Canada, Canadian Income Survey, Survey of Labour and Income Dynamics. Based on available indicators (employment, income, education) the situation is worse for Indigenous peoples on-reserve.** Per cent 10
  11. 11. Costs for essentials are increasing faster than inflation 0 10 20 30 40 50 60 70 80 All Items Shelter costs Child Care Services Tuition Fees Nominal Price Growth for all products and Key Household Costs, 2000-2015Per cent Notes: Shelter costs are a weighted average of rent, mortgage, insurance, property taxes, water, fuel and electricity costs. Source: Statistics Canada, Consumer Price Index. 32.7 39.9 50.1 75.6 11
  12. 12. Higher skills are required to find jobs in a fast changing economy -8 -6 -4 -2 0 2 4 6 8 10 High Skill Middle Skill Low Skill Percentchangeinoccupationshare Job Creation by Skill Level, 1999-2012 Source: “Special Report, TD Economics: Jobs In Canada, Where, What and For Whom?” October 22, 2013. 9 1 - 6 12
  13. 13. Canadians are increasingly feeling left out of the middle class 0 10 20 30 40 50 60 70 2009 2016 Working class or poor Middle-Class Source: EKOS Research Associates, June 2016 and April 2009 Share of Canadians that self identify as middle class, working class or poor. Per cent Middle class 28.9 63.3 44.3 48 13
  14. 14. What do these challenges mean for Canadians? Growth: “Just not getting ahead.” • It is harder to benefit from opportunities that growth is creating (i.e., growth has not been inclusive). • Persistent barriers for some disadvantaged groups mean they may be falling further behind. Affordability: “Harder to make ends meet.” • Cost of necessary goods has outstripped inflation. • Housing costs/costs of raising a family are increasing. • Saving for retirement is harder/fewer employers offering defined benefit pensions. • Greater indebtedness. Changing nature of work: “Harder to qualify for a job and keep it.” • Job insecurity is increasing, making it harder to enter and stay in the middle class. • More education needed to get a good job & tuition costs are rising. • Innovation in training and upskilling in order to create more jobs. • Greater risk in investing in human capital. 14
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  16. 16. What this means for Canadians • Families receive more money to help with the costs of raising children. • Nine out of ten families receive a higher child benefit payment. • 40% fewer kids face a childhood in poverty. • Better EI benefits. • Post-secondary education is more affordable and accessible for low- and middle-income Canadians and student debt is easier to manage. • There are more opportunities for building work-experience, training, and improving skills. • Young Canadians are achieving their full potential. More youth finish school and find jobs. • Sustained growth in high-quality, well- paying jobs help Canadians build the brighter futures that they deserve. • Middle class Canadians pay lower taxes. • More Canadians can count on Employment Insurance when they need it. • Housing needs are reduced and more affordable housing is available. • Homelessness is reduced. • Stronger income security in retirement. • Fewer seniors live in poverty. • Modern, affordable housing and care options are created for seniors. • More health support and care services for seniors. 16
  17. 17. A vision for helping and growing the middle class All Canadians benefit from strong, sustained, and inclusive economic growth and everyone has a real and fair chance at economic opportunity and success. 17

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