The bloated "middle class"

The Federal election here in Canada is still almost four months away -- October 19 is polling day -- but the issues on which it will be fought are starting to come into focus. One of them is, very clearly, the economic performance of the "middle class". The Tories argue, as you'd expect, that family incomes across the board have risen since they were elected ten years ago. If you only look at median income, they're right, but we'll come back to this later. Both the NDP and the Liberals say that "middle class families" are hurting, and they're offering various measures to put that right.

What do we mean by "middle class"?  When I was growing up in the UK, we talked about "working class", "middle class" and "upper class". The terms were a bit misleading, but there was a general consensus on what was what and who was who. You were working class if you mainly worked with your hands; middle class if you mainly worked with your brains; upper class if you didn't really have to work at all. Bill Bloggs the coal miner might earn more than Joe Blow the clerk, but Bloggs would be seen as working class, whereas Blow was middle class.

Now of course, many of the working class jobs of old -- mining, manufacturing and so on, have disappeared, at least in the richer countries, so the old definitions may not mean what they did. What do we have instead?  Well, consider this article in today's Toronto Star.  The very first paragraph contains the startling suggestion that Canadian families with incomes in a range of $40,000 to $120,000 (all figures in Canadian dollars) can be considered "middle class".

Seems like a very wide range, right? And a look at data from Statistics Canada shows that indeed, it is.  Unfortunately StatsCan doesn't include $120,000 as one of its data points, but a quick bit of interpolation allows us to estimate that of the almost 8.3 million households included in the count (these are "family" rather than "individual" households, so not the entire population), about 5 million have incomes in the $40-120,000 range. That's just about 60 percent of the total!

What seems to have happened here is that the old "working class" and "middle class" have in effect been merged and have adopted, or been assigned by lazy journalists, the "middle class" moniker. If there are three classes now, they are "poor", "middle class" and "stinking rich". This is just fine if you're writing knockabout articles for the lifestyle pages of the Sunday papers, but if you're trying to frame public policy, it just won't do.  How do you "target" policy for 60 percent of the population?

Here's another way to look at it. A household income of $40,000 (for a family) will disqualify you from getting a mortgage in any city in Canada. Given the importance that Canadians place on home ownership as a basis for accumulating wealth, that in effect means you are poor. An income of $120,000 will allow you to get a mortgage in any part of Canada except maybe Toronto and Vancouver -- and in cities like St Catharines, just down the road from me, or Hamilton, or Windsor, it will give you access to almost every home on the market. So not only is the income range much too wide to allow any sort of policy targeting, it's also too imprecise in terms of what each level of income actually means. That depends in large part on where in the country you live.

Now it's not clear that the income range quoted in the Star article is the one that the NDP and the Liberals will use as the basis for their policy proposals. However, the article also states that 52 percent of Canadians "self identify" as middle class; that's better, but still too high to allow for good policy. If either party tries to offer "something" to that broad a swath of voters, it will mean that those really in need -- the poor and the lower-income middle class (as self-identified) will get short shrift.

I mentioned off the top that we'd come back to median income as a way of measuring overall household prosperity. The Tories have already offered some sizable benefits to middle income earners, but a big part of their pitch will be the "all boats have risen with the tide" argument: median household income has risen by 5.1 percent under Harper's watch, to just under $77,000. Remember that the median is the figure at which exactly half of the population earns more, and exactly half earns less. Remember too that we live in an era of rising income inequality. It's entirely possible -- indeed likely -- that the rise in the median mainly reflects rising incomes at the top, while lower incomes stagnate. Just one more reason not to define the "middle class" too broadly.

UPDATE, 27 June: I think my interpolation of the income data from StatsCan went awry. I have reworked the numbers and now estimate that about 5 million households, or about 60 percent of the total, are "middle class".  I have corrected the text accordingly. This makes no material difference to the argument.  

On another note, the Toronto Star for today (27 June) bemoans the fact that the middle class is "shrinking". Consistency, please folks!