WHO IS THE MIDDLE CLASS? AND FINANCIAL DISCRIMINATION OF SINGLES AND THE POOR
(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)
There has been much discussion in the last few years about who the middle class is and whether the middle class is disappearing.
Certainly, if one looks back technology has improved the quality of life. Some of us older folks, but not that old, remember housework like laundry that included heating water on the stove, wringer washers and drying clothes on the line.
Other changes over the decades include the following:
- Families have become smaller so income goes further (due to socio-economic pressures)
- Day care and college/university education have become very expensive, but health care and grade 1-12 education are covered under government programs
- Certain occupations face high operating costs (farm machinery and price of farmland)
- Social issues and cyberspace has made child rearing more complex
- Knowledge’ and automation revolutions have replaced certain higher wage jobs with low wage jobs (service)
The definition of the stereotypical ‘American Dream Family: ’they own their own home, have more than one car, can afford to send their children to college, have access to healthcare and benefits, and have spare time to vacation or simply have free time in general.
INCOMES AND NET WORTH OF THE CANADIAN MIDDLE CLASS
In Canada it would appear that the middle class primarily includes those earning between $40,000 and $80,000. However, when the Canadian population is divided into unattached family units and family units of two or more persons, the income levels are quite different. According to Statistics Canada 2013 (statcan.gc.ca/daily) the median after tax income for unattached persons over 65 is $25,700, for unattached persons under 65 $29,800, and female lone parent families $39,400. For two parent families with children the median after tax income is $85,000 and senior families $52,500. (After-tax income is defined as the total of market income and government transfers, less income tax).
The median net worth according to Statistics Canada 2012 (statcan) is as follows: Unattached person under 65 $22,700, unattached person over 65 $246,000, senior families $650,000, non-senior families couples only $365,200, non-senior families with children under 18 $302,100, lone parent families $37,000 and other non-senior families $423,000.
The following information from MoneySense shows Stats. Can. 2011 income and net worth data divided into quintiles:
INCOME TABLE (MoneySense based on Stats. Can. 2011 macleans)
INCOME (PRE-TAX) – HOW DOES YOUR PAY STACK UP
|Quintiles||Unattached Individuals||Families of Two or More|
|Bottom 20 %||$0 to $18,717||$0 to $38,754|
|Lower-Middle 20%||$18,718 to $23,356||$38,755 to $61,928|
|Middle 20%||$23,357 to $36,859||$61,929 to $88,074|
|Upper-Middle 20%||$36,860 to $55,498||$88,075 to $125,009|
|Highest 20%||$55,499 and up||$125,010 and up|
NET WORTH TABLE
|Quintiles||Unattached Individuals||Families of Two or More|
|Bottom 20 %||Negative to $2,468||Negative to $67,970|
|Lower-Middle 20%||$2,469 to $19,264||$67,971 to $263,656|
|Middle 20%||$19,265 to $128,087||$263,657 to $589,686|
|Upper-Middle 20%||$128,088 to $455,876||$589,687 to $1,139,488|
|Highest 20%||$455,877 and over||$1,139,489 and up|
(Caveat: It is difficult to determine if unattached individuals includes widowers who often have more net worth than ever singles, early in life divorced persons and single parents).
DEFINING MIDDLE CLASS IN CANADA
Defining middle class in Canada by Sanita Fejzic (middle-class) article gives an interesting perspective on the middle class.
‘There are two ways of looking at the middle class. The first is to focus all the attention on the baby boomers and define middle class based on their experience. While this is problematic, it also makes sense for two reasons: (1) baby boomers make up a large portion of Canada’s total population, so, in terms of simple number crunching, their experience results in a national average and (2) because baby boomers are the majority, their votes become valuable and therefore most of the political rhetoric on middle class inevitably revolves around their experience. The hiccup with this scenario is that middle class baby boomers are relatively financially wealthy.
The second way of seeing middle class acknowledges the situation from an intergenerational point of view.
“Data suggests it’s really important to be careful about using the language of the middle class squeeze,” adds Paul Kershaw, Interim Associate Director, Human Early Learning Partnership at the University of British Columbia and Founder of Generation Squeeze Campaign. “While this language is popular among some political parties, it hides the reality that the squeeze is much more of an age issue.”
As Kershaw points out, high housing prices explain why the median 55-64 year old today reports wealth that has nearly tripled compared to the same age group a generation ago. “That’s not a middle class squeeze,” says Kershaw. “That’s the middle of a demographic nearing retirement with more wealth than the country has ever seen.”
High home prices that were good for people who bought homes decades ago are crushing their kids and grandchildren’s dreams of home ownership. “Gens X and Y pay housing prices that have nearly doubled after adjusting for the CPI, with wages that are down $3/hour, even though they are more than twice as likely to have post secondary [education] today compared to the past, and take jobs that are far less likely to pay generous pensions,” he explains. “In sum, the squeeze is primarily on younger generations.”
Political focus is on the baby boomer middle class.
As 93% of Canadians (see link) self-identify as middle class, all three political parties have high stakes when it comes to winning the hearts of middle class voters.
“The middle class is the political battleground,” states Leslie Pal, Professor of Public Policy and Administration and Director of the Centre on Governance and Public Management at the University of Carleton. “And it’s not about which parties benefit the middle class but how they are appealing to an older, greying middle class.”
In other words, the three parties are either completely ignoring the generational aspect of the problem or simply don’t understand it. Instead, their energy is going into securing the votes of middle class baby boomers.
According to Pal, there are two broad directions the three parties have taken to appeal to the baby boomer middle class. “One is what I call the jelly bean policy and the other is policy that tackles major problems,” he says.
In jelly bean policy, small offerings are made to baby boomer middle class voters because they’re already living relatively comfortably and have no sense of urgency.
Here we see the Conservatives’ tax breaks on sports equipment, bus passes and policy that unbundles cable packages and the NDP’s messages regarding high ATM fees. “They’re tiny policies,” says Pal. “Like giving jelly beans, it’s sweet and tasty, but it doesn’t fix the problem.”
The other direction solves larger problems, with a focus on reforming the pension system. Much has been done to this regard and there is much to do.
“The use of the term middle class [in the political arena] is rhetorical to some extent,” says Pal. “The Tories have crafted a package whose appeal is sharper [to the baby boomers.]” They’re tough on crime, focused on tax breaks and have strict immigration policy.
The Liberals’ middle class rhetoric is lighter on policing and immigration and focuses on minorities, making ends meet and affordable education, while the NDP is focusing on household debt and lowering credit card fees. The NDP has created a number of social support systems that have safeguarded the middle class, including Medicare. However, their focus has traditionally been about protecting main-street workers and minorities.
But none of the three parties are drafting policy that addresses the threat of a disappearing middle class in the future. As they get ready for the 2015 election — and with the help of sophisticated technology to micro-target various demographic groups — they’ll have to remember to tailor real policies aimed at the group that’s potentially got the most to lose, generation squeeze’. (End)
THE DISAPPEARING MIDDLE CLASS AND HOUSING
(disappearing-middle-class) An Excerpt from Joel Kotkin’s Forthcoming book The New Class Conflict
‘…..This process has been greeted with enthusiasm by financial hegemons, who have stepped in with billions to buy foreclosed homes and then rent them; in some states this has accounted for upwards of twenty percent of all new house purchases. Having undermined the housing market with their “innovations,” notably backing subprime and zero down loans, they now look to profit from the middle orders’ decline by getting them to pay the investment classes’ mortgages through rents.
Part of this shift has been exacerbated by the movement of large investment groups like Blackstone to buy up single family houses for rent, representing a kind of neo-feudalist landscape, where landlords replace owner occupiers, perhaps for the long-run.
The very idea of homeownership is widely ridiculed in the media as a bad investment and many journalists, both left and right, deride the investment in homes as misplaced, and suggest people invest their resources on Wall Street, which, of course, would be of great benefit to the plutocracy. One New York Times writer even suggested that people should buy housing like food, largely ignoring the societal benefits associated with homeownership on children and the stability of communities. Traditional American notion of independence, permanency and identity with neighborhood are given short shrift in this approach.
This odd alliance between the Clerisy and Wall Street works directly against the interest of the middle and aspiring working class. After all, the house is the primary asset of the middle orders, who have far less in terms of stocks and other financial assets than the highly affluent. Having deemed high-density housing and renting superior, the confluence of Clerical ideals and Wall Street money has the effect on creating an ever greater, and perhaps long-lasting, gap between the investor class and the yeomanry’. (End)
INCREASE OF SQUARE FOOTAGE IN HOUSING SINCE THE 40’S AND 50’S
“Why Canada’s houses are getting smaller”, Tristin Hopper, National Post, July 13, 2012 (shrinking-home)
‘From post-war bungalows to 1990s McMansions, the Canadian House has spent the last 60 years progressively ballooning into one of the largest domiciles in history….In 1947, to accommodate a wave of post-war home construction, houses were often no bigger than 1,000 square feet. Then came powder rooms, family rooms, enclosed garages; by 1975 home sizes had jumped to 1,075 square feet. But still, their children, the Baby Boomers, shared bedrooms and cope with the weekday morning ritual of waiting for a spot in the home’s only bathroom.
Crazed for elbow room, when the Boomers finally seized the reins of home ownership in the 1980s, all hell broke loose. Wide hallways, gargantuan entrance halls, mud rooms. By the turn of the millennium, Canadians lived in some of the world’s largest houses – and were filling them with some of the world’s smallest families….
But then, by 2007, the meteoric growth of Canadian houses began to a slow to a trickle…the average new home size had dropped to 1,900 square feet – well down from a mid-2000s peak of 2,300 square feet….over the years, lot sizes stayed pretty much the same, but builders added storeys, dug out basements and pushed the front steps to the sidewalk….Canada, too, is witnessing the slow death of walk-in closets, hobby rooms and even the once-ubiquitous living room…..
The Millennials, the generation born from 1983 onwards, enjoyed a childhood free of bunk beds or even shared bathrooms. Growing up in plush mega homes undoubtedly helped them become, in the words of one author, ‘self-centered, needy, and entitled with unrealistic work expectations. Oddly, it also spawned a group of people patently unimpressed with backyards and breakfast nooks….
Under current economic forecasts, Millennials are poised to spend their early adulthood decidedly less affluent than their parents. They are also facing a housing market that has outpaced income growth for well over a decade….
Except, of course, in Alberta, in the land of $85,000 median wages and dirt-cheap housing lots, young families are still snapping up giant, single-family homes like it’s still 1985….Edmonton has more space per person than any major city in Canada….In Calgary, even the condos are 4,000 square foot ‘monsters’.’ (End)
WHAT DETERMINES HOW THE MIDDLE CLASS IS CREATED
Michael Lind, “Are We Still a Middle-Class Nation?” The Atlantic Monthly 293, no. 1 (January/February 2004) (issues).
Michael Lind goes so far as to claim “each of America’s successive middle classes has been artificially created by government-sponsored social engineering—a fact that is profoundly important for us to admit as we think about the future of middle-class America.” (End)
Andrew Coyne: “Forget the Liberal mythology, Canada’s middle class is not struggling” (middle)
“This has always been implicit in Liberal rhetoric about “the one per cent,” but now it is policy. If the rich have been “taking” from the middle class, then the Liberals want you to know they will take it back: a cut of one-and-a-half percentage points in the lower-middle bracket, paid for by an increase of four percentage points in the top rate of tax. Fairness demands nothing less.
Seldom have the politics of “gimme that” been expressed quite so nakedly. It is one thing to redistribute from rich to poor, or from the broader society to those on its margins. But the beneficiaries in this case are not the poor, or even the median: as the NDP helpfully pointed out, the $44,701 threshold at which the Liberal tax cut would kick in would benefit only the top one-third of tax filers.” (End)
Wants have changed, it seems new homeowners all want hardwood floors and granite countertops and will pursue those dreams and accumulate high debt even with out of reach house prices.
Many wealthy Canadians (mainly married or coupled person family units) think they are only middle class, but own their homes outright, have multiple properties, recreation vehicles, winter in Arizona or Florida, and have huge net worth and assets. Many also have multiple income sources from their net worth and assets in their senior years. Many will buy properties with their increased wealth to rent out to those at the bottom of the wealth pile. The rent charged is set at levels of greed to not only cover the mortgage and other costs, but also make 3 or 4% profit on their investments (affordable)
As stated above, 93% of Canadians believe they are in the middle class. Yet MoneySense statistics presented above shows that 40% of Canadian families of two or more persons have incomes above $88,000 and have net worth and assets above $600,000. THIS LAST STATEMENT BEARS REPEATING AGAIN. Forty per cent of Canadian families have incredible wealth and yet think it is okay to lie to themselves and other Canadian singles and poor families about their wealth. They continue to spin these lies and this spin is perpetuated by government and politicians.
As has been shown in past blog posts, government and politicians have created upside side down and schizophrenic financial policies that benefit upper middle class families more than ‘middle of the road’ middle class families, singles and the poor (government-program). Baby boomers and families because of their voting power are considered to be more financially important than other generational persons such as millennials.
What’s the point of hard work and common decency if the financial system is stacked against singles and the poor? The values that have actually enriched the wealthy and upper middle class appear to be greed, over consumption, arrogance, dishonesty and telling lies upon lies upon lies about their wealth (especially with regards to affordable housing) .
‘Hard working’ phrase is used ad nauseum, but many middle class families think they should not have to work til age 65 due to a sense of entitlement.
Even with having one of the highest standards of living in the world, middle class Canadian families are still unhappy and want more and appear to have no qualms about financially discriminating against the lower middle class, singles and the poor.
(This blog is of a general nature about financial discrimination of individuals/singles. It is not intended to provide personal or financial advice.)
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