“Statistics Canada reports that poverty rates in Canada are declining, so I would suggest that the middle class must be growing”

According to a report from November 2020, the wealth of Canada’s top billionaires grew by $53 billion between April and October of last year, an increase of 28%. Of those 44 billionaires, 43 increased or maintained their fortunes over those six months.

Canada’s richest family, the Thomsons (Thomson Reuters), saw the biggest gain, with an estimated increase of $8.8 billion between March and September and Shopify’s Tobi Lutke added $6.6 billion to his fortune. The third one in the list is the Westons grocer and pharmacy family who added $1.6 billion to their fortune.

However, these big numbers contrast with low-wage workers in Canada who have been hit hardest during the pandemic. The current minimum wage in Ontario is $14.25 per hour, a number that is not enough to buy most of the necessary things.  Milénio Stadium spoke with the Chief Economist and primary spokesperson at The Conference Board of Canada, Pedro Antunes, who believes that middle class is growing in Canada because poverty rates are declining.

Milénio Stadium: Is minimum wage fair in this growing/inflationary economy?

Pedro Antunes: Minimum wages are generally provincially/territorially set and levels vary by region. Most of the jurisdictions do have indexation formulas that will adjust the minimum wage to inflation, but these will lag changes in the CPI. Many provinces/territories have increased minimum wages significantly over the past five years. There is a new federal minimum wage as well, for workers employed in the federally regulated private sector, which will come into to effect at the end of December this year at $15 per hour. Minimum wages are not an optimal policy measure to establish fairness for lower wage workers. For instance, a $15 minimum wage in Toronto is far from a living wage but would certainly provide more purchasing power in Timmins Ontario where the cost of living is lower.

MS: Is fair wage policy in our provinces balanced for today’s economy?

PA: Wages are market driven, it’s an area where policy makers need to tread carefully if they want to adjust for any market failures because of many (potential) unintended consequences. Of course, it’s important to establish labour standards that include safety, work hours, etc. If governments want to address low incomes there are many other measures/programs that can be used to bolster the social safety net.

MS: Where does Canada compare to other countries, especially the G-7 countries?

PA: Converting to American dollar, Canada has generally higher minimum wages than the United States but lower minimum wages than many European countries. But these comparisons are difficult to interpret because the cost of living differs by country and by region within countries.

MS: How can the provinces increase their per capita income?

PA: GDP is income earned through economic activity, essentially labour income and profits. The question of how to increase GDP per person is of great interest, of course, to economists and policy makers. But the truth is that there is not necessarily a simple answer. For developed economies, productivity is a key driver of per capita income. The Conference Board has done much research in the past looking at what can drive productivity. One important factor is the amount of capital per worker—such that attracting private investment and infrastructure spending are important components of productivity gains. Interestingly, Canada’s productivity performance has improved in recent years and there’s hope that the shakeup caused by the pandemic, that has forced an uptake of technology investments, will help bolster productivity growth in the future, despite the impact that COVID-19 has had on the economy.

MS: Why are the rich getting richer, even with a pandemic, and the poor getting poorer in light of the global pandemic?

PA: It’s true that very high-income earners have seen incomes outpace those in middle and lower income households over the past two decades. However, overall, Canada has seen an improvement in income inequality, especially over the past 15 years. This is because of solid wage increases (nominal wages outpacing inflation since about 2004) and more generous social programs, such as expanding the Canada Child Benefit for instance. Canada’s (after-tax, after-transfers) Gini coefficient, a measure of income inequality, has improved over the 2004 to 2019 period, in the sense that inequality has been declining (we have data from Statistics Canada up to 2019).

It’s true that the pandemic will have important implication on labour income. Higher income, knowledge economy workers generally kept their jobs through the pandemic, while lower income workers were most affected by the shutdowns and health measure imposed to try and contain COVID-19. However, losses to labour income were more than offset by federal and provincial support programs. Now that the economy is reopening, the important question is whether many affected workers will be able to land on their feet—especially as support programs dry up. Our sense is that the economy will undergo important structural changes that may slow the return to work for many Canadians. This could have implications for income inequality going forward.

MS:  Does the middle class still exist in Canada? And if so – how long will it be around?

PA: We don’t really have a definition for what is middle class—this is a term that is favoured by politicians because most Canadian will consider themselves middle class. Statistics Canada reports that poverty rates in Canada are declining, so I would suggest that the middle class must be growing as a share of total population.

Joana Leal/MS