'Canadian dream' is a myth more than a reality"

[Devils'Advocate]

You people yelling "If people would stop buying stuff on credit it would solve all our problems!", I think you forget that the economy is GREASED by that money and if people turned to paying off their debt instead of borrowing for a new car that YOU will be impacted by the crushing blow it would be to the economy. We have a system BUILT on personal irresponsiblity.

Source:
http://www.nbcnews.com/id/11546847/n...-credit-cards/

About two-thirds of the U.S. economy is based on consumer spending. So if we all squeezed our household budgets to payoff our debts, you would likely see a sharp decline in GDP and a huge spike in unemployment. Without all that spending, there would no need for millions of jobs – from the people who make the cardboard boxes to package all the stuff we buy to the people who work in the stores, restaurants and malls that make a living serving it up.

Even if we could all get to this “debt-free zone” unscathed, we’d still have to contend with an economy that was no longer lubricated by credit. Credit cards aren’t just convenient: they actually create spending power that is then used to buy goods and services. If you sucked all that spending power out of the system all at once, you’d risk creating a huge deflationary backdraft. Yes, people who still had jobs might have more to spend. But there would be much less spending power overall because many more people would be out of work.

Another way to fund this massive debt payback would be to tap the trillions in savings in stocks or appreciated home prices. But if credit card holders all tried to tap their paper profits at the same time, the stock and housing markets would be flooded with sellers, forcing prices to fall sharply. So that wouldn’t work either.

[GGG]

Originally Posted by nik-

If you ignore purchasing power. This "constant dollar" is supposed to take it into account though.

This is where I struggle. If this is indexed for inflation, why does purchasing power decrease.

There are only two things I can think of that affect this one is that inflation does not properly account for housing value increases as that is the greatest portion of our spending. OR the definitions of what we are buying has changed. Does it use constant values or just look at a basket of ever changing goods. How does it account for increased amount of things. For example Cell Phones, you used to just have one phone bill now if you want for $4 per month you could have the same phone, TV, and Internet service you had in 1990.

So I have the same question how can that graph indexed for inflation show that the middle class is just as well off as they always have been yet there purchasing power has decreased?

[Rathji]

Originally Posted by darklord700

Kids working at Mickey Ds are earning to buy booze so they should be excluded.

Adult working in Walmart to raise a family should be included to make meaningful comparisions.

They are earning money to buy designer clothes, iTunes downloads, iPhones, makeup, fast food, and yes, likely some booze as well, that their parents can't afford (or just don't want) to purchase for them.

I bet these kids with jobs that you are concerned about including in the stats spend more on their own food and electronics than their parents do.

[Devils'Advocate]

If anyone wants to read the full report it is here:
http://www.scribd.com/doc/208456900/Middle-class-blues

The overall findings from the end of the report are:
There has been a hollowing out of the middle class (middle class being defined as 75% to 150% of the median income; so in a year where the median family income is $100,000, middle class would be defined as families earning $75,000 to $150,000). For the most part they have moved into the "moderate class" which is defined as being above the LICO but also below that 75% mark.

- The "family unit" most likely to be in the "middle class" is either (a) couples with no dependants or (b) single people.

- While the economy has grown, you would expect an overall increase in standard of living. However, middle-income wages have stagnated. Furthermore, over the medium-term, middle income Canadians are unlikely to move into the higher income brackets which HAVE seen their wages increase with the growth in the economy.

- A large portion of what middle income families spend goes to basic needs (shelter, food) and essentials (electicity, heating, transportation). They will borrow, mortgaging their future, to sustain consumption levels they are accustomed to.

BTW - factors that MOST likely are going to move a family into a higher income bracket:
- Experience a decrease in family size (less dependent means mom can go back to work)
- Benefit from an increase in the earnings of other family members (Jimmy gets a job straight out of high school, but is still living with mom and dad)
- Getting a university diploma (more education = higher paying jobs)

[FlamesAddiction]

Originally Posted by Oil Stain

But home ownership is actually up from 60% to 69% since the 1970's.

Again, don't mistake access to credit with actual wealth. The US was at 69% ownership when the floor fell out.

The number of mortgages in arrears right now is 0.46% of all mortgages. The earliest comparable data I could find is from 1990 when it was 0.18% of mortgages that were in arrears. Household debt to income in Canada is about 164% now (up 40% from 10 years ago), and keep in mind that it was about 170% in the U.S. when their housing bubble burst.

Not to mention that a lot of "homes" today are in fact single dwelling apartments not suitable for a family. You certainly don't get the same value nowadays (the average price of a home is now 5 times the average salary as compared to 3 times in the 1980s).

[kevman]

Originally Posted by Flash Walken

Right, I wasn't trying to misrepresent you.

One thing we can agree on is that it's essentially impossible to raise a family of 4 comfortably on a single income. That's not subjective.

30, even 20 years ago, this wasn't the case.

What changed? Where did that money go?

I see it as a chicken or egg situation.

Are dual incomes the norm because it's difficult to support a family on a single income or is it difficult to support a family on a single income because dual incomes are the norm?

When Susan entered the workforce the Jones' buying power just got a lot stronger.

Also interesting is the influence of dual incomes on household income inequality. Smart, motivated and career driven women tend to be attracted to smart, motivated and career driven men or vice versa. Once you take care of the basic necessity's a family of four with two professional income earners will have substantially more buying power than a family of four with two general labour income earners.

[Flash Walken]

Originally Posted by kevman

I see it as a chicken or egg situation.

Are dual incomes the norm because it's difficult to support a family on a single income or is it difficult to support a family on a single income because dual incomes are the norm?

When Susan entered the workforce the Jones' buying power just got a lot stronger.

Also interesting is the influence of dual incomes on household income inequality. Smart, motivated and career driven women tend to be attracted to smart, motivated and career driven men or vice versa. Once you take care of the basic necessity's a family of four with two professional income earners will have substantially more buying power than a family of four with two general labour income earners.

Susan joined the workforce so that her family could pay the bills.

In the early 1960s, maybe the tail end of 1959, unions in the States, and by association Canada, began to feel political heat from the government and private interest. There were several legal changes introduced that hamstrung the organization abilities of unions but also provided cover for anti-union 'consulting' for businesses.

I am not as familiar with the specific data points for Canada vs. the United States, but I do know they are linked almost intrinsically.

Because the role of women in the labor force has changed strikingly over the last 40 years, the problem is most evident in trends in male earnings. And, in fact, there has been a lot of talk about the stagnating wages of American male workers. Using conventional methods of analysis, the data show that the median earnings for prime-age (25-64) working men have declined slightly from 1970 to 2010, falling by 4 percent after adjusting for inflation.

This finding of stagnant wages is unsettling, but also quite misleading. For one thing, this statistic includes only men who have jobs. In 1970, 94 percent of prime-age men worked, but by 2010, that number was only 81 percent. The decline in employment has been accompanied by increases in incarceration rates, higher rates of enrollment in the Social Security Disability Insurance program and more Americans struggling to find work. Because those without jobs are excluded from conventional analyses of Americans’ earnings, the statistics we most commonly see — those that illustrate a trend of wage stagnation — present an overly optimistic picture of the middle class.

When we consider all working-age men, including those who are not working, the real earnings of the median male have actually declined by 19 percent since 1970. This means that the median man in 2010 earned as much as the median man did in 1964 — nearly a half century ago. Men with less education face an even bleaker picture; earnings for the median man with a high school diploma and no further schooling fell by 41 percent from 1970 to 2010.

http://economix.blogs.nytimes.com/20...merican-wages/

Essentially one presidential cycle after loosening the laws on union busting and coercion, male american working wages begin to stagnate. While there are guilds and professional associations, the union still represents the average american male employed because of their output of labour. Since the disruption of union organization efforts, the constituents who make up the vast majority of union representation, under-educated labour, have had it even worse. "High school dropouts' earnings have fallen 66 percent since 1969, and people with some college - the median level of education in the US - have seen earnings fall by a third. "

This is visible and echoes in all sorts of other avenues of historical and political study.

The first problem is that, as Lane Kenworthy notes, racial minorities and women were being integrated into the work force well before median wages started to stagnate in the 1970s. Indeed, white men's share of the workforce has declined at roughly the same speed since the 1950s. This means something else likely caused wages to stagnate and that simply continuing to integrate women and racial minorities isn't the cause.

The second and bigger problem is that Conard's central contention - that wages have increased for each gender and racial group - is simply false. As Evan Soltas notes, just looking at Census data it's clear that income for men, and non-Hispanic white men particularly, has stagnated.

But it's actually worse than that.

http://www.washingtonpost.com/blogs/...re-plummeting/

[GP_Matt]

The pattern that I see from your post is that in the 1950's men had most of the jobs. Both the highly paid ones and the lower paid ones. As women entered the workforce they most likely started at the bottom both the lower end jobs and the entry level jobs. This created a boom for the economy as there was more work being done. By the 70's though women were starting to move up within the workforce. Both because they had more rights and because they had gained experience and naturally advanced in the careers that they started in the 50's. Post 1970 the women are on a roll. They are gaining entry into more of the higher paid male dominated fields and taking some positions away from the men.
At the same time, the economy is moving faster and faster towards a knowledge based one where the bricklayer is paid less than the office employee.
Fast forward to today and women are graduating at faster rates than men in most programs and it makes sense that men are no longer assured the cushy middle class jobs that they once were.

[Calgary14]

Originally Posted by Slava

I'm of two minds on this. Of course no one wants to see a shrinking middle class and wage deflation, but I also see so much unnecessary spending that people undertake that you have to consider that as part of the problem as well. People are having a harder time making ends meet and yet the mall parking lots are full and car dealerships are all doing good business. So while wages should keep pace with growth, so should common sense.

And the low interest rates definitely aren't helping things in terms of overspending

[Devils'Advocate]

Interest rates, smintrest rates.... Credit card rates ain't cheap. And then there is something out there that I don't ever remember seeing when I was growing up.

Payday Loans, Money Mart, The Cash Store, Cash 4 You, Eazy Cash Loans... these places are EVERYWHERE and the interest is criminal. Well, ALMOST criminal. They work just a hair away from breaking the law....

[corporatejay]

Originally Posted by Devils'Advocate

Interest rates, smintrest rates.... Credit card rates ain't cheap. And then there is something out there that I don't ever remember seeing when I was growing up.

Payday Loans, Money Mart, The Cash Store, Cash 4 You, Eazy Cash Loans... these places are EVERYWHERE and the interest is criminal. Well, ALMOST criminal. They work just a hair away from breaking the law....

Most people I know pay for everything on their credit card (most pay off the balance at the end of the month). It's easy to track, you get points etc..

My mom was telling me that in the 80s "putting something on your credit card' meant you didn't actually have the money and was considered an embarassment. If you had a credit card at all it was for emergencies. Now it's normal for 18 year olds to have 2 or 3

[Flash Walken]

Originally Posted by GP_Matt

The pattern that I see from your post is that in the 1950's men had most of the jobs. Both the highly paid ones and the lower paid ones. As women entered the workforce they most likely started at the bottom both the lower end jobs and the entry level jobs. This created a boom for the economy as there was more work being done. By the 70's though women were starting to move up within the workforce. Both because they had more rights and because they had gained experience and naturally advanced in the careers that they started in the 50's. Post 1970 the women are on a roll. They are gaining entry into more of the higher paid male dominated fields and taking some positions away from the men.
At the same time, the economy is moving faster and faster towards a knowledge based one where the bricklayer is paid less than the office employee.
Fast forward to today and women are graduating at faster rates than men in most programs and it makes sense that men are no longer assured the cushy middle class jobs that they once were.

I appreciate the response but I think that is a lot of speculation.

Women earn anywhere between 20-25 percent less than men for comparable positions. It's not that the positions were being taken by women, it's that the positions were declining. Incorporating a large group of women into the work force lowers the wage demands.

What it's meant to illustrate is that what is being reported as the average income is neglecting to incorporate key elements. There are many posts in this thread speculating about why some of the figures don't appear to make sense.

[Flash Walken]

Originally Posted by CaptainCrunch

Is it a war on the middle class, or is it governments at all levels providing way to many social programs and jacking up the tax rates on the middle class?

This is for america, it's probably even more disproportionate here.

Estimated per capita amount the federal government spends on programs for children each year : $3,822

On programs for the elderly : $25,455

[darklord700]

A revelation came to me from watching the "Love it or list it" show today. A family of 5 living in a small turn of the century 100 year old house found the house not fulfilling their needs because it has only one bathroom and siblings are sharing a bedroom.

And the female owner said this house had been good for families for a 100 year and why is it not good for them now. And she didn't think one bedroom per child is a God given right.

I guess that says it all. Our expectation changes and if you want multiple bathrooms, two car attached garage and every kid having their own room, you have to pay for it. And having one salary paying for these additional needs is going to be tough.

[GP_Matt]

Originally Posted by Flash Walken

I appreciate the response but I think that is a lot of speculation.

Women earn anywhere between 20-25 percent less than men for comparable positions. It's not that the positions were being taken by women, it's that the positions were declining. Incorporating a large group of women into the work force lowers the wage demands.

What it's meant to illustrate is that what is being reported as the average income is neglecting to incorporate key elements. There are many posts in this thread speculating about why some of the figures don't appear to make sense.

My point was definitely speculation. I was responding to the note that the decline happened a generation after unions lost their power. That seems to be very speculative as well so I wanted to provide an alternate theory that had nothing to do with unions.

[calgarywinning]

When you look at a country as large as Canada and these reports come in, it's blended across such a huge territory which different social/economic situation in play.

The average will be higher in places where cost of living is higher for the middle class. So most of our comparisons are from our own experience in our social/economic environment.

Market rate for labour is in effect for people that are in the middle class. There is opportunity in Alberta for people that want to provide more value, work harder for a better income and apply themselves. It is possible in our economic environment here. There is little or no economic opportunity in the maritimes or Manitoba.

The graph shows a disparity by plotting mean averages. There is a way to scatter plot this information to lessen the extremism.

Also, BC used to have one of the highest net tax rates, now has one of the lowest, create business opportunity. Why would a business setup in Manitoba, NS, New Brunswick or PEI? The net effect to the worker and the company is devastating.

The report then goes on to say that people make choices to use debt to fund their lifestyle. Well this is a choice that is partially available based on the feds policy to print money, make it available and low interest rates. It always gets my goat when the government is warning of a housing bubble and does little for it's lending policy to control it. Damned if you do and damned if you don't. Take it from me, I waited a decade to buy a home waiting for a correction.

I for one am tired of banks increasing the limits for people who are at the max on their cards making the minimum payment. Or when I go to the bank to borrow money trying to load me up with more credit cards. They make it too easy, especially for the middle class that aren't financially trained or aware of their responsibility. The bank creates a mouse and cat game and the middle class is the mouse.

The next major modifier in my opinion, is purchasing power. In Canada, we are subject to currency fluctuations and in many cases duties and tariffs that are built into a lot of costs on the shelf, among other things. The government recently mentioned in the last budget that they look to create parity between US and CDN retail prices but did not outline HOW. This would be a major step to the middle class, because most every retail item is taxed a minimum of 18% on the converted currency rate, which drives down purchasing power.

That being said, consumption and controlling consumption is the only answer for your true freedom and piece of mind. Savings is wealth, wealth is choice and free's you from the tyranny of others running your life. Don't know how many broke NFL players, NHL players who squandered away their fortunes because of their individual choices. Then there are the ones that have invested, built multi-million dollars businesses that employ said middle class. It comes down to encouraging business, investment, to reward people who save, to create opportunity for all!! (how does this interest rate environment reward a saver??? it's setup to reward a person to buy a goddamn truck he doesn't need).

[SebC]

Originally Posted by Devils'Advocate

BTW - factors that MOST likely are going to move a family into a higher income bracket:
- Experience a decrease in family size (less dependent means mom can go back to work)

[blankall]

Housing prices will always outpace pay rates in a growing population. If you have twice as many people living in North America, demand will increase, and prices will rise disproportionally.

Unfortunately, we are seeing a shift that occurs whenever population density increases. After you reach a certain point, it no longer becomes economical to own. It's not an entirely bad thing, as other equally good investments to property exist. If you look at places like NYC, Berlin, London, etc... few people own. It's actually the norm for housing to be unaffordable in major cities. The idea of owning a house with a yard and fence is a very North American concept.

[Igster]

I guess the biggest problem with a lot of comments in this thread that are directed at "living within your means" is the fact that it's not living at all to some people. My wife and I like to go out. We are social people. We don't spend a lot when we do...maybe a few beers, $50 - $60 once a week, sometimes not. We like to eat out once in a while as well. Again, no $150 meals or anything like that. I like having beer in the house so we buy an 8 pack quite often. Sometimes 2.

We both drive 2013 vehicles. We use our vehicles for work and like something comfortable to drive in. We're not driving BMW's or anything. I own a Journey and she bought a Elantra. Nothing extravagant, but new vehicles that we have to pay on each month. We don't own, we rent. It's just the two of us (well, and a dog and cat - kids are grown up and moved out). We've run up a bit of credit card debt going out and keeping up with some technology (mainly phones because I'm a geek that way). But we have older audio and video equipment...we did buy the Shaw Gateway and are paying monthly on that.

I guess the point of what I'm saying is we spend beyond our means for the things we like and we do live paycheque to paycheque because of it, but if we didn't, then we wouldn't be living the way we want to live. And isn't that what life is all about? We're both nearing 50. We don't get to do this again. I want to enjoy life while I can. Have a bunch of beers with friends while I can and enjoy it.

It is stressful though living through until the next paycheque and we normally dip into our overdraft on our bank account to make it. Could we make major changes and get back on track? Perhaps...but am I willing to give up a year of what I like doing in order to do so? I could get hit by a bus tomorrow. I could clutch my chest and hit the floor today. You just never know. Between the two of us, we make just under $100k and we barely get by enjoying a few things in life. And here I thought we were middle class, but now, not so much.

Again, the point of this story? Not sure, just how we live. We earn ok money - not great, but we don't work for $12/hr or something. We are both professionals and just getting by pay to pay is our reality if we want to have any sense of life and enjoyment. It's sad really, but has become our reality. I thought two people making almost $100k could live quite comfortably, but not anymore if you ask me. Not unless we stop going out entirely and eat KD and hot dogs 3 times a week.

[rd_aaron]

Originally Posted by Igster

I guess the biggest problem with a lot of comments in this thread that are directed at "living within your means" is the fact that it's not living at all to some people. My wife and I like to go out. We are social people. We don't spend a lot when we do...maybe a few beers, $50 - $60 once a week, sometimes not. We like to eat out once in a while as well. Again, no $150 meals or anything like that. I like having beer in the house so we buy an 8 pack quite often. Sometimes 2.

We both drive 2013 vehicles. We use our vehicles for work and like something comfortable to drive in. We're not driving BMW's or anything. I own a Journey and she bought a Elantra. Nothing extravagant, but new vehicles that we have to pay on each month. We don't own, we rent. It's just the two of us (well, and a dog and cat - kids are grown up and moved out). We've run up a bit of credit card debt going out and keeping up with some technology (mainly phones because I'm a geek that way). But we have older audio and video equipment...we did buy the Shaw Gateway and are paying monthly on that.

I guess the point of what I'm saying is we spend beyond our means for the things we like and we do live paycheque to paycheque because of it, but if we didn't, then we wouldn't be living the way we want to live. And isn't that what life is all about? We're both nearing 50. We don't get to do this again. I want to enjoy life while I can. Have a bunch of beers with friends while I can and enjoy it.

It is stressful though living through until the next paycheque and we normally dip into our overdraft on our bank account to make it. Could we make major changes and get back on track? Perhaps...but am I willing to give up a year of what I like doing in order to do so? I could get hit by a bus tomorrow. I could clutch my chest and hit the floor today. You just never know. Between the two of us, we make just under $100k and we barely get by enjoying a few things in life. And here I thought we were middle class, but now, not so much.

Again, the point of this story? Not sure, just how we live. We earn ok money - not great, but we don't work for $12/hr or something. We are both professionals and just getting by pay to pay is our reality if we want to have any sense of life and enjoyment. It's sad really, but has become our reality. I thought two people making almost $100k could live quite comfortably, but not anymore if you ask me. Not unless we stop going out entirely and eat KD and hot dogs 3 times a week.

What's your retirement plan, if you don't mind me asking? Does "living paycheque to paycheque" include some sort of savings? Do you have a pension? I get the feeling if you continue your current lifestyle you'll be forced to eat KD & hot dogs through your 70s, 80s, 90s..