The political fight for Ontario’s middle class

“Middle class” is the new “working Ontario families.” Every second speech and press release here contains it now. – Adrian Morrow, Globe and Mail reporter, Queen’s Park, Twitter, March 20, 2014.

With election fever mounting in Ontario, the political field is quickly crowding around the middle of the income spectrum in search of votes.

And – surprise, surprise – low taxes are dominating the list of enticements.

NDP Leader Andrea Horwath is insisting she’ll reject any provincial budget that includes asking Ontario’s middle class to pay more taxes or tolls.

Premier Kathleen Wynne appears to be acquiescing by promising not to raise taxes on the middle class to finance much-needed expansion for the Greater Toronto Area and Hamilton’s public transit. Premier Wynne’s latest intervention focuses on asking the richest among us to contribute more.

And when Progressive Conservative Leader Tim Hudak isn’t beating up on the labour movement, he’s baiting Premier Wynne to reveal just who she thinks the middle class really is.

So let’s talk about that: who fits into the middle of Ontario’s income spectrum and what can governments do to address their needs?

There are many ways to measure the middle income. In this blog post, I’m settling on data by statistician Richard Shillington that focuses on families with children under the age of 18.

Everything that follows compares changes in median income from the late-1970s ­– a period of economic growth – to the most recent period (2011) – a period of decline. Since numbers can jump around a bit from year to year, looking at the average over four years at the beginning and the end of each period can help give a snapshot of income changes over time. Here we’ve chosen 1976-79 – when data like this started being tracked by Statistics Canada – and 2008-11 – the latest available comparable data (and that’s why this analysis ends there).

It might surprise you to know the middle 60% of Ontario families with children under the age of 18 earn a median after-tax income within the range of $47,000 to $106,000 [income ranges for deciles 3, 4, 5, 6, 7 and 8].

If you want to focus more tightly on the middle 40% of Ontario families [deciles 4, 5, 6 and 7], the median after-tax income range is between $58,000 to $91,000.

Decile 3 represents families in the lower middle class. Their median after-tax income is  $47,000. That represents an increase of 1% over more than 30 years.

Families in decile 4 earned a median after-tax income of $58,000 – an 8% increase over the course of a generation.

Families in decile 5 earned a median after-tax income of $68,000 – a 15% increase over the course of a generation.

Families in decile 6 earned a median after-tax income of  $80,000 – a 20% increase over the course of a generation.

Families in decile 7 earned a median after-tax income of $91,000 – a 23% increase over the course of a generation.

Decile 8, families in Ontario’s upper middle class, earned a median income of $106,000 – representing a 27% increase over the course of a generation.

Here’s the kicker: without the tax and transfer system to help buffer things, families in Ontario’s lower middle class would have been in big trouble.

In a world where we still hear people say ‘let the market decide’, the market has been brutal to many Ontario families. Those families in decile 3 saw their median market income fall by 19% over the past generation; decile 4’s median market income fell by 4% in that time frame. The bottom four deciles had less market income than their counterparts a generation ago, though they’ve increased their weeks worked in the paid labour market. (See Armine Yalnizyan’s 2007 report for a full discussion).

So if we’re concerned that a ‘free market’ isn’t the answer for Ontario’s middle class, what can governments do about the squeeze so many families raising children are facing?

We could focus on better labour market policies to ensure that every job is a good job  – including, but not restricted to: a better minimum wage, pay equity, employment equity, more robust employment standards, fewer employer practices that drive down wages, an appreciation for the labour movement’s potential as a great equalizer. (It’s like thanking someone for an award – I’ve left out many acknowledgements here).

We could ensure public services that benefit everyone are not only protected from further cutbacks but enhanced (affordable child care, anyone?).

And we could change the conversation about taxation in Ontario: because another round of tax cuts is not going to save those families at the bottom 40% of Ontario’s income spectrum from the grief they’re getting in the labour market. (Why? Because tax cuts lead to public service and income support cuts – bad move).

It’s time to revalue the role of the public sector in the lives of Ontario’s middle class.

Families in the middle and upper middle fared relatively better in terms of market income, but also found their fortunes improved due to the tax and transfer system.

That is what revenue tools are meant to do: allow us to redistribute income and collectively purchase public services and supports so that the majority can enjoy improvements in their quality of life.

But since the mid-1990s, Ontario has been focused on ensuring the province keeps taxes low. In fact, now all the political parties are doing it.

Over the course of the coming provincial election you’ll hear parties of diverse political stripes talk about all manner of taxes as a “burden”, but that’s a frame well worth hard scrutiny.

Nearly $19 billion: that’s how much CCPA Research Associate Hugh Mackenzie estimates we lose in revenue every year due to the combination of tax cuts in Ontario since the mid-1990s (cumulative).

Without all of those cuts, Ontario would not be in a fiscal deficit situation today. The GTA and Hamilton would not be wringing its hands over how to pay for public transit expansion that’s not a luxury but, rather, an urgent and long past due necessity. (Ways to fund it here).

For too long, the political conversation has been training us to think small. Taxes are not the enemy of Ontario’s middle class – in fact, the public services and supports that our taxes create benefit everyone. They keep our province cleaner, safer, healthier.

Paying taxes isn’t something we get to keep asking other people to do without losing the benefits of that social bargain over time.

It’s time to change the conversation on taxes; it’s time to stretch our imagination about what’s possible – and how we can all contribute to that possibility.

As I wrote in my contribution to the book Tax Is Not A Four-Letter Word edited by Alex and Jordan Himelfarb, there’s greater openness to the idea of taxation than our political leaders allow:

“Environics Research asked Canadians a revealing poll question: What do you do that makes you feel like a good citizen. Number three on the list? Pay taxes. Tax contribution as an act of social citizenship, as a measure of the public good. That concept of virtue has been erased from the Canadian political discourse.”

[For wonks: Source for the decile data – Statistics Canada, custom tabulations from the Survey of Labour and Income Dynamics for the Canadian Centre for Policy Alternatives. Yes, there are alternative units of analysis – I find families with young children to be a compelling one.]

Trish Hennessy is director of the Canadian Centre for Policy Alternatives’ Ontario office. Follow her on Twitter: @trishhennessy. Follow the CCPA Ontario on Twitter: @CCPA_Ont.

 

One comment

  1. This is a most helpful set of definitions and numbers to inform the discussion about the political fight for the middle class. The growing inequality in the distribution of income since the mid 1960s has taken a great deal of consumption and demand for labour out of the economy. At the same time the growing concentration of corporate wealth has enabled sizable growth in profit due to productivity that has not been shared with labour. The work week has not been reduced so there is an excess supply of labour. Tax changes have failed to offset the increasing inequality and free trade and globalization have further reduced incomes of the middle and lower classes. We failed to downsize the private sector and increase the public sector which creates jobs. So the same increase in economic inequality over the 50 years that preceded the great depression has occurred since the mid 20th century. The resulting increase in wealth has led to speculation in assets particularly housing – though not on the same scale as the stock market increase in the 1920s. The only thing that has kept the economy going is increasing household debt. But that is close to being at an end. Economic inequality aided by tax cuts leads to ever increasing instability in financial markets and precarious job prospects for the middle class. Political change to reverse inequality will not happen as long as large portions of the middle and lower classes decide not to vote in elections. All parties will chase the high portion of citizens with above average income who are unaffected by inequality and who will continue to demand tax cuts.

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