The ‘paycheque to paycheque’ myth:

Posted on February 26, 2014 in Equality Debates – How Canada’s middle class is getting richer, a lot richer
February 25, 2014.   John Shmuel

Canadian politicians have been trying to make the middle class out to be a poor huddled mass of declining fortunes, but a landmark study from Statistics Canada paints very much the opposite picture.



The study, released Tuesday, shows the median net worth of Canadian families jumped 44.5% to $243,800 in 2012, up from $168,700 in 2005. Over the past 15 years, the median net worth figure leaps 80%. The numbers are adjusted for inflation and measure the amount of money left over if all debts were paid and all assets were sold.

“This shows the middle class isn’t withering away,” said Philip Cross, research fellow for the Macdonald-Laurier Institute and former chief economic analyst at Statistics Canada. “It shows Canadians have money to set aside for savings, so it’s not like they are living from paycheque to paycheque, which is the way a lot of the narrative surrounding the middle class has recently been framed.”

Tuesday’s study is the first comprehensive look at net worth by Statistics Canada since 2005 and helps paint a picture of how families have weathered the recession. It found rising home prices and pension fund gains have all helped fuel higher net worth.

The middle class has become a significant political battleground in Canada. NDP Leader Thomas Mulcair has criticized both Liberals and the Conservatives for policies he said have led to the loss of well-paying jobs and have contributed to runaway consumer debt in the country. Liberal Leader Justin Trudeau said in an ad last year that the current Canadian economy tends to overwhelmingly benefit “a few” at the expense of Canada’s middle class.

This idea was not borne out in the StatsCan study which also showed the middle class sucking up a bigger portion of the country’s overall wealth.

It found that families in the bottom quintile have seen their net worth decline slightly since 1999. Back then, the bottom 20% of families had a median net worth of $1,300. That dropped to $1,100 in 2005 and remained unchanged in 2012.Meanwhile, the wealthiest 20% of families in Canada possessed 67.4% of the country’s net worth in 2012, down from 69.2% in 2005.

Consequently, the three middle quintiles — which can roughly be defined as Canada’s middle class — increased their share of the country’s $8.07-trillion personal net worth by 1.8 percentage points.

“I would say that that contradicts the idea that all the wealth in the last decade was hoarded by the 1% and the rest of us are fighting over table scraps,” said Mr. Cross.

The study noted that debt owed by Canadian families has increased substantially, particularly mortgages, which have more than doubled from $453.6-billion in 1999 to $1-trillion in 2012. But the run up in debt has been more than balanced out by steady gains in the housing market during that period.

Canadian families held a total of $9.4-trillion in assets in 2012, with principal residences — or homes — representing one-third of all assets. Those homes saw big increases in value over the past decade — the median value of a home was $300,000 in 2012, up 83.2% from 1999 and 46.6% from 2005.

Vince Gaetano, principal broker at, said that homebuyers he speaks to are being smarter about protecting their wealth than in the past.

That contradicts the idea that all the wealth in the last decade was hoarded by the 1% and the rest of us are fighting over table scraps

“It used to be that Canadians wanted to buy the biggest home so they could make the biggest buck,” said Mr. Gaetano. “But in the past year or so, I’ve noticed more and more homebuyers are looking at what they’re more comfortable carrying. People today are concerned where rates are going, they’re concerned about their jobs, about the economy. So they’re saying let’s pay what we can afford. They want a buffer of cash on hand.”

The value of private pension assets in Canada has also helped increase net worth. Pensions represented about 30.1% of assets held by Canadian families in 2012, unchanged from previous years. But their value has increased substantially, from a median of $65,500 in 1999 to $77,400 in 2005 and $116,700 in 2012.

Jason Heath, a certified financial planner for Objective Financial Partners in Toronto, said that Canadians are starting to take a more active part in building their wealth — something he thinks will help increase net worth in the future.

“It’s amazing how many people in their 20s and 30s are reaching out to a financial planner,” said Mr. Heath. “People in the past would simply go to work and expect that their defined benefit plans would take care of retirement wealth. The current environment is forcing young people to think more actively about how to build wealth and I’m seeing they’re taking initiative to do that.”

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