When it comes to finances, do you feel like you’re treading water? You’re not alone.
A growing number of Canadians are feeling the economic crunch, with household debt reaching an all-time high of $1.5 trillion, according to a report releases this week by the Certified General Accountants Association of Canada.
Fueled by more than our consumer society’s lust for trinkets, the debt load is increasingly tied to everyday purchases as we try to deal with our sinking standard of living.
“The report confirms that more than half of indebted Canadians are borrowing just to afford day-to-day living expenses like food, housing and transportation,” says Anthony Ariganello, president and CEO of the association. “For these individuals, there is little hope for improved financial condition.”
The survey-based report reveals several alarming trends, as single-parent families, retired Canadians, and those with annual household income of less than $50,000 face a bleak financial situation.
This is no accident, however, as the middle class has been under assault for more than three decades.
Studies in Canada and the U.S. show parents today are increasingly convinced their children will be less well off than they were. The figures back up that sentiment, as the great prosperity that flowed out of the postwar years in particular succumbs to constant attack.
The majority of us have seen real incomes decline. Studies show the gap between rich and poor is growing, even during the best of economic conditions. The trend that started in earnest 30 years ago has been exacerbated by the recession.
Canada’s richest one per cent are taking more of the gains from economic growth than ever before in recorded history, says the report by the Canadian Centre for Policy Alternatives (CCPA).
“The Rise of Canada’s Richest 1%” looks at income trends over the past 90 years and reveals the 246,000 privileged few who rank among the country’s richest one per cent took almost a third (32 per cent) of all growth in incomes between 1997 and 2007.
“That’s a bigger piece of the action than any other generation of rich Canadians has taken,” says Armine Yalnizyan, CCPA senior economist and the report’s author.
“The last time Canada’s elite held so much of the nation’s income in their hands was in the 1920s. Even then, their incomes didn’t soar as fast as they are today. It’s a first in Canadian history and it underscores a dramatic reversal of long-term trends.”
Among the report’s findings: from the beginning of the Second World War to 1977, the income share of the richest one per cent dropped from 14 per cent to 7.7 per cent; by 2007 they’d made a comeback, as the richest one per cent held 13.8 per cent of incomes; since the late 1970s, the richest one per cent has almost doubled its share of total income; the richest 0.1 per cent has almost tripled its share of total income; and the richest 0.01 per cent has more than quintupled its share of income.
The average earnings of the richest 10 per cent of Canada’s families raising children were 82 times that earned by the poorest 10 per cent of families. That is approaching triple the ratio of 1976, when the ratio was around 31 times. The after-tax income gap has never been this high in at least 30 years, and it has been growing faster than ever since the late 1990s.
Essentially, we’re spending more time at work, but 80 per cent of us are getting a smaller share of Canada’s economy, in good times and in bad. Only the richest 20 per cent are experiencing gains, and most of those gains are concentrated in the top 10 per cent.
That richest 10 per cent of Canadian families are getting richer. They enjoyed a 30-per-cent earnings increase compared to a generation ago, the only group to experience such gains.
This is creating a new phenomenon in income distribution in Canada: the rich are breaking away from the rest of society, in a way not seen since such information began to be collected 35 years ago.
You can expect that trend to continue in earnest, aided by the recession. The wealthy are already recovering nicely, thank you very much, as the financial sector resumes business as usual, as seen by the large increase in the derivatives market – aka speculation. Instead of regulating the industry, eliminating some of the most egregious practices, governments in effect handed a blank cheque to those who caused the meltdown.
Now, it will be the average Canadian – those on the hook for the guarantees and loans – who will cover the costs directly through their taxes and loss of services, and indirectly through the coming decreases in our standard of living.
As with drops in corporate taxes and shifts to consumer taxes, the goal is to shift the burden to you. This will continue transferring wealth to those already making the biggest gains while contributing to the debt loads of middle-class Canadians trying to maintain their position as real incomes – both pre- and after-tax – continue to fall.
Governments of all stripes have been pushing the same agenda, though watch for it to accelerate over the next four years courtesy of the government in Ottawa.