In 1939, the Westinghouse Electric Corporation commissioned a fifty-five-minute film about the Middletons, a fictional Indiana family who travel to the New York World’s Fair, where they are dazzled by the company’s futuristic vision of “a new Tomorrow.” It’s a consumer paradise that includes everything from television to a photoelectric bike called the Phantocycle to a towering voice-controlled robot named Elektro. The movie’s highlight is a staged dishwashing competition between “Mrs. Modern,” who is armed with a new Westinghouse dishwasher, and “Mrs. Drudge,” who works furiously at a sink. To no one’s surprise, the gleaming labour-saving device wins.
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The contest was more than smart product placement. It presaged the postwar financial boom that ushered in the dramatic expansion of the middle class. Indeed, the ideals of prosperity and success that shape much of how we still understand the middle class can be traced largely to this period, often referred to as the golden age of capitalism. From 1950 to the early 1970s, governments across the Western world managed to both build their economies and strengthen the social safety nets that underpinned those economies. Incomes rose, households grew wealthier, and values like thrift and sacrifice, which had guided previous generations, were replaced with indulgence as consumers coveted the ever-widening array of household items and goods that flooded the market. According to Frederick Elkin’s 1971 book, The Family in Canada, Procter and Gamble reported in 1957 that more than half of its sales volume came from products that hadn’t existed at the end of the Second World War. By 1963, 94 percent of Canadian households sported refrigerators, 87 percent used electric washing machines, and 90 percent gathered in front of television sets that hawked drinks, instant rice, and toys. The Middletons had become a reality.
If you showed someone from the late 1950s the typical Middleton life today, they would probably think society had made extraordinary economic advances. How else could someone middle class afford a beautiful car, an enormous new house (relative to what was normal, say, seventy years ago), and access to the kind of food and wine once the exclusive preserve of royalty and the very rich? But they would miss what lies under the surface of that abundance: ever-churning anxiety. It seems almost unthinkable today, but for a time, the middle-class dream was attainable with just one good income (as well as the support of unpaid homemakers, something the pandemic has brought back into the discussion). While the average middle-class family in 2020 may have more in the way of consumer opportunities, the cost goes well beyond the sticker price on any given item. To afford it, people have to work longer and harder than they did before. They’re more alienated from their communities, more distant from their families, and more nervous about their futures—which are increasingly paid for by money they’ve borrowed.
By the beginning of 2020, the average Canadian household owed $1.77 for every dollar of after-tax income, a combined total of more than $2.3 trillion. That number is largely a by-product of paying down mortgages, but it’s also a reflection of our new national pastime: living beyond our means. With the majority of middle-income households seeing little change in their annual incomes between 1981 and 2011, families have needed to go deeper into hock to enjoy the trappings of an existence their parents and grandparents were able to afford without overextending themselves. Even before COVID-19 crashed the economy, Canadian households were dedicating nearly 15 percent of their spending to servicing debt, a level not seen even in the United States at the peak of its 2007 housing bubble. If interest rates rise, or if runaway housing markets correct themselves, overleveraged families will be in deep trouble. According to a recent Ipsos poll conducted for insolvency firm MNP, almost a third of Canadians can’t pay their bills without sinking deeper into debt, with another 21 percent admitting they are $200 or less away from insolvency at month’s end.
The question is whether the middle class, at least in how we’ve come to understand it, will go extinct. If wages stay stagnant, many Canadians will have no choice but to postpone or cancel investments in their homes, in their children’s education funds, and in their retirement plans. Meanwhile, the pace of technological change will keep upending entire industries, reminding everyone that steady career paths are a thing of the past, along with the healthy pensions they used to produce. “For the better part of the postwar era,” writes former CIBC economist Jeff Rubin in The Expendables, his recent book about globalization’s effect on Canada’s declining living standards, “membership in the middle class was for life. Today, staying in the club is a lot harder.” Indeed, the Organization for Economic Co-operation and Development (OECD) made a key finding in a 2019 report: just under 70 percent of baby boomers were middle class in their twenties and thirties, but only about 60 percent of millennials achieved the same status. Generation Z is almost certain to have even fewer people meet the standard.
Yet, despite the considerable hurdles—housing costs, stagnant incomes, massive debt loads—the standard still beckons. No wonder: unlike the concept of upper or lower class, the connotations associated with the middle class are almost entirely positive. In our ever more polarized society, it remains a shared identity both aspirational and uncontroversial. Members of the middle class are celebrated as hard-working citizens who want what’s best for kin and community and are therefore engines of both progress and stability. “Societies with a strong middle class,” writes OECD chief of staff Gabriela Ramos in her foreword to the report, “have lower crime rates, they enjoy higher levels of trust and life satisfaction.” The middle class, in a sense, is the immune system of modern democratic societies: weakening it weakens us all.
That may explain why the federal government thought it a good idea to appoint a minister of middle-class prosperity in 2019. In her mandate letter, Mona Fortier was asked to lead efforts to “better incorporate quality of life measurements into government decision-making and budgeting.” But, with the pandemic now throwing both that decision making and budgeting into complete disarray, the future of the middle class—and the over 1 million debt-laden Canadians who have suddenly lost their income—is looking more precarious than ever.
While politicians will be busy tripping over one another in the months to come, frantic to restore the glory of everyone’s favourite socioeconomic demographic, the current moment gives us a rare opportunity to reassess what it is we should be trying to restore and how we ought to do it. The preferred option has often seemed like a return to the past—making the middle class great again, as it were. The solutions commonly discussed involve either generating more income (by signing new trade deals or cutting taxes) or redistributing the income we already have (by raising taxes on the rich and investing in new programs, like child care).
But maybe a more lasting solution lies in strategic retreat: embracing the fact that this past can’t be recreated and that we may not want to even if it could. Consumerism helped build the vision of middle-class prosperity that prevailed in the latter half of the twentieth century, but it also heaped the middle class with household debt, which got it into serious trouble. Most importantly, while consumption is a big part of the picture, the middle class is being routed by forces much bigger than the average household.
What we need is an idea of the middle class that aligns with the technological, social, and financial realities of our time. This means understanding that we don’t all have to live in major cities or near our workplaces anymore: as the pandemic has shown, technology can make it possible to move from places that are overpriced or overcrowded. It means understanding that atomized households can lead to fragile family structures and that we may need to extend our sense of community by welcoming different generations into the same spaces, which will not only stretch our money further but also leave us more connected. And it means understanding that current generations will likely live longer than any in history and should plan accordingly. It also means confronting the fragmented nature of the gig economy and the rise of precarious employment.
These are problems that require policies that take us in fresh, unprecedented directions. Instead of trying to help more people get into the old version of the middle class, a version underwritten by social and economic conditions no longer replicable or desirable, we should focus our collective energy on building an entirely new one. It’s high time we gave the Middletons a makeover.
First, we need to understand who we’re making over. The OECD defines the middle class as those earning between 75 and 200 percent of the median income, which, for a family of four in Canada, puts the range between approximately $65,242 and $173,980. But defining the middle class by income quickly runs into trouble because there’s no consensus on where to draw the line. The Pew Research Center says it’s between 67 and 200 percent. Some economists prefer 50 to 150 percent, others 75 to 125 percent.
The middle class’s inherently amorphous nature allows nearly everyone to imagine themselves either as members of its ranks or as people on their way to getting there. Politicians are of little help because they have a vested interest in making the concept as open ended as possible. When pressed in the House of Commons in 2020, Fortier admitted she had no “statistical measure” of the group she was supposed to be helping.
But, if there’s one thread that ties together the various definitions of the middle class, it’s the group’s role in the creation of a consumer-oriented economy. In 2017, then finance minister Bill Morneau classified such Canadians, in part, by the “lifestyle they aspire to.” Undeterred by stalled wages and rising costs, the drive to maintain that lifestyle has remained undiminished, with middle-income households now accounting for almost two-thirds of total spending on consumer goods in OECD countries. The holy grail of that lifestyle is also the most expensive part: the single-family home. Pursuit of home ownership at nearly all costs defined the middle class in the postwar years. Spurred on by government programs that promoted the aspiration and by a culture that valorized it, young families struck out for their own pieces of the white-picket-fence dream. From the 1940s to the 1960s, home ownership in the US spiked from 43.6 to 61.9 percent. That figure was even higher in Canada, where, according to the Canadian Housing and Renewal Association, it reached 66 percent in 1961. The residential industrial complex also put tens of thousands of tradespeople to work, building garages that needed to be filled with new cars and modern kitchens that needed the latest appliances and fixtures.
Today, the trajectory established in the postwar period has remained intact. After plateauing between 1981 and 2001, home ownership rates in Canada resumed their upward march, topping out, in 2011, at nearly 70 percent. They ticked down to 67.8 percent in 2016, but a recent Scotiabank survey reports a surge of interest in pandemic homebuying as rates have crashed and people have sought more space to manage the challenge of working from home. At some point, however, home ownership appears to have been transformed from a utilitarian objective to a social marker of prosperity and success. Television networks like HGTV have fed the fantasy of couples with middle-income jobs buying, flipping, renovating, or otherwise trading in seven-figure homes, and banks and other lenders have been mostly happy to go along with it.
In elevating the cultural importance of the owned home, the middle class has allowed other priorities to get usurped. A house, after all, means you’re shackled to a mortgage, which in turn constrains other financial choices. You can’t save as much. You can’t afford as many kids as you may have wanted. You can’t send them to the college or university you hoped for. Owning a house also shackles you to a location, which constrains your flexibility: namely, the ability to quickly and effectively adapt to changing circumstances, like unemployment or disability. In our increasingly disruptive—and disrupted—economy, that’s a dangerous place to be.
It’s also a familiar one for the middle class. After all, its lack of resilience was first highlighted when the conditions that drove its expansion in North America started to fall apart in the mid-1970s. Among the most significant setbacks occurred when Arab members of the Organization of Petroleum Exporting Countries punished the US and any Western allies that supported Israel in the 1973 Arab–Israeli War by refusing to sell them oil. By the following year, the price of crude jumped about 400 percent, and the surge helped kick off a bout of stagflation—a lethal mix of economic stagnation, runaway inflation, and high unemployment—that undermined the generous incomes and benefits that had fed middle-class prosperity. The results of that are stark: after growing at a rate of 2.6 percent per year between 1947 and 1973, according to the Economic Policy Institute, hourly wages have struggled to keep up with inflation ever since.
The tipping point took a bit longer to arrive in Canada, but by the early 1980s, the trend was clear. Yes, the economy grew, but the spoils were distributed far less equitably. As governments embraced globalization and its growing network of trade agreements, the middle class paid the highest price. Economic activity was increasingly outsourced to lower-wage jurisdictions, and good manufacturing jobs disappeared—and, with them, the ability of labour to negotiate better pay. The households that saw gains in their annual income were almost exclusively those already in the top 10 percent—and especially the top 1 percent. “Fans of globalization have always had good news to share,” writes Rubin. “But there is no such thing as a free lunch. Someone is picking up the bill, and it could very well be you.”
That financial pain, however, wasn’t entirely apparent at the time. Instead, it was masked by a rise in two-income households—a trend that made it seem, from roughly 1975 to 1990, like things were still getting better for middle-class families. But, while there was more income, nearly everything cost a lot more. Some American families spent that additional salary on competition for educational opportunities, either in the form of expensive homes in desirable school districts or tuition at better universities. In Canada, tuition fees were lower than in the US, but middle-income families still spent a growing portion of their household budgets on education, housing, and child care. Without the ability to add an extra income in times of hardship—as the one-income households that defined the 1950s and 1960s could—and with those higher fixed costs eating away at their ability to save money, two-income households were more vulnerable to economic shocks than the middle-class families that preceded them had been.
COVID-19 is the most recent of those shocks. It may prove the most devastating. Right now, thanks to the more than $125 billion that the federal government has provided in direct payments to individuals and in wage subsidies to businesses, many households are treading water. But those waters won’t stay calm forever. Financial experts are concerned that, when spending winds down and the bill for those mortgage deferrals comes due, the pandemic’s full financial impact will be felt. Many predict a huge wave of insolvencies and bankruptcies.
But, for all of the havoc COVID-19 is creating, the pandemic has also served as an opportunity for Canadians to take stock, both as individuals and as a society. “We don’t just see a financial system in crisis,” says Yannick Beaudoin, an economist and a director general for the David Suzuki Foundation. “It’s society that’s going through a crisis.” That crisis might give us the space we need to imagine both a different kind of middle class and a new set of goals it could work toward.
Beaudoin has already done some of that work in the form of town halls, where he’s asked Canadians what the purpose of the economy is and what it should be. “Those answers, 99 percent of the time, are qualities. They’re defining prosperity, progress, and well-being in experiential terms—how I feel, the quality of my life, the quality of the education of my children. Nobody ever came up with quantities, like how many dollars I have in my pocket.”
Last June, pollster Nik Nanos shared some findings, in the Globe and Mail, from a handful of national surveys on how Canadians were feeling, about the pandemic and the country’s future, three months into the lockdown. Only 12 percent believed we would return to a prepandemic normal. Fifty-six percent were in some agreement that “the post pandemic Canada will be united with a common purpose to improve our lives.” Those polled pointed to, for example, a growing appreciation for friends and family and an interest in fewer material possessions. “Less of a focus on the self, a yearning for a simpler life and a retreat from consumerism,” Nanos wrote, “would be watershed changes.”
This shift is easier said than done. It assumes that many chose their prepandemic lives when, in reality, most felt they were just barely getting by. The middle class is carrying a huge burden, one not sufficiently borne by existing social supports. There’s no question that smaller homes, less-pricey tastes, and more-modest retirements would put Canada’s middle class on a more sustainable trajectory—one not underwritten by massive debt and back-breaking work schedules. But, when the culture pressures us to supersize our lives and everything in them, from our homes to our vehicles, that shift becomes more difficult than it should. Such resets aren’t natural in a society hard-wired for growth.
“To suddenly say we’re going to focus on well-being instead of growth creates a heart attack for the monetary system,” says Edmonton economist Mark Anielski, who published The Economics of Happiness in 2007, a book that challenged the conventional understanding of economic prosperity and the measures, like GDP, that track it. In his research, Anielski—who likes to remind people that wealth comes from a Middle English word for well-being—has tried to develop financial tools able to account for human values, such as health or happiness. But what Anielski calls “a civilization of love” can be a hard sell to policy makers obsessed with growing the economy as quickly as possible for the good of the country. “That’s why there’s this constant push to overproduce and overconsume,” he says, “because everyone is debt financing their future, whether it’s a mortgage or a student loan or a business loan or government bonds.” The rising cost of living—according to a 2019 RBC report, the ongoing expenses of a new home in Vancouver or Toronto would eat up, respectively, 88 and 76 percent of typical household income—underscores that a healthy GDP doesn’t mean much if the spoils aren’t reaching the people who are helping drive it, and it means even less if that GDP is negatively affecting their future.
Even when consumerism was powering the middle class’s growth, and vice versa, there were early doubts about whether this was such a good thing. According to the Pew Research Center, in 1968, three years before the US middle class reached its high-water mark in overall proportion of households, presidential hopeful Bobby Kennedy gave a speech, at the University of Kansas, in which he argued that newer isn’t always better. “Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things,” he said, referring to the GDP. “It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile.” Six years later, speaking in Vancouver, prime minister Pierre Trudeau echoed Kennedy. “Prosperity is the rallying cry of politicians everywhere. But what of happiness?”
The challenge Pierre Trudeau and others like him faced is that there wasn’t a politically viable alternative to challenge the flawed logic of economic measures like GDP. As an estimate of the total value of the goods and services a given country produces, GDP is often conflated with the health of the economy. Middle-class spending can have a big effect on the size of that number. But GDP doesn’t pay attention to the goods or services being produced or whether they have any intrinsic value to the society in question. It doesn’t measure the distribution of economic growth or its impact on communities and households. As far as GDP is concerned, a dollar is a dollar, no matter how it’s made or whose pocket it ends up in. As we’ve seen over the past three decades, however, not all dollars are created equal—and economic growth doesn’t mean nearly as much if that growth finds itself in the bank balances of the wealthy.
There is a better metric we can use to reset our shared understanding of middle-class life: sustainability. A more financially balanced quality of life might take the form of smaller homes and older cars. But it could also mean bigger bank balances and less-strenuous work schedules. Sustainability could also involve recycling and reusing, cutting down on food waste, and biking or taking public transportation—in other words, having a smaller impact on the environment and consuming fewer resources.
A new vision of middle-class prosperity is about more than just new tax measures or social programs.
Yes, such changes may have downsides. GDP may not grow as fast if the middle class reduces the scale of its desires. In fact, the economy could even shrink. But, perhaps counterintuitively, we could end up emotionally richer, as individuals and as communities. Before we can even get to that point, though, we need to shift the conversation away from what we want and toward why we want it. “How do you distinguish the things you actually aspire to,” Beaudoin asks, “from the belief that the only way to get those things is consumption? It’s not something that can happen overnight. But I think a disruption like covid has opened up the possibility of those conversations.”
If Canada’s politicians really want to help restore and rebuild the middle class, they should start by directing their attention toward creating a more fair and just tax system.
Since 1951, when the middle class was entering its best years, taxes on the richest 2 percent in Canada have fallen, while, for the middle class, they’ve risen. As economist Armine Yalnizyan noted in a 2010 paper, “In 1948, the top marginal tax rate was 80 percent, on taxable incomes over $250,000.” Today? Nowhere near. “The top tax rate in 2009,” Yalnizyan writes, “averaged across Canada, was 42.9 percent for incomes above $126,264.” A 2019 study from the Fraser Institute reaffirmed this reality, noting that the marginal effective tax rate for those earning more than $150,000 was 41 percent—and just 43 percent for those making more than $300,000. (This flattening of income-tax rates is hardly unique to Canada. A study released last year found that, in 2018, the richest 400 US families paid a lower effective tax rate—23 percent—than the bottom half of American households did.)
By restoring tax rates on high-income earners to more traditional levels, the federal government would have more revenue at its disposal to fund programs and services that benefit the middle class, such as education and child care—ones that pay out obvious social and economic dividends. It could also use that revenue to keep reducing taxes on middle-class households. To its credit, the federal government has made some progress here. Its middle-class tax cut, implemented in 2016, reduced the rate for people who made between $45,282 and $90,563 from 22 to 20.5 percent, and in 2019, it followed that tax cut by tabling legislation that would increase the basic deduction to $15,000 by 2023 (and phase that benefit out for those in the top tax brackets). The Canada Child Benefit, which was created in 2015 and combined a bunch of different programs and benefits into one payment, has put thousands of additional dollars in the pockets of parents, depending on their incomes and family sizes.
That said, a new vision of middle-class prosperity is about more than just new tax measures or social programs. It’s also about distancing ourselves from the definition of prosperity that got so many households into trouble in the first place. That means, first and foremost, breaking our addiction to home ownership. Starting in the 1960s, the Canada Mortgage and Housing Corporation played a key role in developing initiatives that didn’t require a mortgage. Tracing its roots to the 1940s Wartime Housing Limited, CMHC’s mandate is to improve housing conditions in Canada, which has primarily meant supporting the construction of cooperatives and, more recently, helping people get on the property ladder through mortgage insurance. While the federal government’s ten-year, $55 billion National Housing Strategy, announced in 2017, will have CMHC overseeing the construction of 125,000 new housing units, the organization will need to be even more ambitious if it wants to bend the curve here.
The good news is that Evan Siddall, president and CEO of the National Housing Strategy, is willing to be bold. As the Globe and Mail reported in 2019, he has called out what he describes as “the glorification of home ownership”—an unusual step for the CEO of a federal housing program that, despite its mandate to reduce homelessness in Canada, seemed, in the recent past, committed to fuelling that glorification. “Renting is a perfect and valid housing option,” Siddall said last year at a Globe and Mail event on affordable housing, “and may in fact be the best long-term option for many households.”
This sort of blasphemy hasn’t endeared him to Canada’s real estate industrial complex—Royal LePage president Phil Soper described his arguments as “bizarre.” But Siddall, whose term ends this year, has become even more outspoken about the risks that first-time homebuyers face and the counter-productive role that banks can play in giving them too much financial rope. He has also steered straight into the morass of NIMBYism, which continues to frustrate efforts to create the kind of density that’s needed if we want our cities, as he said in 2019, “to serve as engines of economic growth, innovation, and job creation that benefits all Canadians.” That means looking beyond single-family homes. “Underutilized capacity is inexpensive and readily available.” Options include laneway houses (smaller houses built in the backyards of existing homes), secondary suites, and co-living models.
Tapping into these sources of underutilized capacity is essential if the middle class is to escape the ever-escalating pressure of trying to afford a home in Canada’s major urban centres. But so, too, is examining whether the every-household-for-itself approach that helped build the middle class is now contributing to its decline.
If there’s a silver lining to the last decade of precarious employment, tighter household budgets, and soaring real estate prices, it’s how these factors have pushed people back together, whether that’s toward their genetic families or toward families of their own choosing and creation. This trend, often involving at least three generations living under one roof, has been driven by both adult children returning home (or staying there longer before moving out) and seniors moving in with their kids. But the popularity of such arrangements among Indigenous and immigrant families is also helping to drive up their number. The last census, in 2016, revealed that 2.2 million Canadians were living in a multigenerational setup, which was itself a 37.5 percent increase since 2001, making them the country’s fastest-growing housing category. The highest share of such housing is in real estate hot zones Toronto and Vancouver (5.8 and 4.8 percent, respectively).
All of this was in play before COVID-19, but our pandemic era will likely accelerate the trend because of both its economic upside—sharing mortgages, taxes, and utilities—and the reminder it has given us about the importance of being closer to family and friends. In a March 2020 story for The Atlantic, David Brooks argued that idealizing the nuclear family as the perfect household unit has been nothing short of a disaster, leaving many lonelier and with weaker support systems. He makes the case that we need to return to “big, interconnected, and extended families” and the values that informed them. “For decades, we have been eating at smaller and smaller tables, with fewer and fewer kin. It’s time to find ways to bring back the big tables.”
We also need to reexamine the size and scope of the table we all eat at—and what’s being served. Rather than budgeting on the basis of fiscal deficits and surpluses, some governments, like New Zealand’s, Scotland’s, and Iceland’s, are incorporating social and cultural balance sheets into their decisions. In May 2019, prime minister Jacinda Ardern’s government tabled New Zealand’s first well-being-based budget, which was guided by priorities like aiding the transition to a low-emissions economy, lifting the incomes of Māori and Pacific Islanders, and reducing child poverty. It also invested $1.9 billion (NZ) in new funding for mental health, including nearly half a billion for the so-called missing middle: the wider population experiencing mental distress that misses out on care in a system focused on the most severe needs. “We’re embedding that notion of making decisions that aren’t just about growth for growth’s sake but how are our people faring,” Ardern said at the time. “These are the measures that will give us a true measure of our success.”
The government here hasn’t taken these sorts of steps yet, but maybe the mandate letter for the minister of middle-class prosperity suggests that we aren’t that far behind. Mona Fortier has kept busy holding a series of town halls on the government’s financial response to the pandemic, and her mandate’s promise to incorporate “quality of life” metrics into the budget process may be helping to inform the progressive choices the government has made since COVID-19—especially its willingness to err on the side of spending more rather than less. “If we can all agree that something’s wrong,” Beaudoin says, “and we can all agree on a path toward making it right, there’s no impediment to us making it happen—at any scale.”
For the twenty-first century’s answer to the Middletons, this would be a long-overdue reckoning. Their predecessors were won over by a vision of limitless opportunity. But that was then: clinging to the past is no way to build a future.