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Wealth of US middle class now lower than Canada’s - report

Published time: April 23, 2014 00:59
Reuters / Emmanuel Foudrot

Reuters / Emmanuel Foudrot

American workers who previously made up the wealthiest middle class in the world have lost that distinction, according to new research that attributes the economic stagnation on rising income inequality in the US.

Economic growth in the US continues to be as strong if not stronger than other developed nations, although fewer Americans are reaping the benefit of their hard work. An analysis of income and spending numbers published Tuesday by the New York Times indicated that the wealthiest tax brackets are enjoying more financial growth, while the lower and middle income tiers are now lagging behind their counterparts throughout the world.

Median income in Canada tied with median income in the US in 2010 and has likely surpassed that number since, according to the Times. Britain, Sweden, the Netherlands, and a number of Western European countries still trail US median income, although the margin is much narrower than any forecasters had previously predicted.

The numbers were assembled from surveys taken over a 35 year period in the US and elsewhere throughout the world. The Luxembourg Income Study Database (LIS) first compiled the data before turning it over to the New York Times and independent economists.

The idea that the median American has so much more income than the middle class in all other parts of the world is not true these days,” Harvard economist Lawrence Katz told the newspaper. “In 1960, we were massively richer than anyone else. In 1980, we were richer. In the 1990s, we were still richer.”

That change seems to have been caused by a variety of factors, with education chief among them. Americans between 16 and 24 years old rank behind the same demographic in Canada, Australia, Japan, and Scandinavia in literacy, math, and technology performance. Young Americans still rank alongside citizens in Italy and Spain, although elderly US nationals lead the world in the same categories.

Another, perhaps more substantial factor, is how companies compensate American employees. CEOs in the US make far more than those in Europe, and the poor earn far less. The minimum wage in America is lower than in other developed countries and labor unions have been weakened in recent decades, unlike on the other side of the Atlantic Ocean.

Median income in the US, after taxes, is approximately $74,000 for a family of four. Income levels rose by about 20-percent between 1980 and 2000 but have remained largely unchanged since then. Canadians, on the other hand, enjoyed an income increase of 20-percent between 2000 and 2010 alone.

Several experts, affiliated and not affiliated with LIS, told journalists David Leonhardt and Kevin Quealy that governments in Canada and throughout Western Europe also do far more to redistribute vastly uneven incomes.

Meanwhile, a mere one-third of the US population thinks the nation is moving in the right direction. Poll numbers indicate that families begin worrying about college costs when their children are increasingly young. Many of those same families think their own parents enjoyed more advantages than they do at the same point in their life.

Things are pretty flat,” Kathy Washburn, a Iowa resident who has worked at Ace Hardware for more than 20 years but still makes an annual $33,000, told the Times. “You have mostly lower level and high and not a lot in between. People need to start in between to work their way up.”

This analysis is just the latest in a number of studies that document the increasingly difficult financial burdens so many Americans are up against. A 2012 Pew Research study identified middle class citizens as anyone who earned between $39,000 and $118,000 and found that, for the first time since the end of World War II, the number of Americans who fit into that category shrunk.

The years between 2000 and 2010 included two damaging recessions and, for middle class earners, have been described as the worst decade in modern history. By contrast, income for the wealthiest 400 Americans quadrupled during the same time.

Comments (33)


WD 26.04.2014 15:45

What most Americans think of as the Canadian system is actually OHIP--that is, the Ontario Health Insurance Plan. Aside from being an Ontario thing (though most provinces have a similar system as healthcare is a provincial responsibility), the free portion is usually limited to GP and hospital visits; medicines are largely paid for by the plan however Ontarians still pay a nominal fee for them (it isn't anywhere close to American costs though). As well, dental and vision care as well as cosmetic surgery are all private.


WD 26.04.2014 15:42

Chase Fillingame 23.04.2014 17:38

Canadians pay more taxes but the taxes are used to pay for free healthcare, good welfare benefits, and largely subsidized college tuition so it actually doesn't even out. The Canadian middle class has just a little bit better than the American middle class.


&q uot;Free healthcare" is the number one misconception Americans have of how things work in Canada. It's not entirely "free," nor is it entirely nationwide. Let me explain:


O'Reilly 24.04.2014 12:24

America is going bankrupt but Apartheid Israel will still get its $3 billion of our tax money. Thank you, corrupt congress.

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