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Canada’s middle class has little to cheer about

Genet Shume, a single mother who came to Canada from Ethiopia, was headed to her home country with her two children to give family and friends money she had saved working at a bank. (CBC)

A new study says Canada’s middle class is among the richest in the world, ahead of the United States, but economists say there’s little in the numbers to cheer about - and a few caveats.

According to a study done by The New York Times, based on data from the Luxembourg Income Study Database, median income in Canada tied with the U.S. in 2010 and has outpaced it since then.

“After-tax middle-class incomes in Canada — substantially behind in 2000 — now appear to be higher than in the United States,” says the report.

It says median income also rose 20 per cent in Canada between 2000 and 2010, to the equivalent of US$18,700.

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That’s equal to the U.S., but the study points out pay in Canada has risen faster than pay in the U.S. since then.

Economists say that’s likely because the U.S. economy took a bigger hit than Canada’s during the 2008-09 recession, but our neighbours to the south are quickly catching up.

Consider that the U.S. unemployment rate is now lower than in Canada and its economy is growing more quickly.

Markets south of the border have also performed better than in Canada in 2013.

Erin Weir, an economist with the United Steelworkers, says the report reflects the fact that the recession and rising inequality have been worse in the U.S. than in Canada.

“The Canadian middle class appearing to be in relatively good shape compared to the hard-hit American middle class is nothing to celebrate,” he said.

Canadians should also be concerned, Weir adds.

“The weakness of the U.S. middle class is bad news for Canada because it weakens the main consumer market for our exports.”

He believes policymakers in Canada should support the middle class by promoting fair collective bargaining, strong labour standards, adequate social programs and progressive taxation.

“The fact that things may be even worse south of the border is no excuse for complacency north of the border,” Weir said.

The New York Times study says governments in Canada, as well as Western Europe, have been more aggressive in boosting take-home pay of its citizens.

It also points out that middle-class families around the world have worries, some specific to their countries.

“In many parts of Europe, as in the United States, parents of young children wonder how they will pay for college, and many believe their parents enjoyed more rapidly rising living standards than they do,” the report states. "In Canada, people complain about the costs of modern life, from college to monthly phone and Internet bills. Unemployment is a concern almost everywhere.”

Economists note Canada’s high ranking is due in part to the fact that countries such as Norway and Switzerland weren’t included in the data.

According to Statistics Canada data released last summer, median market, after-tax income for a single person in Canada was $20,900 in 2011, similar to 2010. StatsCan said the numbers were stable for both seniors ($9,000) and non-seniors ($26,600).