Reports from national and international news sources have been softly declaring that Canada’s middle class is wealthier than America’s middle class for the past couple years. A recent study this year indicates that is most definitely the case and provides solid proof that not all middle classes are created equal. The middle classes of the two countries are in fact very different when it comes down to disposable household income.
The New York Times completed a research study with the help of figures and data from a team of LIS researchers. LIS, a cross-national data center and home to the Luxembourg Income Study Database and the Luxembourg Wealth Study Database, gathered household income data from around the world and harmonized the statistics for comparison of different countries. Evidence shows that median net worth has been rising in Canada for a decade or more, and certain factors have certainly fueled the growth of Canada’s middle class and pushed them to the top of the list. Here are several influences and trends considered in why we have seen a rise in Canada’s middle class:
- Exchange Rate: The Canadian dollar has appreciated by more than 40% over the American dollar over the past decade. This has allowed for greater purchasing power for Canadians and the ability to buy imported goods at lower prices.
- Oil Exports: With oil as a major export commodity for Canada, the price increase for a barrel of oil worldwide has strengthened the export market for Canada and created a windfall for all of Canada.
- Housing Prices: Home prices in Canada have continued to rise over the past ten years, even through the recession. This has allowed for success not only in the real estate market, but also allowed for a boom to the middle class bottom dollar. (Although on the flip side, some claim it is overvalued)
- Mortgage Rates: Even though housing prices have increased and real estate debt has increased as well, competitive mortgage rates have decreased and allowed middle class Canada to purchase a home with lower monthly overhead expenditures. With lower mortgage expenses, more money is freed up for disposable income.
- Unemployment Rates: Through the recession, women have continued to enter the workforce and contribute to their household income, allowing overall family incomes to rise. Despite the fact that the proportion of men unemployed is higher, the Canadian unemployment rate is far below the United States unemployment rate.
- Aging Population: As middle class populations age, Canada is seeing a fair amount of a graying workforce continue to be present in the workplace. This older working demographic contributes to seeing middle class incomes that not only remain steady but increase as well, thus contributing to economic growth of the middle class population.
Overall, modern capitalism is clearly having an effect on the middle class of Canada and this most recent New York Times study clearly indicates that Canada’s economic well-being is performing far greater than many other countries.
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