As wealthy Americans continue to forge ahead of several of their global peers, the American middle class – for long the most affluent in the world – seems to have lost that distinction, according to an analysis conducted by New York Times.
The analysis, based on surveys conducted over the past 35 years, shows that citizens of other advanced countries have obtained considerably larger raises over the past three decades across the lower-and-middle-income tiers. In addition, Canadian middle class incomes (after tax) are higher than in the United States – this, after falling significantly behind US middle class income standards in 2000. The numbers suggest that high and rising income inequalities are to blame for this decline in American middle class income levels.
Most economic experts cite statistics like the per capita gross domestic product to show that the US has maintained its lead as the world’s richest country. However, these figures do not focus on the distribution of the income, as much as they do on averages. As most recent income gains usually flow to a relatively smaller group of high-earning households, it is clear that most Americans are not at par with their counterparts around the globe.
Three factors could be behind this phenomenon. Firstly, educational attainment has slackened in the US as opposed to other parts of the industrialized world. This has made it harder for the American economy to retain its control over high-skilled, well-paying jobs. While American aged from 55 to 65 years have above average literacy, numeracy and technology skills as compared to 55-to-65-year-olds in the rest of the industrialized world, Americans from 16 to 24 years of age rank closer to the bottom among rich countries.
The second factor contributing to this is that companies in the US distribute a smaller share of their wealth to the middle class and the poor as opposed to companies elsewhere in the industrialized world. Finally, the governments in Canada and Western Europe are aggressively ensuring that they redistribute income to raise the take-home pay of low-and-middle-income households.
Despite this drop in income levels for the American middle class and the poor, the fact remains that the US continues to register stronger economic growth. Americans still earn 20 percent more than their Canadian counterparts do. They also earn about 26 percent more than their British counterparts and 50 percent more than their Dutch counterparts do. However, it appears that only a small percentage of American households is benefiting from this growth of the world’s most prosperous economy.
Source: The New York Times
Canada has overtaken the United States as having the richest middle class in the world, according to a new report from the New York Times.
Though the richest Americans still earn more than their counterparts in other developed nations, the growth of America’s middle class has remained comparatively stagnant over the last decade. The average income, after tax, for a family of four in the U.S. is $75,000. Though an exact average was not provided for Canada, the authors of the report conclude that it is “most likely” higher, since wages in Canada caught up to the U.S. back in 2010, and have likely now surpassed them.
Canada’s mid-level strength, the report argues, is likely due to the country’s wealth re-distribution policies. However, some financial experts in Canada are concerned that Canada’s wealth gap is now, in fact, growing in similar fashion to the U.S.
“Increasingly, whatever wage gains there are have been tilted to a select group of higher-paid sectors, leaving the median worker with leaner improvements,” said economists at CIBC in a report last month.
The CIBC report also found that median wages in the country are not growing as fast as other incomes, with only 1 percent improvement last year. Additionally, middle-class Canadians have less disposable income than expected.
Still, however, Canada’s middle-class was not as hard hit during the recent global recession as many Americans, particularly those who lost thousands in the recent housing bust. Overall, the Canadian system appears to have more checks in place to ensure the economic stability of its middle-class, though these certainly do not dissolve Canadians of having fiscal responsibility, particularly in light of recent concerns over the country’s growing consumer debt.
Source: Global News