How Canada’s middle class got shafted

[BeaverFever]

How Canada’s middle class got shafted

Real median wages of Canadians have barely changed since 1976. Canadians need a two-income household and must work longer hours than international peers

DAN BREZNITZ

SPECIAL TO THE GLOBE AND MAILPUBLISHED SEPTEMBER 19, 2024

Dan Breznitz is the Munk Chair of Innovation Studies at the University of Toronto, as well as the co-director of the Canadian Institute for Advanced Research’s program on innovation, equity and the future of prosperity. He served as the Clifford Clarke Economist for the federal Department of Finance during 2021-22.
 

 

If there is one thing Canadians are united about – it is the importance of the middle class. The middle class is our anchor, our measure for being a healthy society and our national aspiration is that each and every Canadian should be able to join and enjoy it.

On almost every front that should ensure that Canada’s middle class is healthy and prosperous, we have been doing very well. Over the past 45 years we became the world’s most educated country. Unlike what some politicians like to claim, Canadians are hard-working, and participation in the labour force among 18- to 64-year-olds is higher than both the United States and the average for Organization for Economic Co-operation and Development (OECD) countries.

 

 

We have developed an impressive, extremely high-performing research and higher education infrastructure that continues to punch above its weight. Lastly, our businesses have enjoyed rising profits – rising faster in the past decade than profits among many global peers.

But the reality is that our middle class is facing a serious problem, and the reasons for it are puzzling. The benefits of this educated work force, research-intensive higher education and highly profitable business sector are not translating into economic well-being for the middle class. Real median wages of Canadians have barely changed since 1976 (yes, that was 48 years, or two generations ago). As a result, Canadians need a two-income household and must work for longer hours than their international peers to achieve comparable standards of living.

…

If the foundations are so strong, why is the Canadian middle class getting shafted?

The answer is our systematic failure in both innovation and engagement in new knowledge by both the private and public sector.

Simply put, Canadian businesses and government could have used the publicly financed gift (enhanced by immigration) of a highly educated, highly skilled and highly motivated work force – and matched it with the best technology – to become the most innovative and productive economy in the world (and then shared that extra wealth with workers). Instead, both our government and our businesses have opted for a model in which they underpay overqualified Canadians to work with barely sufficient equipment and technology to avoid all risk associated with buying, using and developing new technologies and products.

The result is stagnant wages, poor-quality jobs, skills mismatches, continuously declining-in-quality public services and 48 years of missed economic growth opportunities. This is what is known technically as a low-wage, low-innovation, high-skill equilibrium. The price of Canada getting stuck in it has been paid by the Canadian middle class.

…

 

To put it in sports terms, we had a team with more talent than my sorry Maple Leafs, and we managed to do even less with it than the Leafs did (yes, that amazingly managed hockey team that failed to win anything since 1967 while having the highest ticket prices in the NHL and getting any player they ever wanted).

But this is just management. The most important thing for growth is innovation. Indeed, innovation is the only way for an advanced economy such as Canada to have sustained productivity and wage growth as well as improved welfare.

…It is here that we truly and tragically fail in each and every facet of innovation, from research and development (R&D), where Canada won the all-time wooden spoon by becoming the only OECD economy in which its business-sector investment in R&D declined annually from 2001 until 2019, and is now standing at the developing-countries level of just above 1 per cent of GDP, far away from the world leaders at 5.3 per cent or the OECD average of 1.99 per cent. Even when we add all public R&D and measure gross domestic R&D, Canada still significantly lags the G7 and the OECD average, and the gap with the leaders only grows.

…

 

In short, the smarter Canadians become, the more relatively stupid our economy and public sector becomes. A trajectory that is reminiscent of another, once-very-rich, highly educated, immigration-based country, with vast natural resources – Argentina.

Some have argued that this is just our culture. What can one do, so the theory goes, Canadians just have a sub-par achievement culture. Interestingly, both current affairs and history demonstrate the failure of this “lazy-bums, risk-haters are us” argument. After all, many Canadians that move after university to the United States somehow suddenly excel. But those moving to the United States have spent decades being deeply immersed with that bad Canadian culture. To blame the issue on culture forgets that. Additionally, this story of decline is a recent development. Until around 2000, Canada was clocking advances on all those measures.

So, what happened in the second half of the 1990s that so effectively and systematically moved us down toward a slow decline?

The first thing that might come to your mind is the North American free-trade agreement (NAFTA), and you would be correct. But it is not the actual trade agreement that we signed. NAFTA was just the embodiment of a series of decisions to commit ourselves to a very specific economic ideology. A naive view of global markets as a magical force that would mysteriously fix all of our woes without our government needing to do anything. The only thing Canada needs to do, according to this theory, is to truly believe in “The Market” and let it work its magic without any intervention or strategy. A sort of religious belief that happily led us to thoroughly dismantle our ability to govern, even of basic things such as ensuring competition. Worse, we fall asleep at the same time that all of our trading partners strategically built up their government capacities, specifically so they can they shape the global market and, even more importantly, their participation in it.

…

The result is that once we start a decline in every domain, from innovation to health and crime, our federal government finds itself time and time again unable to strategically and decisively act to counter it.

Our very own action led us to become a country adrift without an ability to govern, any capacity and ability to develop and implement a strategy, or indeed even openly discuss what it wants to be in the future.

Innovation is a perfect example of this.

And who are the ones that pay for all of this?

Our middle class.

 

https://www.theglobeandmail.com/business/commentary/article-how-canadas-middle-class-got-shafted/

 

[BeaverFever]

Just now, BeaverFever said:

How Canada’s middle class got shafted

Real median wages of Canadians have barely changed since 1976. Canadians need a two-income household and must work longer hours than international peers

DAN BREZNITZ

SPECIAL TO THE GLOBE AND MAILPUBLISHED SEPTEMBER 19, 2024

Dan Breznitz is the Munk Chair of Innovation Studies at the University of Toronto, as well as the co-director of the Canadian Institute for Advanced Research’s program on innovation, equity and the future of prosperity. He served as the Clifford Clarke Economist for the federal Department of Finance during 2021-22.
 

 

If there is one thing Canadians are united about – it is the importance of the middle class. The middle class is our anchor, our measure for being a healthy society and our national aspiration is that each and every Canadian should be able to join and enjoy it.

On almost every front that should ensure that Canada’s middle class is healthy and prosperous, we have been doing very well. Over the past 45 years we became the world’s most educated country. Unlike what some politicians like to claim, Canadians are hard-working, and participation in the labour force among 18- to 64-year-olds is higher than both the United States and the average for Organization for Economic Co-operation and Development (OECD) countries.

 

 

We have developed an impressive, extremely high-performing research and higher education infrastructure that continues to punch above its weight. Lastly, our businesses have enjoyed rising profits – rising faster in the past decade than profits among many global peers.

But the reality is that our middle class is facing a serious problem, and the reasons for it are puzzling. The benefits of this educated work force, research-intensive higher education and highly profitable business sector are not translating into economic well-being for the middle class. Real median wages of Canadians have barely changed since 1976 (yes, that was 48 years, or two generations ago). As a result, Canadians need a two-income household and must work for longer hours than their international peers to achieve comparable standards of living.

…

If the foundations are so strong, why is the Canadian middle class getting shafted?

The answer is our systematic failure in both innovation and engagement in new knowledge by both the private and public sector.

Simply put, Canadian businesses and government could have used the publicly financed gift (enhanced by immigration) of a highly educated, highly skilled and highly motivated work force – and matched it with the best technology – to become the most innovative and productive economy in the world (and then shared that extra wealth with workers). Instead, both our government and our businesses have opted for a model in which they underpay overqualified Canadians to work with barely sufficient equipment and technology to avoid all risk associated with buying, using and developing new technologies and products.

The result is stagnant wages, poor-quality jobs, skills mismatches, continuously declining-in-quality public services and 48 years of missed economic growth opportunities. This is what is known technically as a low-wage, low-innovation, high-skill equilibrium. The price of Canada getting stuck in it has been paid by the Canadian middle class.

…

 

To put it in sports terms, we had a team with more talent than my sorry Maple Leafs, and we managed to do even less with it than the Leafs did (yes, that amazingly managed hockey team that failed to win anything since 1967 while having the highest ticket prices in the NHL and getting any player they ever wanted).

But this is just management. The most important thing for growth is innovation. Indeed, innovation is the only way for an advanced economy such as Canada to have sustained productivity and wage growth as well as improved welfare.

…It is here that we truly and tragically fail in each and every facet of innovation, from research and development (R&D), where Canada won the all-time wooden spoon by becoming the only OECD economy in which its business-sector investment in R&D declined annually from 2001 until 2019, and is now standing at the developing-countries level of just above 1 per cent of GDP, far away from the world leaders at 5.3 per cent or the OECD average of 1.99 per cent. Even when we add all public R&D and measure gross domestic R&D, Canada still significantly lags the G7 and the OECD average, and the gap with the leaders only grows.

…

 

In short, the smarter Canadians become, the more relatively stupid our economy and public sector becomes. A trajectory that is reminiscent of another, once-very-rich, highly educated, immigration-based country, with vast natural resources – Argentina.

Some have argued that this is just our culture. What can one do, so the theory goes, Canadians just have a sub-par achievement culture. Interestingly, both current affairs and history demonstrate the failure of this “lazy-bums, risk-haters are us” argument. After all, many Canadians that move after university to the United States somehow suddenly excel. But those moving to the United States have spent decades being deeply immersed with that bad Canadian culture. To blame the issue on culture forgets that. Additionally, this story of decline is a recent development. Until around 2000, Canada was clocking advances on all those measures.

So, what happened in the second half of the 1990s that so effectively and systematically moved us down toward a slow decline?

The first thing that might come to your mind is the North American free-trade agreement (NAFTA), and you would be correct. But it is not the actual trade agreement that we signed. NAFTA was just the embodiment of a series of decisions to commit ourselves to a very specific economic ideology. A naive view of global markets as a magical force that would mysteriously fix all of our woes without our government needing to do anything. The only thing Canada needs to do, according to this theory, is to truly believe in “The Market” and let it work its magic without any intervention or strategy. A sort of religious belief that happily led us to thoroughly dismantle our ability to govern, even of basic things such as ensuring competition. Worse, we fall asleep at the same time that all of our trading partners strategically built up their government capacities, specifically so they can they shape the global market and, even more importantly, their participation in it.

…

The result is that once we start a decline in every domain, from innovation to health and crime, our federal government finds itself time and time again unable to strategically and decisively act to counter it.

Our very own action led us to become a country adrift without an ability to govern, any capacity and ability to develop and implement a strategy, or indeed even openly discuss what it wants to be in the future.

Innovation is a perfect example of this.

And who are the ones that pay for all of this?

Our middle class.

 

https://www.theglobeandmail.com/business/commentary/article-how-canadas-middle-class-got-shafted/

 

TL;DR Version:

Despite demanding Canadian workers have ever-higher academic qualifications, work ever-increainglonger hours and in some cases investing in fancier machines and computers for them to use, our businesses and government are misusing the talent and capital for non-innovative purposes.
 

Canada is like a horse- buggy maker researching and developing the latest buggy-making technology, hiring the world’s most talented engineers, forcing them to work around the clock developing the latest buggies …all in the age of the Ford Model T.    And whenever they do actually develop an innovative patent or design that could have actual long-term future value, they sell it off for a fraction of its worth. 
 

What I wish the article had touch on:

- The extent to which foreign ownership of “Canadian” companies has discouraged innovation in Canada. Once you become just a another “branch office” of a foreign multinational you often lose your ability or desire to innovate and your focus becomes just routine run-rate activities. In this category I would also put foreign “capture” of Canadian companies where the Canadian owned business has become so dependent upon supplying foreign (usually American) customers with a basic good such as logs, oil etc. that they have no ability or desire to innovate or evolve 

- The impact of Canada’s small monopolistic and notoriously conservative financial sector.  As I’ve read elsewhere, if you’re a new startup or an existing business with a revolutionary  innovative product, it’s extremely hard to attract investment or lending compared to other peer countries as there are very few financiers in Canada relatively speaking and they tend be very risk- averse. 

[herbie]

We've slowly abandoned Canadian efforts in technology. Celebrated the Canada Arm so long, the Model T version took a decade to appear on bills. Stay on the Net for 10 minutes you'll find a link to the Avro Arrow that got dropped 55 years back.
Cdn auto people aren't even allowed to swap parts about and create our own models. faded away there before even the Australians.
I bet half the country didn't know Blackberry was Canadian until they saw the movie 15 years after that passed away.

Now we have the Tories suggesting we NOT give money for better communications in the North, we hand that off to Elon Musk's Starlinlk because it's cheaper.

We will be the first country to collapse because it wasn't cost effective to invest in ourselves.

[Moonlight Graham]

Every young Canadian should go out and get a B.A. in history or philosophy or some other extremely economically useful degree.  This will jumpstart the economy like in decades past.

[Moonlight Graham]

2 hours ago, herbie said:

We've slowly abandoned Canadian efforts in technology. Celebrated the Canada Arm so long, the Model T version took a decade to appear on bills. Stay on the Net for 10 minutes you'll find a link to the Avro Arrow that got dropped 55 years back.
Cdn auto people aren't even allowed to swap parts about and create our own models. faded away there before even the Australians.
I bet half the country didn't know Blackberry was Canadian until they saw the movie 15 years after that passed away.

Now we have the Tories suggesting we NOT give money for better communications in the North, we hand that off to Elon Musk's Starlinlk because it's cheaper.

We will be the first country to collapse because it wasn't cost effective to invest in ourselves.

You're right.  Canada gushes over the Avro Arrow and the Canada Arm.  The US creates technology like this every single day it seems and we're patting ourselves on the back about a few pieces of tech from several decades ago.  How embarrassing.

But alas, even if we invented a bunch of new tech we'd just let the Chinese steal it all.

Edited September 23, 2024 by Moonlight Graham

[herbie]

On 9/22/2024 at 11:07 PM, Moonlight Graham said:

even if we invented a bunch of new tech we'd just let the Chinese steal it all.

China's just the flavour of the month. Who was once a leader in microwave, nuclear and communications technology?
We do it to ourselves.

[cannuck]

darnit!  have to be careful and exclude the particulars, but:   one of my associates was pulled away from his own business to use his former financial skills to salvage a Canadian tech company that developed the ONLY viable and sustainable bio/organically sourced nano material with extremely high yield/low cost.  Doing is DD he found that our illustrious government poured $15mm into a Quebec mine that extracts the intermediate feedstock unsustainably and has as yet to produce a gram of the nano-tech stuff.

The Canajun way, eh?

Edited October 2, 2024 by cannuck

[eyeball]

So is this the fault of the left wing or the right wing, isn't that's what usually matters the most?

In any case....recall how we were told we needed to get out of the business of hewing wood and drawing water but nowadays we're being told to get ready for a great unleashing of our natural resources sectors - back to hewing wood and drawing water IOW.

Maybe they didn't get the memo.

 

[herbie]

23 hours ago, eyeball said:

So is this the fault of the left wing or the right wing, isn't that's what usually matters the most?

Of course it is. Anything short of laissez-faire capitalism is Communism.

[cannuck]

On 10/3/2024 at 3:22 PM, eyeball said:

So is this the fault of the left wing or the right wing, isn't that's what usually matters the most?I

No wings at all, so it should not be able to fly.   

The partisan political process survives because it keeps the ignorant population occupied thinking one or the other can do something or wants to do something that neither has ever done:  find and fix the real problems.

Our problem is similar to what has happened around the globe: we have given Bay Street/Wall Street/Casino Capitalism free reign to re-distribute wealth without adding any value - thus de-funding Main Street.  How is that?  Why would you want to take the risk of investing capital in developing new products and services that takes a lot of time and skill when you can instead take a bunch of "market money" and inflate the value of an equity by purchasing control and cashing in on an M&A deal in just a short time with near zero risk?

[eyeball]

3 hours ago, cannuck said:

Why would you want to take the risk of investing capital in developing new products and services that takes a lot of time and skill when you can instead take a bunch of "market money" and inflate the value of an equity by purchasing control and cashing in on an M&A deal in just a short time with near zero risk?

Well, you might want to if the alternative was that the government taxes the casino and uses the proceeds to stimulate the real means of production.

[cannuck]

7 hours ago, eyeball said:

Well, you might want to if the alternative was that the government taxes the casino and uses the proceeds to stimulate the real means of production.

government should be taxing speculative gain almost 100% to pay the bills from inflation.   Any attempt or even ability of government to "stimulate" anything would be #1 a total screwup in result and #2 open yet another pathway for corrupt to direct the flow.

The business of government should be limited to governing - that means legislate regulate and control to ALLOW enterprise (not choose winners and losers)   Also to enforce and protection through civil and military authorities.   Instead of striving for a level playing field we (globally) have allowed government to evolve to do little more than dispense privilege to entities willing to pay to play.

Edited February 18 by cannuck

[herbie]

Quote

Why would you want to take the risk of investing capital in developing new products and services that takes a lot of time and skill when you can instead take a bunch of "market money" and inflate the value of an equity by purchasing control and cashing in on an M&A deal in just a short time with near zero risk?

Because that is the epitome of capitalism, the biggest return for the least effort.

That is why regulation is required. Some people refuse to believe why there was a French and Russian revolution and the middle class is what shields them from another.

Maybe we could become the rich, but at least you have the chance to become us.

[Moonbox]

On 2/17/2025 at 9:15 PM, cannuck said:

government should be taxing speculative gain almost 100% to pay the bills from inflation.   Any attempt or even ability of government to "stimulate" anything would be #1 a total screwup in result and #2 open yet another pathway for corrupt to direct the flow.

If you can separate what truly is just speculative investing vs more conventional capital investment (which has a speculative element) that could work, but it requires a government willing to make tough and long-term decisions and stop caving into every special interest that whines.  

On 2/17/2025 at 9:15 PM, cannuck said:

The business of government should be limited to governing - that means legislate regulate and control to ALLOW enterprise (not choose winners and losers)   Also to enforce and protection through civil and military authorities.  Instead of striving for a level playing field we (globally) have allowed government to evolve to do little more than dispense privilege to entities willing to pay to play.

True enough.  

[Michael Hardner]

Wow.  Good thread 🧵