The OECD is continuing to expand its highly regarded work on inequality by launching a new research centre. The announcement will be formally made in Paris on Monday with a series of panel discussions, featuring economists, policy makers and government officials from a number of countries. I’m pleased to be a participant, but I’m looking for advice on how to answer to some questions that may be asked. I’d love to hear your ideas, so send them along.
If you are interested in more details about the commentary I wrote for today’s Toronto Star, “The Inequality Debate: Canada’s middle class is losing ground,” you can find the original version in this post. You might also have an interest in this post, imaginatively entitled: “Who are the middle class?”
A number of journalists have recently addressed the topic, nicely offering a broader perspective. Whether you like to listen, watch, or read, you have some good choices.
Listen to this Ira Basen documentary called “What We Talk About When We Talk About The Middle Class,” which was broadcast on CBC Radio’s program “The Sunday Edition”; watch this documentary by Holly Doan for CPAC, which also features the much-cited New York Times article (look down the right column of the page to find it as “Vote 2015 Special: The Middle Class”); or read this Globe and Mail article, “The Middle Class: Just Who are They, Anyways?” by Erin Anderssen.
I hope all this helps to inform you about the talking point that, by waving around a New York Times article, leads our policy makers to dismiss the very fundamental and long-standng changes in the nature of work and incomes that are generating more insecurity for many Canadians, particularly young Canadians.
Here are the slides for the presentation “Too many children left behind: The U.S. Achievement Gap in Comparative Perspective”, which I gave to the conference “Causes and Consequences of Inequality and Social Mobility: What Can Be Done?”
The conference was held at the Faculty of Economics, Sapienza University of Rome on September 25th and 26th, 2015, and you can see the full program here: http://www.eticaeconomia.it/ee/wp-content/uploads/2015/09/Evento-n28_pdf.pdf
“What are the areas of policy and institutional strength that have a particularly strong bearing on social participation in the process (productive employment) and outcomes (median household income) of economic growth?”
In other words, what promotes inclusive growth?
This is the question that animates a report released by the World Economic Forum, which suggests that three policies appear to be holding back the process in Canada: limited social protection, particularly an inappropriately designed and not terribly generous Unemployment Insurance program, the lack of affordable child care, and lackluster entrepreneurship.
One economist recently suggested that there are as many as 156 definitions of the middle class. If this statistical potluck isn’t complicated enough, pollsters also tell us that a very large fraction of the population describe themselves as “middle class.”
You can see why politicians have made the “middle class” an election issue, but also why they might hesitate to answer the question: “Who are the middle class?”
It isn’t a contradiction for many people to feel they are in the “middle” even if their incomes are well above average or well below. There’s a certain truth to this because most Canadians share a set of common concerns that go beyond just their incomes.
You are “middle class” if you aspire to a better tomorrow, and have a hope for growth and progress in your circumstances; you are “middle class” if you are struggling with uncertainty, and worried if you and your family will be able to weather the storms that tomorrow will surely bring; and you are “middle class” if you have an expectation that your children should be treated fairly once you have done all you can to help them.
But while many people share these three concerns, their circumstances and capacities to manage them differ, something that is the result of growing inequality in access to secure and well-paying jobs.
Ninety percent of the population may belong to the “middle class”, but that doesn’t mean there is a one-size-fits-all-policy.
One way to get our heads around this is to let the answer to “Who are the middle class?” fall out of an answer to another question: “How is the economic pie divided?”
The Fraser Institute has weighed in on the income inequality debate with a report called “Income inequality: measurement sensitivities” that reviews the statistical measurement of income inequality in Canada.
The report quite rightly points out that there are many nuances in the measurement of income, and income inequality, and that the results vary substantially depending upon how economists and statisticians deal with them. Is income measured by earnings, or by total income that includes not just business and investment income but also government transfers? Should it be measured before or after taxes? And should we be looking at total family income or try to represent this as individual income by accounting for family size?
The analysis is carefully done and clearly presented, and though it covers ground that is pretty well standard for many economists working in this area, it helps to clarify the issues for a broader audience.
But the study concludes, in the words of the screaming press release, that there is “No income inequality crisis in Canada when it’s properly measured.”
That is the wrong inference to be making. What the study is missing is a coherent understanding of the link the different measures it so accurately calculates. As a result it misses important policy lessons.