Duelling reports: Finance rebuts grim analysis by another federal department

Finance Canada has issued a rebuttal of a politically embarrassing report on middle-class economic woes that was compiled last fall by experts in another federal department.

OTTAWA — Finance Canada has issued a rebuttal of a politically embarrassing report on middle-class economic woes that was compiled last fall by experts in another federal department.

The duelling analyses highlight an economic issue almost certain to dominate the federal election campaign next year, as political parties cite the same data to make opposite points.

Last October, bureaucrats at Employment and Social Development Canada wrote a scathing internal report on the plight of the middle class, calling the Canadian dream “a myth more than a reality.”

The report, obtained by The Canadian Press under the Access to Information Act, was immediately hailed by opposition parties as proof of the financial straits of Canadian families, but it was dismissed by cabinet ministers as outdated and misleading.

In April this year, Finance Canada economists put together a more detailed rebuttal for the new minister, Joe Oliver, using the same data but interpreting them in a more positive way.

The report for Oliver, for example, concludes that “controlling for the changing composition of families, income of the Canadian middle class has grown strongly since 1976…. All major family types benefited from strong income growth.”

The analysis faults Employment and Social Development Canada for weak methodology, and for delivering a different message from that of the Feb. 11 federal budget.

“Their analysis arrives at conclusions — namely that middle-income families have stagnant wages, are unlikely to move to higher income groups, and are increasingly indebted — which appear to conflict with the general message in Budget 2014 and previous internal briefings,” says an accompanying briefing note for Oliver.

Copies of the rebuttal material, with some significant sections censored, were obtained from Finance Canada under the Access to Information Act.

The new analysis, entitled “Income Equality and the Middle Class: Recent Trends,” also uses data up to 2011, whereas the previous report covered the period only to 2007.

While the latest report paints a rosier picture, it also warns of problems ahead.

For example, the authors play down the claim that the middle class is more indebted than other groups, saying households at all income levels show the same levels of indebtedness.

But they also warn that “high levels of household indebtedness and the fact that a significant portion of middle-income families spend more than they earn do pose risks to the economic outlook.”

The Finance Canada study also acknowledges that the key driver of middle-class prosperity in Canada has been women workers, more of whom have been entering the workforce, upgrading their skills, moving to full-time from part-time, and getting better-paid jobs.

The wages they have added to middle-class households have helped maintain prosperity levels, whereas previous generations typically needed only one major income earner in a household to enjoy a middle-class lifestyle.

“Higher employment rates, especially of females, account for most of the increase in working middle-class family incomes,” says the report. Otherwise, “middle-class families have not received significant hourly wages increases. This is true in absolute terms and relative to other income groups.”

The authors note that the current high employment rates of women means this avenue of income growth for middle-class families will not be available in future.

The 24-page analysis also acknowledges that income inequality has grown in Canada, as elsewhere in the industrialized world, with the wealthiest one per cent collecting 8.6 per cent of all 2011 income, compared with 5.8 per cent of all income in 1982.

Economist Armine Yalnizyan says the duelling reports show that “depending on your unit of analysis, depending on your time frame, you can make two very solid cases….”

“Clearly, Finance wants to stick with the message track that it’s got in the budget…. They’re cherry-picking the data they want to look at.”

But Yalnizyan, of the Canadian Centre for Policy Alternatives, a left-leaning think-tank, notes even Finance Canada acknowledges the party is over when it comes to women workers buoying middle-class households, because their participation rates are already high.

“That has kept the middle class from sagging,” she said in an interview. “But it’s not available as a strategy going forward.”

The Finance Canada report estimates about 70 per cent of the increase in middle-class household incomes since the mid-1990s can be attributed to higher workforce participation rates, primarily by women workers.

“There is no second wave of women, spouses, entering the workforce,” said New Democrat MP Nathan Cullen, the opposition’s finance critic.

Cullen said Conservative government policies are also exacerbating the plight of the middle class, with tax breaks that favour the rich and with no effective measures to replace some 350,000 well-paid manufacturing jobs lost in central Canada.

“It’s overstating and misrepresenting the facts to say ’nothing to worry about here — in fact, much to celebrate,”’ he said in an interview.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Red Deer Public Schools says that in the absence of additional funds from the provincial government, there was no consideration of using alternate classroom sites in the district. (AP Photo/Gregory Bull)
Red Deer Public Schools launches online engagement process

Red Deer Public schools is seeking community input to help ensure a… Continue reading

Red Deer Rebels defenceman Mason Ward battles with a Medicine Hat Tigers’ forward during the WHL Central Division season opener. (Photo by Rob Wallator/ Red Deer Rebels)
Tigers come back to spoil Red Deer Rebels home opener

It’s been nearly 345 days since the Red Deer Rebels last played… Continue reading

Students walk into Hunting Hills High School, which is one of the Red Deer Public Schools with solar panels on its roof. (Photo by SEAN MCINTOSH/Advocate staff)
Red Deer high school was placed in lockdown following potential threat

Hunting Hills High School was placed in a lockdown Friday after Red… Continue reading

Red Deer Mayor Tara Veer says some details of the provincial government’s 2021-22 budget need to be ‘sorted out’ when it comes to the hospital expansion funding. (File photo by Advocate staff)
More detail needed regarding hospital funding, says Red Deer mayor

Red Deer Mayor Tara Veer says some information is unclear regarding the… Continue reading

Alberta Health reported two new COVID-19 deaths in Red Deer Friday. (Image courtesy CDC)
Two more deaths linked to Olymel outbreak in Red Deer

Province reported 356 additional COVID-19 cases Friday

An arrest by Red Deer RCMP is facing online scrutiny. No charges have been laid and the incident is still under investigation. (Screenshot of YouTube video)
Red Deer RCMP investigating violent arrest caught on video

Police say officer ‘acted within the scope of his duties’

A health-care worker prepares a dose of the Pfizer-BioNTech COVID-19 vaccine at a UHN COVID-19 vaccine clinic in Toronto, Thursday, Jan. 7, 2021. A single dose of Pfizer-BioNTech's COVID-19 vaccine is barely enough to cover the average pinky nail but is made up of more than 280 components and requires at least three manufacturing plants to produce. THE CANADIAN PRESS/Nathan Denette
From science to syringe: COVID-19 vaccines are miracles of science and supply chains

OTTAWA — A single dose of Pfizer-BioNTech’s COVID-19 vaccine is barely enough… Continue reading

Wetaskiwin RCMP say a Maskwacis man died after he was struck by a vehicle. (File photo by Advocate staff)
Clare’s Law in Saskatchewan used handful of times; Mounties review their role

REGINA — A first-of-its-kind law in Canada meant to warn those at… Continue reading

The Magpie river in Quebec is shown in a handout photo. THE CANADIAN PRESS/HO-Boreal River MANDATORY CREDIT
Quebec river granted legal rights as part of global ‘personhood’ movement

MONTREAL — With its kilometres of rapids and deep blue waters winding… Continue reading

Thorough sanding of a table top is usually the first step to renewing a finish. Wax contaminants can sometimes still remain on a surface like this after sanding. Cleaning with rubbing alcohol and a rag gets rid of these contaminants without leaving a residue behind. (Photo by Steve Maxwell)
Houseworks: Fixing wood finishes

Q: How can I stop polyurethane from beading up on a mahogany… Continue reading

Need a knife? There are knives of all shapes and sizes at The Kitchen Store.
Hints from Heloise: Finding a good set of kitchen knives

Dear Readers: A good set of knives in the kitchen is a… Continue reading

Runner Melissa Bishop-Nriagu speaks to the media at the opening news conference at the Canadian Track and Field Championships Thursday, July 25, 2019 in Montreal.THE CANADIAN PRESS/Ryan Remiorz
Canadian athletes struggling to find competition as they try to qualify for Tokyo

Canadian athletes struggling to find competition as they try to qualify for Tokyo

New York Red Bulls midfielder Jared Stroud, right, vies for the ball against Toronto FC midfielder Jonathan Osorio during an MLS soccer match in Harrison, NJ., Sunday, Nov. 8, 2020. Entering his ninth season with Toronto FC, Jonathan Osorio said his off-season regimen was no different than in the past. THE CANADIAN PRESS/AP-Eduardo Munoz Alvarez
Veteran TFC midfielder Jonathan Osorio looks to take it to the next level this season

Veteran TFC midfielder Jonathan Osorio looks to take it to the next level this season

Most Read