What’s next for middle class?
Trudeau has provided some help and some hurt — but must move past tinkering
Is Trudeau strengthening our middle class?
For years Prime Minister Justin Trudeau has stressed the need to strengthen the middle class and help those hoping to join it. It was the central plank in his 2015 election platform: “We will bring back economic fairness for the middle class”.
In the face of Brexit and Donald Trump, Trudeau also says this will help insulate Canada from the populist rage that’s sweeping the world.
He has taken this message around the globe. Speaking in February in Hamburg, Germany, to 400 notables, he said, “It’s time to get real about the challenges facing the middle class. Old approaches don’t work anymore. We can’t go about things the same way and expect to succeed in this new world.”
So our prime minister gets it; he understands the challenge.
But does he have a workable strategy to deal with Canada’s growing income and wealth disparity? Are those who have fallen through the cracks really getting help?
Trudeau’s first budget was as an encouraging start. It provided reduced taxes for a segment of the middle class, a non-taxable Canada Child Benefit, an enhanced Canada Pension Plan (CPP) and a return of age eligibility for Old Age Security to 65 from 67.
But since then Trudeau has clawed back more in taxes and credits than his 2016 budget provided.
For working middle-class Canadians, the tax break has been wiped out by the CPP payroll tax. The children’s arts tax credit, the education and textbook tax credit and the children’s fitness tax credit have been eliminated. The widely used income-splitting for couples with children was repealed.
In addition, there is the taxhike effect for many Canadians who are now limited to a $5,500 contribution (down from $10,000) to the tax-free savings account. And there will also be the consumer prices increases following the introduction of the federal carbon tax.
The 2017 budget is billed as “Chapter 2” in the Liberal government’s efforts to deal with middle-class anxiety. There’s talk of billions for down-theroad innovation, daycare spots, skills training, gender equality and affordable housing.
But short term, it slaps more taxes on the favourite mood-modifiers of the middle class — cigarettes and alcohol. The public transit tax credit is repealed. And we will have to pay HST on Uber rides.
So, from a tax perspective, it’s hard to see how Trudeau is helping those who are struggling to pay the bills and maintain a decent standard of living.
Trudeau also promised more and better jobs, and there’s been modest progress on that front. But many of the key economic programs, such as infrastructure spending, haven’t moved beyond the promise stage.
Unemployment has dropped slightly from 7.1 per cent to 6.7 per cent. But that doesn’t mean much for Trudeau’s goal of quelling the rise of populist politics. Trump won the presidency in a country with a stronger economy and an unemployment rate of only 4.5 per cent.
The underlying factors at play are complex and increasingly outside the reach of governments alone. Globalization, technological change, robotics and the Internet-of-everything are creating new jobs requiring new skills. They’re also displacing existing jobs at a dizzying rate.
Recent studies predict nearly 50 per cent of existing jobs will be replaced by robots and computers within the next 10 to 20 years. In 1990, Ford, General Motors and Chrysler earned $36 billion in revenue and employed more than one million workers. Last year Google, Facebook and Apple earned $1 trillion in revenue and employed only 137,000.
This fundamental, seismic shift in employment, wealth creation and distribution cannot be resolved domestically. Like climate change, these issues need global action.
A growing number of business leaders see a looming crisis of confidence in capitalism. They acknowledge its contribution, but they aren’t blind to the excessive cost in terms of public and private debt, resource depletion, excessive consumerism and far too many people left behind.
More than half of the 100 largest economies in the world are now corporations. So any attempt to reform capitalism has to involve the captains of capital.
Canada should press the G8 and G20 countries to get serious about this issue. They should create a forum to engage world market dominant companies like Walmart, China National Petroleum, Toyota and Google. The goal would be a more sustainable system: one that better balances the values of democracy with those of capitalism.
Anything less is just tinkering around the edges and leaving the disenfranchised to fall victim to simplistic, populist solutions. R. Michael Warren is a former corporate director, Ontario deputy minister, TTC chief general manager and Canada Post CEO. r.michael.warren@gmail.com