Family Finance 2010

f
The Current State of Canadian Family Finances

2 0 1 0 R e p o r t
Roger Sauv
People Patterns Consulting
f e b r u a r y
2 0 1 1
The Vanier Institute of the Family was established in 1965 under the patronage of Their Excellencies Governor General Georges P. Vanier and Madame Pauline Vanier. It is a national voluntary organization dedicated to promoting the well-being of Canadas families through research, publications, public education and advocacy. The Institute regularly works with businesses, legislators, policy-makers and program specialists, researchers, educators, family service professionals, the media and members of the general public. The Current State of Canadian Family Finances is an annual report which monitors trends in family income, expenditures, savings and debt.
About the Institute
The opinions expressed in this report are those of the author and do not necessarily reflect the views of the Vanier Institute of the Family. Ce rapport est disponible en franais.
94 prom. Centerpointe Drive Ottawa, Ontario K2G 6B1 www.vifamily.ca
The Current State of Canadian Family Finances

2 0 1 0 R e p o r t
Roger Sauv
People Patterns Consulting
f e b r u a r y
2 0 1 1
f e b rua r y 2 0 1 1
TABLE OF CONTENTS
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Technical Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2010 REPORT Introducion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Recession technically over but uncertainty ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Households concerned about economy, jobs and personal finances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Reality check on the unemployment rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Have many of the lost jobs have returned? It depends on the measure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Job losses and gains vary sharply by age and type of work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Youth are big losers in recession and gain little in recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Many core-age workers have found jobs again... about 142,000 have not . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 The 55 and over group just kept on working... and working . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Private sector employment still down by over 100,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Goods producing sector still below the previous peak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Hourly earnings increasing in 2% range . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Household incomes recovering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Employment insurance (EI) cushioned the income decline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Fewer of the unemployed now receive benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Dual incomes one pathway to rising household incomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Consumer spending dipped during recession... but not for long . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Savings rate up but still low . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Debt per household surpasses the $100,000 mark in 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 More warnings about household debt loads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Rising household debt places one million families in vulnerable situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Another look at mortgage debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Housing prices likely to fall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Poverty is on the rise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 There is growing income inequality in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Special Feature on the Middle Class Middle class incomes recover after stagnation through the 1990s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Middle class getting smaller share of total incomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Middle class families and middle class unattached individuals show gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 The middle class household has changed over the last decade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Expenditures on personal care, public transportation, health care and tuition rose through last decade . . . . . . . . . . . . 34 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Appendix A Average incomes of families and unattached individuals, and share of incomes after transfers and income taxes (constant 2008$), 1990, 2000 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Appendix B Rate of low income (poverty) among families and unattached individuals after transfers and income taxes, 1990, 2000 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Appendix C Major components of average net worth per household based on market value (constant 2008$), 1990, 2000 and third quarter 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Endnotes and Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2010 report |
t h e va n i e r i n s t i t u t e o f t h e f a m i l y
List of Charts and Tables Charts
Chart 1 Unemployment rate actual vs. what it would have been if labour force participation rate had remained at pre-recession peak (October 2008), January 2007 - December 2010 Chart 2 Recent trends in total employment, using two Statistics Canada measures (January 2007=100), January 2007 - December 2010 Chart 3 Average hourly earnings,* percentage change over previous year based on a 3-month moving average, January 2007 - December 2010 Chart 4 Average disposable income* per household, using two measures, in constant 2008$, 1990 - 2010 Chart 5 Total Employment Insurance (EI) benefits,* seasonally adjusted 2007Q1 - 2010Q3 Chart 6 Percent change in average incomes* between 1990 and 2008, by sex and household type Chart 7 Percentage of couple families with two or more earners, 1990 - 2008 Chart 8 Personal savings rate, 1990 - 2010 Chart 9 Average debt* per household, in constant 2008$, 1990 - 2010Q3 Chart 10 Mortgage debt per household for households with a mortgage and for all households, in constant 2008$, 1990 - 20103Q Chart 11 Percentage of persons in low income,* 1990 - 2010 Chart 12 Average income after income taxes and transfers of middle class* households, in constant 2008$, 1990 - 2008 Chart 13 Share of transfers, after-tax incomes and income taxes of middle class* households, 1990 - 2008 Chart 14 Average income after income taxes and transfers, and upper and lower income limits, of middle class* families, in constant 2008$, 1990 - 2008 Chart 15 Average income after income taxes and transfers, and upper and lower income limits of middle class* unattached individuals, in constant 2008$, 1990 - 2008
Tables
Table 1 Labour force indicators through recession and recovery periods, by age group and sex Table 2 Percentage share and average after-tax income by household income quintile, 1990, 2000 and 2008 Table 3 Selected household characteristics, middle class households*, 1999 and 2008 Table 4 Average expenditures, middle class households* (current dollars**), 1990 to 2008 Appendix A Average incomes of families and unattached individuals, and share of incomes after transfers and income taxes (constant 2008$), 1990, 2000 and 2008 Appendix B Rate of low income (poverty) among families and unattached individuals after transfers and income taxes, 1990, 2000 and 2008 Appendix C Major components of average net worth per household based on market value (constant 2008$), 1990, 2000 and 3rd Quarter 2010
| t h e c u r r e n t s tat e o f c a n a d i a n f a m i l y f i n a n c e s
f e b rua r y 2 0 1 1
Foreword
Canadian families are finally in six figure territory. Unfortunately it is on the wrong side of the ledger. In its 12th annual assessment of the state of Canadian family finances, the Vanier Institute of the Family reports that average family debt has now hit $100,000. Not only that, the debt-toincome ratio, which measures household debt against income, stands at a record 150%, meaning that for every thousand dollars in aftertax income, Canadian families owe one thousand five hundred dollars. The Institute, Canadas foremost authority on family issues, has been sounding the alarm for many years over the issue of debt stress facing Canadian households. The debt-to-income ratio has been steadily climbing for the past 20 years. In 1990, average family debt stood at $56,800, with a debt-to-income ratio of 93%. The $100,000 figure represents a real increase of 78% over the past two decades. Just as the debt ratio has climbed, the savings rate has slid downward. In 1990, Canadian families managed to put away $8,000, a savings rate of 13.0%. In 2010, that savings rate was down to 4.2%, averaging $2,500 per household. The stress of debt can be seen in many areas of family finances. The number of households which have fallen behind in their mortgage payments by three of or more months climbed to 17,400 in the fall of 2010, up nearly 50% since the recession began. Credit card delinquency and bankruptcy rates also remained higher than pre-recessionary levels.
2010 report |
The report notes that despite recent job gains, governments at all levels need to be concerned about the prospect of rising unemployment as workers who dropped out of the labour market attempt to jump back in and as those who are working part-time hours (over 900,000 workers) continue to seek full-time hours. In particular, families with younger members preparing to enter the workforce face tremendous pressure. Only 5% of the new jobs created since mid 2009 went to the 15-24 age group. A year ago, the Vanier Institute cautioned that for far too many, there is too little income, too much spending, too little saving and too much debt. As governments at all levels craft their budgets for the coming year and look at cutting programs to reduce their deficits, they need to be mindful that the state of Canadian family finances continues to be fragile in many households. The new report from the federal Task Force on Financial Literacy reminds us that the time for action is now that short-term fixes wont be sufficient. Whatever is enough to know and do today will not be enough for tomorrow. The Task Force is calling for a comprehensive strategy designed to strengthen the knowledge, skills and confidence of Canadians to make responsible financial decisions as well as creating an environment that facilitates good choices and affords financial security. We look forward to working with the government to move these important recommendations forward. Thanks again to Roger Sauv, President of People Patterns Consulting, who has worked with us over many years to produce this important annual assessment of family finances in Canada. Ottawa, February 17, 2011
f e b rua r y 2 0 1 1
Highlights
The recession is over but many Canadians are still worried In technical economic terms, the recession is over. While this may be true for total output, the path to recovery has left many people behind. Polls show that many are still worried about the economy, their jobs and their financial situations. Unemployment higher than reported If the rate of participation in the labour force had remained at the level attained in October 2008, the unemployment rate in December 2010 would have been 8.9% rather than the 7.6% that has been reported. The reported unemployment rate may well start to rise again as those who have dropped out of the labour force, for whatever reason, start searching for jobs once again. Shocking job situation for youth Male and female youth aged 15-24 represented only 15% of all job holders at the October 2008 employment peak but experienced over one-half of all the jobs lost between the peak and July 2009. During the recovery period to December 2010, youth captured a mere 5% of all the net new jobs created. Household incomes recover recession losses Real per-household incomes fell by about 0.5% in 2009. By the third quarter 2010, average household incomes had recovered to a level that was approximately equal to 2008 average. This is much sooner than in previous recessions. Savings increased as well but remain low. Debt load reaches $100,000 per household For the first time, the average total accumulated debt per Canadian household crept above the $100,000 mark in late 2010. The average debt load is now equal to 150% of average disposable income of households in Canada. At this time, Canadas household debt-toincome ratio is about equal to that in the United States. Women outpace men in income growth Before-tax incomes, when measured at the individual level, increased by 12% for men between 1990 and 2008. The increase for women was almost double at 23% over the period, but men continue to have higher average incomes. The rich get richer but also pay more income taxes The richest 20% of households was the only group to increase their share of total after-tax incomes between 1990 and 2008, increasing their share from 41.0% to 44.3% over this period. The richest 20% of households are also paying a bigger share of all income taxes. Special feature on the middle class The 1990s were a lost decade for middle class household incomes. After-tax incomes stagnated through the first few years of the 2000s, and then experienced a strong upturn from 2004 to 2008. There are more conveniences in todays middle class homes than just a decade earlier. Certain expenditures, notably on personal care, public transportation, health care and tuition, have increased rapidly over the last decade.
2010 report |
TECHNICAL NOTE
Families are the main focus of this report but the latest detailed Statistics Canada family income indicators only go to the year 2008. (See appendix tables A and B.) More timely information is available for the total personal sector and is used to provide many of the estimates for all households up to the year 2010. Households include both families and unattached individuals. About twothirds of households are family households and thus the recent trends for households provide a good directional guide to what is happening for families. For ease of understanding and to make the results more relevant, most measures have been converted to a per-household or per-family basis. Household numbers for the years 1990 to 2008 are taken directly from Statistics Canada, Income in Canada. Household numbers for 2009 and 2010 are assumed to grow at the same percentage rate as in 2008. In this report, most dollar estimates are in 2008 dollars and thus variations over several years represent changes in real purchasing power after inflation. The term real indicates what would have happened if there had been no inflation. Inflation is measured using the consumer price index. All measures incorporate updates and any recent revisions by Statistics Canada. Much of the analysis relates to the period 1990 to 2010 including the latest year available. The year 1990, the year before the onset of the 1991-92 recession, was chosen as the beginning year in order to highlight longer term changes. Almost all of the background data comes from Statistics Canada1. The author did many additional calculations. Any opinions, errors and omissions are the responsibility of the author. Roger Sauv, People Patterns Consulting, can be reached at 613-931-2476 or peoplepatternsconsulting@sympatico.ca, or at his website www.peoplepatternsconsulting.com.
10
f e b rua r y 2 0 1 1
2010 REPORT Introduction

The task of summarizing the current state of Canadian family finances is always a challenge. The challenge is to provide a timely, objective, informative and readable document covering incomes, spending, savings, debt and other topics of significance to families and households. This has to be done in the context of changing economic, social and demographic environments. Perhaps the most difficult challenge is to convey a sense of the different experiences of Canadian families from statistical trends that track the national average. If there is one message from the 2010 Report is that it is important to look behind the general trends. We find that the Canadian economy did improve throughout 2010, notably in the first half. But many families are still struggling economically. The 12th report on Canadian family finances examines incomes, spending, savings, debt and net worth across family and household types. It also takes a closer look at households in the middle of the income spectrum: who they are and how they have been faring over the past two decades.
Recession technically over but uncertainty ahead
Last year, this report stated that [t]he recession came and a recovery now seems to be underway. The recovery did indeed continue through most of 2010. In aggregate terms, as measured by GDP, the recovery has brought the economy all the way back to where it was before the recession. Similarly, the economy has recouped most, but not all, the job losses experienced through the recession. But the most recent data hints that the upward trend may be slowing for both measures. While total output in the economy has just surpassed its pre-recession level, the pace of growth slowed in the latest quarter of 2010. Similarly, while total employment, as measured by the Labour Force Survey, is nearing its pre-recession level, the advance has also slowed in recent months. As will be shown later in this report, the employment recovery has been very uneven. Another Statistics Canada survey suggests that employment has much further to go to return to pre-recession levels.
Households concerned about economy, jobs and personal finances
While the recession may have ended according to technical indicators of output and total employment, many households in Canada dont feel confident about the economy, are anxious about their job security, and feel that their household finances are in poor shape. A survey by Harris-Decima indicated that consumer confidence hit a post-recession high of 89 in February (2010), but fell for two quarters. Consumer confidence was little changed in November.2 The December Index of Consumer Confidence from the Conference Board of Canada dropped 2.6 points in December to 81 after two straight increases. Confidence levels have slid in seven months of 2010.3 According to a Pollara Poll only 38% of Canadians surveyed feel the Canadian economy will im-
2010 report |
11
prove in the next twelve months compared to 54% who felt that way in December 2009. One in five Canadians feel the Canadian economy will actually worsen in 2011, compared to 14% who felt that way one year ago.4 Nanos Report taken in early October found that 32% of respondents were not at all secure or somewhat not secure about their jobs.5 An Angus Reid survey taken in late October 2010 found that 53% of respondents felt that their personal finances were in good or very good shape while 44% said that their finances were in poor or very poor shape. A significant 12% claimed that their finances were in very poor shape. About 11% worried frequently about being able to pay their mortgage or rent.6
Reality check on the unemployment rate
The official unemployment rate peaked at 8.7% in August 2009 and then fell slowly to 7.6% in December 2010. This good news is tempered by the fact that the unemployment rate remains much higher than the 6.1% recorded before the recession. The number of unemployed now stands at over 1.4 million, up by 298,700 from two years earlier, or by 27%. The growth in job numbers is one reason for the decline of the unemployment rate. It is also true that many people have dropped out of the labour force altogether and this is pushing unemployment down as well. This group includes discouraged workers who have given up the job search and are no longer officially counted as being unemployed. It also includes those who have dropped out for family reasons as well as those who have gone back to school on a full-time basis. If the rate of participation in the labour force (employed plus those looking for a job) had remained at the level attained in October 2008, the unemployment rate in December 2010 would have been 8.9%. This represents an additional 261,000 Canadians who would have been counted as unemployed.7 This calculation does not take into account the number of part-time workers who are only working parttime because they cant find full-time work. Involuntary part-time workers are another key source of hidden unemployment. Between 2008 and 2010, the number of part-time workers working part-time because they could not find full-time work rose by almost 210,000 from 711,200 in 2008 to 920,000 in 2010. The rate of involuntary part-time work involuntary part-time work as a share of all part-time work grew from 22.4% to 27.8% over this period. The unemployment rate may well start to rise again as those who dropped out, for whatever reason, attempt to rejoin the job market. The job market will also have to find employment for the 150,000 to 175,000 people who will enter the labour market each year over the next several years.
12
f e b rua r y 2 0 1 1
CHART 1 Unemployment rate - actual vs. what it would have been if labour force participation rate had remained at pre-recession peak (October 2008), January 2007 - December 2010
% 11 10 9 8 7 6 5
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 2007 2008 2009 2010
Unemployment rate if the labour force participation rate had remained at October 2008 level to December 2010 8.9%
Actual unemployment rate 7.6% 6.1%
Source: Statistics Canada, Labour Force Survey, Catalogue no. 71-001-X. Calculations by People Patterns Consulting
There are two major Statistics Canada surveys that estimate the level of employment on a monthly basis. The best known is the Labour Force Survey, which asks households how they are doing in the job market. It is the only source for the monthly unemployment rate. According to the Labour Force Survey, total employment peaked in October 2008 and then dropped by 427,900 to July 2009 as the recession hit hard and fast. Since that low point to December 2010, the economy has created 398,100 net new jobs. The bad news is that the growth in employment has flattened out since mid-summer with very little growth in the last several months. The second major survey of all employers in Canada, the Survey of Employment, Payrolls and Hours (SEPH), paints a less optimistic picture.8 The number of jobs in November 2010 was 84,000 below the October 2008 level. The rate of employment growth has also slowed according to this survey.
Have many of the lost jobs have returned? It depends on the measure
2010 report |
13
CHART 2 Recent trends in total employment, using two Statistics Canada measures (January 2007=100), January 2007 - December 2010
104 103 102 101 100 99

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
Employment based on survey of households
Employment based on survey of firms
2007
2008
2009
2010
Source: Statistics Canada, Labour Force Survey, Catalogue no. 71-001-X, Employment, Earnings and Hours, Catalogue no. 72-002-X. Calculations by People Patterns Consulting
Job losses and gains vary sharply by age and type of work
Whether you feel that the recession is over or not, or that the recovery has taken hold or not, depends on who you are and on the type of work that you do. Table 1 provides some insights into how various groups have been impacted by the recession and the recovery. These numbers are based on the monthly Labour Force Survey. Male youth between the ages of 15 and 24 lost 149,900 jobs during the October 2008 to July 2009 period and have recovered only 19,800 jobs since then. Based on the latest data, only 13.2% of the lost jobs have returned. Female youth aged 15-24 have not been spared. They lost 74,400 jobs during the downturn and have regained only 1,900 positions or 2.6% of all jobs lost since then. Male and female youth aged 15-24 represented only 15% of all job holders at the October 2008 employment peak but experienced over one-half of all the jobs lost between the peak and July 2009. During the recovery period to December 2010, youth captured a mere 5% of all the net new jobs created. This does not bode well for unemployed youth or for new young labour force entrants. It will certainly exacerbate the problems young people experience in financing post-secondary education. This will force more students to increase their already high debt loads and put more pressure on families for financial support. A recent Statistics Canada study found that many students were highly indebted as more students are relying on student loans to help finance their postsecondary education. Between 1995 and 2005, the student borrowing rate among graduates increased from 49% to 57%, as did the average debt from student loans ($15,200 and $18,800). A small but growing proportion of borrowers are graduating with debt loads of $25,000 or more.9
Youth are big losers in recession and gain little in the recovery
14
f e b rua r y 2 0 1 1
Many core-age workers have found jobs again about 142,000 have not
Jobs held by men aged 25-54 plummeted by 192,000 from October 2008 to July 2009 but have gained back 118,400 since then. This represents a net loss of 73,600 over the entire period to December 2010. Women aged 25-54 lost about half as many jobs as men did (-97,900) in the downturn but have gained back only one-quarter as many (+29,700) during the recovery period. In December 2010, there were 68,200 fewer women aged 25-54 with jobs than in October 2008. By the end of 2010, job losses among core-aged workers still numbered about 141,800 less than the employment peak in October 2008. The percentage of families with two incomes dipped during the recession due to job losses among coreaged workers. As a result, a growing number of families were likely living a dual-income lifestyle and supporting a dual-income debt load, but with only one income.
The 55 and over group just kept on working and working
Both men and women aged 55 and up continued to experience job increases during the recession, albeit at a reduced rate. Job growth picked up pace during the recovery period ( July 2009 to December 2010). The 55+ group comprised only 16% of all job holders in October 2008, had no net job losses during the downturn, and still captured 57% of the jobs created during the recovery period up until December 2010. The increase in employment among older workers points to significant anxiety concerning their readiness for retirement within the near to medium-term future. A poll conducted for Investors Group found that 30% of baby boomers believe they wont have enough money to pay for their basic living expenses once they retire.10
Private sector employment still down by over 100,000
Government sector employees did lose jobs during the downturn (-36,800) but then more than made up for these job losses during the recovery period (+132,700) for a net gain of 95,900 over the entire period. It is good to remember that those who lost their jobs during the downturn may not be the ones that were hired in the recovery period. By contrast, private sector companies still had 108,700 fewer employees in December 2010 than at the employment peak in October 2008. Private sector employment growth has picked up recently. This is good news as the deadline for the wind down of government stimulus programs approaches in March 2011. There are still concerns though that private sector job creation wont fill the gap, and job losses may rise once again. Self employment typically increases during recessions,11 even as the total number of jobs falls, and this was certainly true over the 2008-09 recession. Economic necessity compels many laid-off workers to try self-employment in order to make ends meet. As expected, self-employment has fallen more recently.
2010 report |
15
Similarly, the average number of hours worked per week dipped during the recession and then recovered. In December 2010, average hours worked had returned to pre-recession levels.
TABLE 1 Labour force indicators through recession and recovery periods, by age group and sex
Labour force indicators
December 2010 7.6% 18,557,800 1,412,500 17,145,300 13,835,800 3,309,600
October 2008 to July 2009 +2.5 pp 33,500 461,600 -427,900 -446,100 18,200
July 2009 to December 2010 -1.0 pp 235,300 -162,900 398,100 337,200 61,000
October 2008 to December 2010 +1.4 pp 268,800 298,700 -29,800 -108,900 79,200
Percentage Point Change Unemployment rate (%) Total labour force (15+) Unemployed (15+) Employed (15+) Full-time (15+) Part-time (15+) Employed (15+) Males (15+) Females (15+) Males (15-24) Females (15-24) Males (25-54) Females (25-54) Males (55+) Females (55+) Employed (15+) Goods producing Service producing Employed (15+) Self-employed Public sector employees Private sector employees 2,620,200 3,554,500 10,970,600 69,400 -36,800 -460,600 -86,400 132,700 351,900 -17,000 95,900 -108,700 3,788,800 13,356,600 -358,300 -69,600 131,200 267,000 -227,100 197,400 9,006,500 8,138,800 1,225,400 1,231,200 6,130,400 5,548,000 1,650,800 1,359,600 -319,000 -108,900 -149,900 -74,400 -192,000 -97,900 22,800 63,300 265,800 132,300 19,800 1,900 118,400 29,700 127,700 100,700 -53,200 23,400 -130,100 -72,500 -73,600 -68,200 150,500 164,000 Change in Thousands
Note: Shaded cells indicate a deterioration for indicator between periods shown. Source: Statistics Canada, Labour Force Survey, Catalogue no. 71-001-X. Calculations by People Patterns Consulting.
16
f e b rua r y 2 0 1 1
Goods producing sector still below the previous peak
Covering the entire period, a loss of 227,100 jobs in the goods producing sector was almost offset by a gain of 197,400 jobs in the service sector. Over the period, the biggest job losses in the goods sector were in manufacturing (-175,300), while the biggest gains in the service sector were in health and social assistance (+131,000).
Hourly earnings increasing in 2% range
The pre-recession period was marked by labour shortages in many industries and occupations in 2007 and part of 2008. This resulted in strong advances in average hourly earnings during 2007. These increases began to slow during the second half of 2008 and continued to shrink until the end of 2009. Since then, average earnings have stabilized with annual increases of about 2.2% compared to the same month of the previous year. Inflation, as measured by the Consumer Price Index, has advanced by about 2% over the course of 2010. As such, hourly earnings have registered a very slight improvement in real terms. Future wage increases are likely to continue to be restrained as major negotiated wage settlements have also averaged near the 2% level during each of the first three quarters of 2010.12 According to a Bank of Canada survey covering the fourth quarter 2010, only 16% of firms indicate that they are experiencing labour shortages that restricts their ability to meet demand. This stood at 40% before the recession hit.13
CHART 3 Average hourly earnings* % change over previous year based on a 3-month moving average, January 2007 - December 2010
% 6.0 +4.9% 5.0 4.0 3.0 2.0 1.0 0.0
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
+2.2%
2007
2008
2009
2010
Source: Statistics Canada, Labour Force Survey, Catalogue no. 71-001-X. Calculations by People Patterns Consulting.*Figures not adjusted for inflation
2010 report |
17
Household incomes recovering
This report examines household incomes using two different measures. The most up-to-date measure of average income per household is based on Statistics Canadas National Income and Expenditure Accounts. An estimate of average household income to the third quarter 2010 is shown in Chart 4. The second measure of average household income is taken from Statistics Canadas Income in Canada, 2008 statistical tables, based on the Survey of Labour and Income Dynamics. These detailed tables are comprehensive, but only provide information up to the year 2008, and therefore do not record the full impact of the recession. See Appendix Table A for more detailed trends by type of household over the 1990 to 2008 period. As shown in Chart 4, both measures have moved in a similar direction over the last two decades and both tell very similar stories. From the standpoint of income gains, the 1990s might best be described as a lost decade. Average disposable household incomes fell in the first half of the 1990s, during and after the recession, and did not return to 1990 levels until the end of the decade. This was followed by several years of sluggish growth. Beginning in 2004, the economy entered a strong expansionary phase till mid-2008. Then the recession hit. Earliest indications, based on National Income and Expenditure Accounts data, suggest that real disposable incomes per household fell by about 0.5% in 2009, registering the first decline since early in the decade. The decline would have been larger if consumer prices had not stagnated in 2009. By the third quarter 2010, average disposable incomes had recovered to a level that was approximately equal to the 2008 average. Average incomes have rebounded much more quickly than during past recessions.
CHART 4 Average disposable income* per household, using two measures, in constant 2008$, 1990 - 2010
$70,000 $65,000 $60,000 $55,000 $50,000 $45,000 $40,000 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010Q3 Lost decade Reported by Statistics Canada (See appendix A for more detailed information)
Calculations based on National Accounts Flat period
Recession Strong expansion Projected to 2010Q3
Recovery
Source: Statistics Canada, National Income and Expenditure Accounts, Catalogue no. 13-019-XWE, Income in Canada, Catalogue no. 13-F0022XIE, Consumer Price Index, Catalogue no. 62-001-X. Calculations by People Patterns Consulting * Disposable income is total income, which includes government transfers, less income tax.
18
f e b rua r y 2 0 1 1
The Employment Insurance (EI) program responds automatically to changes in unemployment rates providing help to households through difficult transitions. This is especially so in times of high and rising unemployment. Even so, the next section shows that the current EI program has become less responsive than it was in the past. Before the onset of the recent recession, the EI program paid out about $13 billion each quarter (as measured in current dollars on an annual basis). This rose sharply to $20.4 billion by the end of the fourth quarter of 2009, with payments remaining relatively high to late 2010. Just before the recession, EI benefits represented about 1.6% of all wages and salaries earned in the economy. This rose to 2.5% of all wages and salaries at the peak during the fourth quarter of 2009, or up by 55% in dollars terms. This provided help to those that were unemployed and qualified for EI benefits and to the economy as a whole.
CHART 5 Total Employment Insurance (EI) benefits,* seasonally adjusted, 2007Q1 - 2010Q3
Employment insurance (EI) cushioned the income decline
Billions $ 22 20 $20.4 B 18 16 14 12 10
2007Q1 Q2 Q3 Q4 2008Q1 Q2 Q3 Q4 2009Q1 Q2 Q3 Q4 2010Q1 Q2 Q3
$18.1 B B
$13.2 B B $12.4 B B
Source: Statistics Canada, National Income and Expenditure Accounts, Catalogue no.13-010-X. * Billions of dollars at annual rates.
Fewer of the unemployed now receive benefits
In 2009, about 42% of the unemployed received EI benefits compared to 40% in 2008 and 45% in 2003.14 Many of the unemployed did not receive EI benefits because they did not contribute to the program (self-employed), contributed but had insufficient hours of work to qualify, or were deemed to have left a job voluntarily and thus did not qualify. A longer term trend reveals that there is now reduced access to the EI program. The Mowat Centre for Policy Innovation found that in 2008-09, only 46% of unemployed Canadians received EI benefits, compared with 71% and 76% in the recessions of 1981-82 and 1990-91.15 In the 2008/2009 fiscal year, about two-thirds of the dollar value of the EI benefits was paid to the unemployed. Other payments were for sickness, maternity, parental, compassionate care, fishing benefits and work sharing.16
2010 report | 19
Dual incomes one pathway to rising household incomes
Incomes can be examined from the perspective of the individual. Incomes can also be examined from the household vantage point.17 This section attempts to show how these two measurements are linked. When measured at the individual level, the average before-tax income18 of men increased by 12% over the period from 1990 to 2008. The increase for women was almost double at 23%, but men continued to have higher average incomes. At the individual level, both men and women registered record high average incomes in 2008. The rising level of individual incomes for both sexes, combined with more dual-income couple families, facilitated the increase of average after-tax incomes of couple families between 1990 and 2008, by 26%. In 1990, womens incomes accounted for 36% of total income generated in Canada. This increased to 40% in 2008, but was still less than womens 48% share of employment in that year. This reflects continuing wage inequality between the sexes. Based on incomes from all sources, women in 2008 received only 64% of the average incomes that men did.19 Part of the difference in womens and mens income is related to earnings and hours worked: even among full-time workers, women work fewer hours than their male counterparts. There is evidence that the wage gap is closing, though, notably among younger workers. Young women are more likely to have high levels of education, work full-time, and be employed in different types of jobs than their older female counterparts. As well, the economic fortunes of some groups of men have fallen, as sources of employment in well-paid manufacturing, for example, have disappeared.
CHART 6 Percentage change in average incomes* between 1990 and 2008, by sex and household type
% 50 45 40 35 30 25 20 15 10 5 0 All males All females Couple families Female lone-parent families Male lone-parent families All unattached individuals +12% +23% +26% +22% +19% Individual income before income taxes Household income after income taxes +43%
Source: Statistics Canada, Income in Canada, Catalogue no. 13-F0022XIE. * Income figures adjusted for inflation.
20
f e b rua r y 2 0 1 1
At the level of households and families, income gains have been supported by having multiple earners within the family. In 1990, about 80% of couples with children had two or more earners, while 83% did so in 2008, down a bit from the peak in 2007. Couples without children followed a similar pattern with 67% having dual incomes in 1990 and 71% in 2008. Not only are there more dual-income couples but a growing percentage of women are earning more than their spouses. In 1990, about 20% of wives earned more than their husbands and this increased to 29% in 2008. This trend has numerous implications for family dynamics, including the growth in mens participation in child care and domestic labour.20 The economic fortunes of female lone parents have also improved. Female lone-parents increased their labour force participation from 73% to 84% between 1990 and 2008. Rising incomes for women combined with higher participation in the paid work force produced a 43% increase in the average after-tax incomes of female lone parents over this period. The increase for male lone-parent families was 22%. Incomes of unattached individuals of either sex increased the least over the 1990-2008 period (+19%). Unattached individuals, especially those under 65 years of age, have seen the smallest gains in incomes and the smallest improvement in rates of low income (poverty). Indeed, the economic well-being of many groups of unattached individuals, such as young men from newcomer communities, has deteriorated. See Appendix A and B for more details.
CHART 7 Percentage of couple families with two or more earners, 1990 - 2008
% 90 85 80 75 70 65 60
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
% of couple families with children with 2 or more earners
83%
80% 77% 71%
67% 63%
% of couple families without children with 2 income earners
Source: Statistics Canada, Income in Canada, Catalogue no. 13-F0022XIE. Calculations by People Patterns
2010 report |
21
Consumer spending dipped during the recession but not for very long
Households cut back on spending as the recession hit. Based on the National Income and Expenditure Accounts, total expenditures per household (adjusted for inflation) fell by about 1% in 2009. The dip was short-lived such that by the third quarter of 2010, total expenditures had returned to the average level of spending recorded in 2008. Retail sales, a narrower monthly measure of spending in retail outlets, followed a similar path.21 This was a much faster recovery than in previous recessions. Spending was supported by increasing debt loads during both the downturn and recovery periods.
Savings rate up but still low
Canadian households increased their savings rate during the recession, rising from 2.8% of disposable incomes in 2007 to 6.1% in 2009. The savings rate averaged 4.2% during the first three quarters of 2010. An improvement in savings is typical in recessionary periods as individuals become anxious about their futures. Despite the recent improvement, the savings rate remains significantly lower than the 13% rate attained during the recession of the early 1990s and the 20% rate attained during the 1980s recession.
CHART 8 Personal savings rate, 1990 - 2010 (Savings as % of disposable income)
% 16 14 12 10 8 6 4 2 0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010Q3
13.0%
4.2% (average of first 3 quarters 2010)
Source: Statistics Canada, National Income and Expenditure Accounts, Catalogue no. 13-019XWE. Calculations by People Patterns Consulting
A tangible measure of the difficulty of saving is reflected in the percentage of tax filers who make a contribution to Registered Retirement Saving Plans (RRSPs). In 2009, about 24% of tax filers made a contribution, the lowest since a peak of 30% in 1997. For those who contributed, the median contribution remained near the $2,600 mark over the entire period.22
22
f e b rua r y 2 0 1 1
Canadians are also less likely to give to charitable causes than in the past. In 2009, about 23% of tax filers claimed a charitable donation on their income tax forms compared to 26% in 1997, and 30% in 1990. However, those that do donate now give a larger amount, as the median donation more than doubled between 1990 and 2009, from $120 to $250 (in constant dollars).23 The six-digit debt number has arrived. The average total accumulated debt per Canadian household crept above the $100,000 mark in late 2010. This represents a 78% advance in real terms since 1990 and a 46% hike since 2000. (See Appendix Table C for details on the assets, debt and net worth of Canadian households.) Not only is $100,000 an important symbolic threshold but the average debt load is now equal to 150% of the disposable income of households in Canada. At this time, Canadas debt-to-income ratio is about equal to that in the United States. Over the last few years, the Canadian ratio continued to increase while the U.S. ratio has been falling and is still doing so. Under current trends, the Canadian ratio could easily reach 160% within the next two years.
Debt per household surpasses the $100,000 mark in 2010
More warnings about household debt loads
This report has warned about the dangers of excessive debt for the last few years. Other voices are now calling for increased caution. The Bank of Canada is warning Canadians to be careful. The Banks advice to Canadians has been consistent. We have weathered a severe crisis one that required extraordinary fiscal and monetary measures. Extraordinary measures are only a means to an end. Ordinary times will eventually return and, with them, more normal interest rates and costs of borrowing. It is the responsibility of households to ensure that in the future, they can service the debts they take on today.24 The Certified General Accountants Association of Canada (CGA) is very blunt in their assessment: The rapidly deteriorating situation of the household sectors balance sheet should be viewed as alarming.25 The Office of the Superintendant of Bankruptcy Canada issued a special note in early 2011. Its important for Canadians to be aware of the risks and possible consequences of taking on a large amount of debt. Significant events, such as a change in employment or income, a change in family status or a serious illness, can cause a huge drain on finances. The combination of a large amount of debt and the sudden occurrence of a major life event could lead to the harsh realities of insolvency.26
2010 report |
23
CHART 9 Average debt* per household, in constant 2008$, 1990 - 2010Q3

$110,000 $100,900 $100,000 $90,000 $80,000 $70,000 $60,000 $50,000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010Q3
Total household debt (consumer credit, loans and mortgage debt and "other")
$56,800
Consumer credit, loans and mortgage debt only
Source: Statistics Canada, National Balance Sheet Accounts, Catalogue no. 13-022-XWE, Income in Canada, Catalogue no. 13-F0022XIE, Consumer Price Index, Catalogue no. 62-001-X. Calculations by People Patterns Consulting. * Average includes households with debt and those without debt.
Rising household debt places one million families in vulnerable situation
Much of the expansion in credit growth has been due to record low interest rates. Households have been able to take on higher levels of debt since the cost of borrowing has been, and remains, relatively low. The last row in Appendix Table C indicates that interest payments on all outstanding debt were equal to only 7% of disposable incomes in the third quarter 2010. Low interest rates have saved many households from severe distress but led many more into further debt. These low rates will not continue indefinitely. Rates will rise in the near future and cause further stress when they do. This 7% ratio excludes payments required to repay the debt itself.
%
While there has been some improvement lately, current measures of stress are all up significantly from the pre-recession period. For example: In October 2010, some 17,400 mortgages were in arrears by three or more months. This compares to 11,500 before the recession began.27 This is an increase of 50%. The 90-day delinquency rate on credit cards increased from 0.88% before the recession to a peak of 1.34% in early 2010, or over 50% higher. The rate fell to 1.13% in July 2010, still 28% higher than the pre-recessionary level.28 About 32,300 Canadians became insolvent in the third quarter 2010. This is an improvement from earlier in 2010 but still 12% higher than pre-recession levels.29 According to the Bank of Canada, about 6.5% of households currently have a high debt service ratio (DSR) of 40% or more relative to their disposable incomes (debt here includes interest as well as payments on the principal loan). The 10-year average is 6.1%.30 These high DSR households are in a very
24
f e b rua r y 2 0 1 1
vulnerable position; the Bank of Canada model assumes that one out of four households in this situation is likely to default. In the event of an economic downturn, the number of vulnerable households would grow. The Bank of Canada has estimated that the proportion of households with high DSRs would rise to 7.8% in the event of a significant rise in unemployment in the next few years. This would represent 1.2 million to 1.4 million high-debt households by 2012, compared to 950,000 currently.31
Another look at mortgage debt
The average mortgage debt per household currently stands at about $63,000. This figure includes households that hold mortgages and those that do not. Just over one-half of Canadian homeowners (55%) have a mortgage. (See Appendix Table C for information on the average amount of mortgage debt among all households.) The average mortgage debt of households with mortgages was about $172,000 in late 2010 (in constant 2008 dollars). According to the 2005 Survey of Financial Security, young homeowners are more likely to hold mortgages than older homeowners. About 90% of homeowners under the age of 35 had a residential mortgage in 2005. This falls to 81% for those aged 35-44, to 60% for those aged 45-54, down further to 38% for those aged 55-64, and then down to only 12% for those aged 65 and over.32 Evidence suggests that the percentage of homeowners with a mortgage increased during the 1990s and the early 2000s and then stabilized. The average size of mortgages also grew in real terms, slowly in the 1990s and through the first half of the 2000s, and then much more steeply between 2005 and 2009, slowing somewhat in 2010. Of the total percentage increase in size of average mortgages (+45%) over the entire two decades, about three-quarters (+33%) occurred during the 2005 to 2010 period.
CHART 10 Mortgage debt per household for households with a mortgage and for all households, in constant 2008$, 1990 - 2010Q3
$200,000 $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010Q3
$172,000 Average amount of mortgage outstanding by those who have a mortgage
Average amount of mortgage outstanding including those with a mortgage and those without a mortgage
$63,200
Source: Statistics Canada, National Balance Sheet Accounts, Catalogue no.13-022-XWE, Income in Canada, Catalogue no. 13-F0022XIE, Consumer Price Index, Catalogue no. 2-001-X. Calculations by People Patterns Consulting
2010 report |
25
In November 2010, the Multiple Listing Service (MLS) average residential selling price was $344,000, equal to 5.1 times the average household disposable income. This compares to an average of 3.7 times over the last two decades, and only 3.9 times as recently as 2004. The increase in housing prices was mostly due to record low interest rates, lower down payment requirements, and longer amortization periods over which to pay back the mortgage. This created increased demand for homes among consumers and has contributed to the makings of a housing price bubble. As suggested in last years report, the conditions are still in place for a correction in house prices; when and by how much is the difficult question. The when seems to be getting closer and closer or may have already arrived. Over time, the price decline could easily be in the double digit range. It is well to remember that U.S. house prices have fallen by more than one-quarter since 2006. Falling house prices may be good news for new home buyers but will erode the assets and balance sheets of many Canadian homeowners. Canada does not have an official poverty rate. The most commonly used measure is Statistics Canadas After-tax Low Income Cut-off (more details provided in Appendix B). Using this measure, the rate of low income declined from 12.5% in 2000 to 9.4% in 2008. The number of persons living in poverty declined from 3.7 million to 3.1 million over this period. But what happened in 2009 and 2010? Statistics Canada wont have an estimate for 2009 until June 2011 and wont have an estimate for 2010 until June 2012. The Hunger Count survey by Food Banks Canada provides one way to estimate poverty rates over the 2008-2010 period. Each March, Food Bank Canada fields a survey of food bank users. According to their 2010 report, Hunger Count 2010, in March 2010, 867,948 separate individuals were assisted by a food bank in Canada. This is an increase of 9.2% over March 2009 and follows an 18% jump in usage between 2008 and 2009.33 (There is no double counting since each person is only counted once for the month even if they may have used the food bank more than once.) Like unemployment, food bank use tends to track the rate of low income. Applying the same rate of growth in food bank usage to the incidence of low income, it is reasonable to assume that the poverty rate rose by three percentage points between 2008 and 2010 to 12.5% in 2010 or back to where it was in the year 2000. The 2010 estimate represents roughly 4.2 million children and adults.
Housing prices likely to fall
Poverty is on the rise
26
f e b rua r y 2 0 1 1
CHART 11 Percentage of persons in low income,* 1990 - 2010

% 14 13 12 11 10 9 8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 After-tax Low Income Cut-off (LICO-IAT) (See appendix B for more detailed information) 9.4% 12.5% Projected low income rate based on trends in food bank usage 12.5%?
Source: Statistics Canada, Income in Canada, Catalogue no. 13-F0022XIE. Projections by People Patterns Consulting based on Canada Food Banks, Hunger Count 2010. Poverty measure: Percentage of persons with after-tax incomes below Statistics Canada's Low Income Cut-off.
There is growing inequality in Canada
Poverty trends present a picture of the economic struggles of households at the bottom of the income ladder. At the same time, it is important to consider the income trends of households across the income spectrum and the size of the gap between different groups of Canadian families. Even as average household incomes improved through much of the last decade, Table 2 reveals that income inequality was growing. The share of total after-tax incomes shrank for the bottom four fifths (or quintiles) of households. The top 20% of households was the only income group to receive a larger share of the total income pie (from 41.0% in 1990 to 44.3% in 2008) over the period. As noted, all income groups experienced real growth in after-tax incomes between 1990 and 2008. That is where the good news ends. The percentage increases in incomes was smallest for the poorest fifth of households (+8%), while the richest 20% had the largest increases (+31%) over the period. In 1990, the richest 20% took in 7.5 times more income than did the poorest 20%. By 2008, the richest took in 9.1 times more income than the poorest 20%. In dollar terms, the increase in incomes of the richest 20% (+$31,300) was much larger than the increases for all of the other income groups combined (+$20,700). In addition, the additional income received by the richest 20% (+$31,300) from 1990 to 2008 was almost equal to the 2008 average annual after-tax income of the lower middle fifth income quintile ($31,500). And it was the very wealthiest Canadians that experienced the greatest income gains. A new report by Armine Yalnizyan of the Canadian Centre for Policy Alternatives used Revenue Canada tax statistics at the individual level to show that the top 1% of tax filers took in 15.7% of total after-tax incomes in 2007 compared to about 10% in 1990.34
2010 report |
27
TABLE 2 Percentage share and average after-tax income by household income quintile, 1990, 2000 and 2008
Households by quintiles* Poorest fifth Lower middle fifth Middle fifth Upper middle fifth Richest fifth
% share of after-tax income % 1990 2008 change 4.9% -0.6pp 5.5% 11.4 17.5 24.7 41.0 10.6 16.3 23.9 44.3 -0.8pp -1.2pp -0.8pp +3.3pp
Average after-tax income % Dollar 1990 2008 change change $13,400 $14,500 +8% +$1,100 $27,900 $43,000 $60,700 $100,600 $31,500 $48,500 $71,200 $131,900 +13% +13% +17% +31% +$3,600 +$5,500 +$10,500 +$31,300
* each group has 20% of all households Source: Statistics Canada, Income in Canada, Catalogue no. 13-F0022XIE. Calculations by People Patterns Consulting.
While the richest 20% of households are getting a bigger piece of the income pie, they are also paying a larger share of the income taxes. In 1990, the richest 20% paid 54.2% of all the income taxes collected. By 2008, they paid 61.5% of all the income taxes collected. The share of the tax bill declined for each of the other four income quintiles. Canada has a progressive income tax system the rate of taxation of income rises as incomes rise. Statistics Canada uses what is called the implicit income tax rate to estimate how each household income group is impacted by income taxes. The measure is calculated as the average income tax paid expressed as a percentage of average total income. In 2008, the poorest fifth of households paid income taxes equal to about 4% of their total incomes. This increased to 8% for the lower middle fifth, to 12% for the middle fifth, to 15% for upper middle fifth, and to 22% for the richest fifth of households. The implicit income tax rate for each income group is lower than it was in 1990, with the biggest declines occurring in 2001. This general overview of the distribution of incomes clearly shows that inequality is growing in Canada. The special feature, which follows, takes a closer at how the middle class is doing.
28
f e b rua r y 2 0 1 1
Special Feature on the Middle Class

Concern about rising levels of debt and high levels of unemployment over the past two years has highlighted the economic struggles of Canadian households. Polling data show that families continue to be very anxious about their financial prospects. These concerns are not confined to low income households. Middle income households are also worried about their economic fortunes in 2011. This special feature of The Current State of Canadian Family Finances looks at middle class households to better understand the experiences of this key group. Are middle class households getting smaller or bigger? Are times getting better or worse in terms of income? Are there more earners per household? What are middle class households spending their hard earned dollars on? What kind of spending pressures are they facing? The Current State of Canadian Family Finances 2005 Report looked at the middle class as well.35 At that time, we noted that there was no generally accepted way of defining the middle class. Again, as in the previous report, we simply define the middle class as that group that comprises the middle 20% of households in terms of income. As such, 40% have less income than this middle class and 40% have more income than this group.
Middle class incomes recover after stagnation through the 1990s
Chart 12 shows that the 1990s were a lost decade for middle class households. The recession of the early 1990s resulted in a significant drop in average after-tax incomes, dropping from $43,000 in 1990 to $39,700 in 1997. Incomes did not return to 1990 levels until 2001 or more than a decade later. This was followed by a period of stagnation and then strong income growth from 2004 to 2008. (A detailed picture of household income through the recession isnt available yet.)
CHART 12 Average income after income taxes and transfers of middle class* households, in constant 2008$, 1990 - 2008
* refers to the middle 20% of households by income, households include families of two or more and unattached individuals $50,000 $49,000 $48,000 $47,000 $46,000 $45,000 $44,000 $43,000 $42,000 $41,000 $40,000 $39,000 $38,000 $48,500
$43,000 $42,400 Lost decade
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Source: Statistics Canada, Income in Canada, Catalogue no. 13-F0022XIE
2010 report |
29
Middle class getting smaller share of total incomes
As noted earlier, the middle class has seen its share of after-tax incomes drop, from 17.5% in 1990 to 16.3% in 2008. This is less than their 20% share of all households. (Check Table 2 for the shares of the other income groups in 1990 and 2008.) The middle class share of government transfers increased slightly from 20.2% in 1990 to 21.4% in 2008. In 1990, the middle class received an average of about $7,500 in government transfers and $8,700 in 2008 (in constant 2008 dollars). In contrast, the middle class has contributed a declining share of all the income taxes collected over the period, falling from 14.0% in 1990 to 11.3% in 2008. Not only did the middle class pay a smaller share of income taxes but the actual dollar amount also decreased as well, from an average of $8,400 in 1990 to $6,700 in 2008 (in constant 2008 dollars). The more favourable tax situation started in the second half of the 1990s. In 1990, the middle class paid about $900 more in income taxes than it received in government transfers. By 2008, the middle class received about $2,000 more in transfers than it paid out in income taxes. Government policies have had some positive effects on lowering the net burden on middle class households. Changes in other types of taxes and user fees are not included in this analysis.
CHART 13 Share of transfers, after-tax incomes and income taxes of middle class* households, 1990 - 2008
% 26 24 22 20 18 16 14 12 10 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 20.2% Share of government transfers 21.4% * refers to the middle 20% of households by income, households include families of two or more and unattached individuals
17.5%
Share of after-tax incomes 16.3%
14.0%
Share of income taxes paid 11.3%
Middle class families and middle class unattached individuals show gains
It is interesting to look at families of two or more separately from persons who are unattached. Chart 14 and 15 show the income trends for both groups over the past two decades. The average after-tax incomes of families of two or more rose from $54,100 in 1990 to $64,200 in 2008, or an increase of 19%, the bulk of the increase coming in the last few years. By 2008, the upper range for this middle class group was $74,100 while the lower range was $55,200.
30
f e b rua r y 2 0 1 1
CHART 14 Average income after income taxes and transfers, and upper and lower income limits, of middle class* families, in constant 2008$, 1990 - 2008
$75,000 $70,000 $65,000 $60,000 $55,000 $50,000 $45,000 $40,000 $35,000 1990 1992 $54,100 $47,100 $61,500
$74,100 Upper income limit - no family has more income than this amount $64,200 $55,200
Average income
Lower income limit - no family has less income than this amount 1994 1996 1998 2000 2002 2004 2006 2008
Source: Statistics Canada, Income in Canada, Catalogue no. 13-F0022XIE * refers to the middle 20% of families by income
The average after-tax incomes of unattached individuals (persons living alone or with someone with whom they are not related) advanced from $21,400 in 1990 to $25,300 in 2008, an increase of 18%. By 2008, the upper range for this middle class group was $30,600 while the lower range was $20,800.
CHART 15 Average income after income taxes and transfers, and upper and lower income limits of middle class* unattached individuals, in constant 2008$, 1990 - 2008
$32,000 $30,000 $28,000 $26,000 $24,000 $22,000 $20,000 $18,000 $16,000 $14,000 1990 1992 1994 1996 1998 2000 2002 2004 2006 $21,400 Average income $18,000 Lower income limit - no unattached individual has less income than this amount $25,400 Upper income limit - no unattached individual has more income than this amount
$30,600
$25,300
$20,800
2008
2010 report |
31
The middle class household has changed over the last decade
Table 3 presents selected characteristics of households that make up the middle income class. Some of the characteristics have changed a lot over the last decade while others have not. The shaded cells in the table highlight those characteristics that have changed the most. The changes are classified in the last column using a simple ranking system focusing on the general direction of change (1) up a lot, (2) up a bit, (3) no change, (4) down a bit and (5) down a lot as determined by the author. The average age of the head of the household was up a bit from 47 years in 1999 to 49 years in 2008. The average size of the middle class household was down a bit, from 2.6 persons per household in 1999 to 2.5 persons in 2008. The age composition of those residing in middle class households has changed more significantly. The number of children aged less than 15 years old was down a lot over the decade as was the number of adults aged 25 to 64. The makeup of households mirrors some of the changes in society as a whole. The percentage of households comprised of one-person households moved up a lot from 18% of all middle class households in 1999 to 23% in 2008 while the percentage of couple households and lone-parent families was down a bit. The earning structure of the middle class has also gone through some significant changes over the last decade. The percentage of households with only one full-time earner went down a lot from 1999 (56%) to 2008 (49%). This was offset by many more two full-time earner households (from 12% to 16%) and an increase in households with no full-time earners at all. More women in couple families were working full-time while fewer men in these same families were doing so. The ownership structure hardly changed at all during the decade. The percentage who owned their homes (69%) was unchanged, as was the percentage of these owners who had a mortgage on their homes (55%). There were a few more single detached homes, more of the homes had seven or more rooms, and there were a few more microwaves ovens. Microwaves were already near their saturation point in 1999 as almost everyone already had one. Many other types of equipment became significantly more common in middle class households. This was so especially so for dishwashers, air conditioners, cell phones, home computers, and internet use from the home. Cell phones and internet use from the home made the biggest advances soaring from about 30% in 1999 to about 80% in 2008. Owned and leased vehicles were relatively flat while the proportion of two-vehicle households moved up.
32
f e b rua r y 2 0 1 1
TABLE 3 Selected household characteristics, middle class households*, 1999 and 2008
Household characteristics
1999 Average age
2008
Direction of change (1999 to 2008) Up a bit Down a bit Down a lot Up a bit Down a lot Up a bit Up a lot Down a bit Down a bit No change Up a lot Down a lot Up a lot Up a bit
Age of reference person (head) Household size Number of children aged less than 15 Number of youths aged 15 to 24 Number of adults aged 25 to 64 years Number of seniors aged 65+ One-person households Couple households Lone-parent households Other households With no full-time earner With one full-time earner With two or more full-time earners With wife employed full time
47 Average household size 2.6 persons Average age structure 0.54 persons 0.28 1.51 0.29 Household types (%) 18% 66 9 7 Earner characteristics (%) 31% 56 12 16
49 2.5 persons 0.46 persons 0.29 1.43 0.33 23% 63 7 7 35% 49 16 18
35 33 Down a bit With husband employed full time Facilities and equipment characteristics, percentage of households(%) Homeowner on December 31 Owners with a mortgage Rented Single detached 7 or more rooms Microwave oven Dishwasher Air conditioner Cellular telephone Home computer Internet use from home Owned vehicles (autos, trucks, vans) 2 or more owned vehicles Leased vehicles 69% 55 31 56 37 92 50 35 31 51 30 85 35 9 69% 55 31 59 40 96 63 50 78 86 79 84 37 9 No change No change No change Up a bit Up a bit Up a bit Up a lot Up a lot Up a lot Up a lot Up a lot Down a bit Up a bit No change
*refers to the middle 20% of households by income Note: Shaded cells indicate the most significant changes during the decade Source: Statistics Canada, Survey of Household Spending, 1999, Catalogue no. 62F0042XDB and Survey of Household Spending, 2008, Catalogue no. 62FPY0042XDB. Calculations by People Patterns Consulting.
2010 report |
33
Expenditures on personal care, public transportation, health care and tuition rose through last decade
Table 4 examines the growth in average expenditures by middle class households by major categories over the decade. As a guide, the shaded cells highlight those items that grew by at least 40% over the decade, much faster than the 28% increase for all expenditures. All expenditures are in current dollars and thus are not adjusted for inflation.36
The biggest increase (+69%) during the decade was for items classified as personal care. Within this category, spending on electric hair-styling and personal care appliances and personal care preparations (not shown) both increased by more than 125%. Expenditures on public transportation increased by 58% over the decade or almost double the rate of increase for private transportation (+32%). Out of pocket health care expenses paid by middle class households jumped by 43% during the decade. Direct costs increased by 38% while health insurance premiums soared by 53%. Tuition fees paid increased by 43% from 1999 to 2008. Alcoholic beverages, which account for 1.4% of all expenditures, increased by 41% with purchases from stores (+54%) up by more than double the growth of expenditures in licensed premises (+25%). By contrast, reading materials registered the biggest decline (-10%) among the major expenditure categories. Personal income taxes paid increased by 14% over the decade. (The income tax estimate for 2008 in Table 4 ($8,943) is larger than the $6,700 number reported in Chart 13. These two estimates are derived from different surveys, employing different methodologies and targeting different samples of the population.)
34
f e b rua r y 2 0 1 1
TABLE 4 Average expenditures, middle class households*, 1990 to 2008 (current dollars**)
(expenditures include households with the expenditure and those without)
Major categories
Average expenditure per household 2008 dollars $60,187 7,225 12,943 3,022 1,667 2,556 8,782 7,910 873 1,890 1,296 594 1,129 3,351 232 776 597 662 868 8,943 3,295
Percentage of total expenditures 2008 % 100.0% 12.0 21.5 5.0 2.8 4.2 14.6 13.1 1.5 3.1 2.2 1.0 1.9 5.6 0.4 1.3 1.0 1.1 1.4 14.9 5.5
% change in expenditures (current dollars) 1999 to 2008 % 28% 23 33 36 25 30 34 32 58 43 38 53 69 25 -10 32 43 7 41 14 26
Total expenditure Food Shelter Household operation Household furnishings and equipment Clothing Transportation Private transportation Public transportation Health care paid by the household Direct costs to household Health insurance premiums Personal care Recreation Reading materials/printed matter (excluding school related) Education Tuition fees Tobacco products Alcoholic beverages Personal income taxes Personal insurance payments & pension contributions
*refers to the middle 20% of households by income; ** not adjusted for inflation Note: Shaded cells indicate expenditure that increased by more than 40% Source: Statistics Canada, Survey of Household Spending, 1999, Catalogue no. 62F0042XDB and Survey of Household Spending, 2008, Catalogue no. 62FPY0042XDB. Calculations by People Patterns Consulting.
2010 report |
35
Conclusion
This short report reveals that the economic fortunes of middle class households have waxed and waned over the past two decade. The 2004 to 2008 was a very good period, following a decade of slow recovery from the recession of the early 1990s. Overall, the middle class share of total after-tax incomes shrank between 1990 and 2008, as the economic gains of the top 20% of households outstripped those of all other income groups, including middle class households. Middle class households have changed in both their makeup and how their budgets are allocated. There are more conveniences in todays middle class homes than just a decade earlier. Certain expenditures, notably on personal care, public transportation, health care and tuition, have increased rapidly over the last decade.
36
f e b rua r y 2 0 1 1
Appendix A - Average incomes of families and unattached individuals, and share of incomes after transfers and income taxes (constant 2008$), 1990, 2000 and 2008
% change over selected periods
constant 2008$
Entire period
Since 2000
Latest year available
1990 2000 2008 2008 / 1990 2008 / 2000 2008 / 2007 All households $49,100 $51,900 $59,500 21.2% 14.6% 1.4% All families of 2 persons or more 59,400 64,500 74,600 25.6 15.7 1.5 Senior families of 2 persons or more (65 and over) Senior couples 43,900 45,000 53,500 21.9 18.9 -1.3 Other senior families 58,000 51,400 65,300 12.6 27.0 7.0 Core Working-age families of 2 persons or more (under 65) Couples without children 56,300 61,300 71,700 27.4 17.0 0.1 48,000 49,700 56,600 17.9 13.9 -1.6 one earner 62,800 69,400 80,500 28.2 16.0 1.5 two earners Couples with children 65,100 72,800 84,900 30.4 16.6 1.2 47,600 53,200 61,200 28.6 15.0 2.0 one earner 64,600 73,900 84,800 31.3 14.7 1.8 two earners Female lone-parent 28,900 33,600 41,300 42.9 22.9 2.2 Male lone-parent 44,500 48,100 54,200 21.8 12.7 1.7 All families of 2 persons or more by province Newfoundland 48,700 50,500 63,000 29.4 24.8 3.4 Prince Edward Island 50,500 52,800 61,700 22.2 16.9 3.4 Nova Scotia 52,800 55,400 61,800 17 11.6 -1.0 New Brunswick 50,200 54,200 59,100 17.7 9.0 0.0 Quebec 53,000 56,500 64,100 20.9 13.5 1.4 Ontario 66,300 73,300 78,700 18.7 7.4 0.4 Manitoba 54,800 57,200 69,500 26.8 21.5 1.2 Saskatchewan 51,800 55,400 73,500 41.9 32.7 6.2 Alberta 61,000 68,700 90,800 48.9 32.2 2.5 British Columbia 60,600 60,900 77,900 28.5 27.9 3.2 Unattached individuals (living alone or with someone who is not related) Total 26,100 26,200 31,000 18.8 18.3 1.6 Senior males (65 and over) 25,000 25,700 32,900 31.6 28 3.5 Senior females (65 and over) 21,900 23,000 26,800 22.4 16.5 1.9 Non-senior males (under 65) 29,600 29,400 34,400 16.2 17 2.7 Non-senior females (under 65) 24,800 23,900 28,300 14.1 18.4 -0.4 % share of after tax and transfer incomes - all families of 2 persons or more by income groups
(percentage point change (pp))
Poorest fifth of families Lower-middle fifth of families Middle fifth of families Upper-middle fifth of families Richest fifth of families
7.5% 13.4% 18.2% 23.8% 37.1%
6.9% 12.6% 17.4% 23.3% 39.8%
7.1% 12.4% 17.2% 23.1% 40.2%
-0.4 pp -1.0 pp -1.0 pp -0.7 pp +3.1 pp
0.2 pp -0.2 pp -0.2 pp -0.2 pp 0.4 pp
-0.2 pp -0.2 pp -0.1 pp 0.0 pp 0.5 pp
Source: Statistics Canada, Income in Canada, Catalogue no. 13-F0022-XIE. Calculations by People Patterns Consulting.
2010 report |
37
APPENDIX B - Rate of low income (poverty) among families and unattached individuals after transfers and income taxes, 1990, 2000 and 2008
% with low-incomes (poverty) 1990 11.8% 9.0 31.3 2000 12.5% 9.3 32.9 2008 9.4% 6.3 27.2
percentage point change Entire period Since 2000 Latest year available
All households All families of 2 persons or more All unattached individuals
2008 / 1990 -2.4pp -2.7 -4.1
2008 / 2000 2008 / 2007 -3.1 pp +0.2 pp -3.0 0.3 -5.7 -0.3
Senior families (65 and over) All senior families 2.8 Senior couples 2.7 Core Working-age families (under 65) Couples without children 6.7 9.5 one earner 2.7 two earners Couples with children 7.5 17.1 one earner 4.9 two earners Female lone-parent 48.2 Male lone-parent 18.4 All households by age of major income earner Under 25 42.2 25-34 13.8 35-44 10.4 45-54 6.7 55-64 11.2 65 and over 10.0 Children 0-17 by province Canada 14.0 Newfoundland 18.1 Prince Edward Island 6.7 Nova Scotia 11.7 New Brunswick 13.7 Quebec 14.6 Ontario 12.0 Manitoba 19.4 Saskatchewan 17.2 Alberta 15.3 British Columbia 14.9 Unattached individuals Senior males (65 and over) 20.7 Senior females (65 and over) 30.5 Non-senior males (under 65) 29.4 Non-senior females (under 65) 36.8
3.5 1.2 6.9 10.2 2.2 8.7 23.1 4.6 36.2 12.3 39.4 16.0 10.5 9.1 13.8 8.5 13.9 17.9 7.7 12.6 10.8 16.1 13.0 16.9 13.2 12.5 14.2 17.6 21.7 32.1 44.3
2.6 0.9 5.5 7.4 2.0 6.0 17.8 3.2 20.9 7.0 35.0 10.8 8.4 5.7 11.4 6.5 9.1 9.1 4.5 7.9 5.4 10.2 9.1 8.8 9.1 6.8 10.4 12.1 17.1 27.9 36.3
-0.2 -1.8 -1.2 -2.1 -0.7 -1.5 0.7 -1.7 -27.3 -11.4 -7.2 -3.0 -2.0 -1.0 0.2 -3.5 -4.9 -9.0 -2.2 -3.8 -8.3 -4.4 -2.9 -10.6 -8.1 -8.5 -4.5 -8.6 -13.4 -1.5 -0.5
-0.9 -0.3 -1.4 -2.8 -0.2 -2.7 -5.3 -1.4 -15.3 -5.3 -4.4 -5.2 -2.1 -3.4 -2.4 -2.0 -4.8 -8.8 -3.2 -4.7 -5.4 -5.9 -3.9 -8.1 -4.1 -5.7 -3.8 -5.5 -4.6 -4.2 -8.0
0.8 -0.1 0.7 1.1 -0.3 0.4 -3.2 0.5 -3.1 -2.2 2.7 -0.8 -0.3 -0.7 2.4 1.2 -0.5 2.9 -0.2 -0.5 -4.3 0.8 -0.4 -2.9 -1.6 0.5 -2.6 -1.0 2.6 -1.9 1.3
Note: A 4-person family living in a city of 500,000 or more with less than $34,738 ($8,684 per person) and a 4-person rural family with less than $22,724 ($5,681 per person) annually are classified as being low-income. Source: Statistics Canada, Income in Canada, Catalogue no. 13-F0022-XIE. Calculations by People Patterns Consulting.
38
f e b rua r y 2 0 1 1
APPENDIX C - Major components of average net worth per household based on market value (constant 2008$), 1990, 2000 and 3rd Quarter 2010
Percentage change over selected periods Latest year available*
Average Value in 2008$ 1990 2000 2010(Q3)
Entire period Since 2000
2010(Q3) / 1990 Total assets $311,860 $424,520 $510,695 62.8% Financial assets 166,690 263,710 282,597 69.5 shares 27,570 90,310 97,932 255.2 life insurance/pensions 54,620 94,450 102,396 87.5 all other ** 84,500 78,950 82,270 -2.6 Non-financial assets 145,170 160,800 228,098 57.1 real estate 114,220 129,480 197,852 73.2 consumer durables 27,740 28,070 28,181 1.6 all other *** 3,210 3,250 2,065 -35.6 Total debt outstanding 56,780 69,110 100,879 77.7 consumer credit/loans 87.9 19,346 25,306 36,346 mortgages 36,150 42,720 63,126 74.6 (mortgage by mortgage holders) 118,520 126,400 171,500 44.7 other debt**** 1,285 1,087 1,408 9.6 Net worth 255,080 355,400 409,816 60.7 Selected ratios (percentage point change (pp)) Total debt as % of disposable income 93% 113% 150% +57 pp Consumer credit/loan and mortgage debt as % of disposable income Consumer credit as % consumer durables Total debt as % of total assets Total debt as % of net worth Real estate as % of net worth Interest payments as % of disposable income 91% 47% 18% 22% 45% 10.5% 111% 59% 16% 19% 36% 8.0% 148% 102% 20% 25% 48% 7.0% +57 pp +55 pp +2 pp +3 pp +3 pp -3.5 pp
2010(Q3) / 2000 20.3% 7.2 8.4 8.4 4.2 41.8 51.8 0.4 -36.5 46.0 43.6 47.8 35.7 29.6 15.3 +37 pp +40 pp +43 pp +4 pp +6 pp +13 pp -1.0 pp
2010(Q3) / 2009 0.2% 0.0 0.5 0.0 -0.7 0.4 0.8 -1.8 -7.2 1.2 0.1 1.8 1.8 2.4 -0.1 +2 pp +2 pp +2 pp +0 pp +1 pp +0 pp -0.4 pp
* The changes for the latest period (3Q-2010) are from the end of year for 2009. ** Bonds, cash, loans to others, etc. *** Machinery and equipment of unincorporated small business owners, etc. **** Mortgages on non-residential buildings, small business lines of credit, etc. Source: Statistics Canada, National Balance Sheet Accounts, Catalogue no. 13-022-XWE, Income in Canada, Catalogue no.13-F0022-XIE, Consumer Price Index, Catalogue no. 62-001-X. Calculations by People Patterns Consulting.
2010 report |
39
Endnotes and Sources

1 Key Statistics Canada data sources used in the report. Employment, Earnings and Hours, monthly publication, Catalogue no. 72-002-X http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=72-002-XWE&lang=eng Labour Force Survey http://www.statcan.gc.ca/cgi-bin/imdb/p2SV.pl?Function=getSurvey&SDDS=3701&lang=en &db=imdb&adm=8&dis=2 (Labour Force Information, monthly publication, Catalogue no. 71-001-X. http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=71-001-XIE&lang=eng#formatdisp ) Consumer Price Index http://www.statcan.gc.ca/cgi-bin/imdb/p2SV.pl?Function=getSurvey&S DDS=2301&lang=en&db=imdb&adm=8&dis=2 (Consumer Price Index, monthly publication, Catalogue no. 62-001-X. http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=62-001-XWE&lang=eng ) Survey of Labour and Income Dynamics http://www.statcan.gc.ca/cgi-bin/imdb/p2SV.pl?Function=getSurvey&SDDS=3889&lang=en &db=imdb&adm=8&dis=2 (Income Trends in Canada, annual publication, Catalogue no. 13F0022XIE http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=13F0022XIE&lang=eng) Survey of Household Spending http://www.statcan.gc.ca/cgi-bin/imdb/p2SV.pl?Function=getSurvey&SDDS=3508&lang=en &db=imdb&adm=8&dis=2 (Spending Patterns in Canada, annual publication, Catalogue no. 62-202-XWE http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=62-202-XWE&lang=eng) Survey of Financial Security http://www.statcan.gc.ca/cgi-bin/imdb/p2SV.pl?Function=getSurvey&SDDS=2620&lang=en &db=imdb&adm=8&dis=2 National Income and Expenditure Accounts http://www.statcan.gc.ca/cgi-bin/imdb/p2SV.pl?Function=getSurvey&SDDS=1901&lang=en &db=imdb&adm=8&dis=2 (National Income and Expenditure Accounts: Data Tables, quarterly publication, Catalogue no. 13-019-XWE http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=13-019-X&lang=eng) National Balance Sheet Accounts http://www.statcan.gc.ca/cgi-bin/imdb/p2SV.pl?Function=getSurvey&SDDS=1806&lang=en &db=imdb&adm=8&dis=2 (National Balance Sheet Accounts: Data Tables, quarterly publication, Catalogue no. 13-022-XWE http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=13-022-x&lang=eng) Various electronic sources and CANSIM tables
40
f e b rua r y 2 0 1 1
Canadian Press (2010), Consumer confidence more subdued, The Globe and Mail. December 29, 2010. http://www.theglobeandmail.com/report-on-business/economy/consumer-confidencemore-subdued/article1851817/ 3 Kim Covert (2010), Conference Board: Consumers no more confident than during recession, The Financial Post, December 21, 2010. http://www.vancouversun.com/story_print. html?id=4008266&sponsor= 4 Canada News Wire (2011), Canadians more confident, but reserved on economy, shows Economic Club of Canada/Pollara poll, January 6, 2011. http://www.cnw.ca/en/releases/ archive/January2011/06/c8723.html 5 Nanos Research (2010), Canadas Economic Mood Optimism declines for third successive quarter, Nanos Report, October 21, 2010. http://beta.images.theglobeandmail.com/ archive/00957/Canada_s_Economic_M_957423a.pdf 6 Angus Reid Public Opinion (2010), Canadians Split on the Economy as Trust in Harper Falls Sharply, October 26, 2010. http://www.angus-reid.com/polls/43423/canadians-split-on-theeconomy-as-trust-in-harper-falls-sharply/ 7 The Labour Force Survey provides a monthly estimate of the number of persons aged 15 and over in Canada. In October 2008, about 67.7% of this population aged 15 and over were participating (defined as those working plus those looking for work) in the labour force. The reported participation rate, expressed as a percentage of the population aged 15 and over, declined gradually to 66.7% in December 2010. If the percentage of the population aged 15 and over (27,814,800) in the labour force in December 2010 had remained at the same level as in October 2008 (67.7%), the labour force would have been equal to 18,830,600 rather than the 18,557,800 reported (see Table 1) a difference of 272,800. If these additional workers had been counted as unemployed, the unemployment rate would have been 8.9% in December 2010 rather than the 7.6% reported. All the other months have been calculated in the same way. 8 The Survey of Employment, Payrolls and Hours excludes employers primarily involved in agriculture, fishing and trapping, private household services, religious organizations, and military personnel of defense services. 9 May Luong, (2010), The financial impact of student loans, Perspectives on Labour and Income, Statistics Canada, Catalogue no. 75-001-X, p. 14. http://www.statcan.gc.ca/pub/75001-x/2010101/pdf/11073-eng.pdf 10 Noreen Rasbach, (2010), Good news, boomers (and some bad), The Globe and Mail, November 24, 2010. http://www.theglobeandmail.com/globe-investor/personal-finance/home-cents/goodnews-boomers-and-some-bad/article1811172/ 11 Sbastien LaRochelle-Ct (2010), Self employment in the downturn, Perspectives on Labour and Income, Statistics Canada, Catalogue no. 75-001-X. http://www.statcan.gc.ca/pub/75001-x/2010103/pdf/11138-eng.pdf 12 Human Resources and Skills Development Canada (2010), Average Annual Percentage Wage Adjustments. http://www.hrsdc.gc.ca/eng/labour/labour_relations/info_analysis/wages/ adjustments/2010/09/quarterly.shtml 13 Bank of Canada (2011), Business Outlook Survey, Vol 7.4, January 10, 2011. http://www.bankofcanada.ca/en/bos/2011/winter/bos0111e.pdf 2
2010 report |
41
14 15
16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Statistics Canada (2010), Employment Insurance Coverage Survey, The Daily, June 21, 2010. http://www.statcan.gc.ca/daily-quotidien/100621/dq100621b-eng.htm Kenyan Wallace (2010), EI favours east coast, study finds, National Post, September 9, 2010. See Matthew Mendelsohn and Jon Medow (2010), Help Wanted: How Well did the EI Program Respond during Recent Recessions, University of Toronto: Mowat Centre for Policy Innovation. http://www.mowatcentre.ca/pdfs/mowatResearch/22.pdf . This report uses an EI Benefit Rate to track the extent to which the EI system is providing coverage for those who are unemployed. It is calculated by dividing the number of regular EI recipients by the number of unemployed persons. Canada Employment Insurance Commission (2010), Monitoring and Assessment Report 2009, Employment Insurance, Catalogue no. HS1-2/2009E. http://www.hrsdc.gc.ca/eng/ employment/ei/reports/eimar_2009/PDF/EIMAR_2009.pdf Households include both single individuals and families comprised of two or more. Data on individual level incomes are not available on an after income tax basis in the published estimates. Cara Williams (2010) Economic Well-being, Women in Canada: A Gender-based Statistical Report, Catalogue no. 89-503-X, p. 8. http://www.statcan.gc.ca/pub/89-503-x/2010001/ article/11388-eng.pdf Vanier Institute of the Family (2010), Families Count: Profiling Canadas Families IV. Ottawa. http://www.vifamily.ca/node/371 Statistics Canada (2010), Retail Trade, Catalogue no. 63-005-X. http://www.statcan.gc.ca/ pub/63-005-x/63-005-x2010010-eng.htm Statistics Canada (2010), Registered retirement savings plan contributions, The Daily, November 22, 2010. http://www.statcan.gc.ca/daily-quotidien/101122/dq101122e-eng.htm Statistics Canada, Charitable donations, The Daily, November 23, 2010, http://www40.statcan. gc.ca/l01/cst01/famil90-eng.htm Mark Carney, Governor of the Bank of Canada, (2010), Living with Low for Long. December 13, 2010 http://www.bankofcanada.ca/en/speeches/2010/sp131210.html Certified General Accountants Association of Canada (2010), Where is the Money Now: The State of Canadian Household Debt as Conditions for Economic Recovery Emerge, May 11, 2010, p. 12. http://my.texterity.com/cgaresearchreports/debt2010#pg1 James Callon, Superintendent of Bankruptcy, Office of the Superintendent of Bankruptcy Canada (2011), A Message from the Superintendent, January 7, 2011. http://www.ic.gc.ca/eic/site/bsf-osb. nsf/eng/br02524.html Canadian Bankers Association (2010), Statistics, December, 2010. http://www.cba.ca/contents/ files/statistics/stat_mortgage_db050_en.pdf Canadian Bankers Association (2010), Statistics, October, 2010. http://www.cba.ca/contents/ files/statistics/stat_creditcarddelinquency_en.pdf The Office of the Superintendent of Bankruptcy (2011), Insolvency Statistics, January 7, 2011. http://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br02524.html Bank of Canada (2010) Financial System Review, December 2010. http://www.bankofcanada.ca/ en/fsr/2010/fsr_1210.pdf Ibid.
42
f e b rua r y 2 0 1 1
Statistics Canada (2006), The Wealth of Canadians: An Overview of the Results of the Survey of Financial Security, 2005, Catalogue no. 13F0026MIE No. 001. http://www.statcan.gc.ca/ pub/13f0026m/13f0026m2006001-eng.pdf 33 Food Banks Canada (2010), Hunger Count 2010, p. 5. http://www.foodbankscanada.ca/ documents/HungerCount2010_web.pdf 34 Armine Yalnizyan (2010), The Rise of Canadas Richest 1%, Canadian Centre for Policy Alternatives, December 2010. http://www.policyalternatives.ca/sites/default/files/uploads/ publications/National%20Office/2010/12/Richest%201%20Percent.pdf 35 Roger Sauv (2006), The Current State of Canadian Family Finances 2005 Report, Vanier Institute of the Family. http://www.vifamily.ca/node/419 36 Current dollars are used given that it is difficult to adjust each expenditure category separately and it is impossible to do so for insurance payments and pension contributions. 32
2010 report |
43
44

Family Finance 2010

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Family Finance 2010

Uploaded by

Copyright:

Available Formats

f

The Current State of Canadian Family Finances

About the Institute

94 prom. Centerpointe Drive Ottawa, Ontario K2G 6B1 www.vifamily.ca

The Current State of Canadian Family Finances

List of Charts and Tables Charts

2010 REPORT Introduction

Recession technically over but uncertainty ahead

Households concerned about economy, jobs and personal finances

Reality check on the unemployment rate

Actual unemployment rate 7.6% 6.1%

104 103 102 101 100 99

Employment based on survey of households

Employment based on survey of firms

The 55 and over group just kept on working and working

Private sector employment still down by over 100,000

Labour force indicators

December 2010 7.6% 18,557,800 1,412,500 17,145,300 13,835,800 3,309,600

Goods producing sector still below the previous peak

Hourly earnings increasing in 2% range

Household incomes recovering

Calculations based on National Accounts Flat period

Recession Strong expansion Projected to 2010Q3

Employment insurance (EI) cushioned the income decline

Fewer of the unemployed now receive benefits

Dual incomes one pathway to rising household incomes

% of couple families with children with 2 or more earners

80% 77% 71%

% of couple families without children with 2 income earners

Savings rate up but still low

4.2% (average of first 3 quarters 2010)

Debt per household surpasses the $100,000 mark in 2010

More warnings about household debt loads

CHART 9 Average debt* per household, in constant 2008$, 1990 - 2010Q3

Consumer credit, loans and mortgage debt only

Rising household debt places one million families in vulnerable situation

Another look at mortgage debt

$172,000 Average amount of mortgage outstanding by those who have a mortgage

Housing prices likely to fall

Poverty is on the rise

CHART 11 Percentage of persons in low income,* 1990 - 2010

There is growing inequality in Canada

Special Feature on the Middle Class

Middle class incomes recover after stagnation through the 1990s

$43,000 $42,400 Lost decade

Source: Statistics Canada, Income in Canada, Catalogue no. 13-F0022XIE

Middle class getting smaller share of total incomes

Share of after-tax incomes 16.3%

Share of income taxes paid 11.3%

Source: Statistics Canada, Income in Canada, Catalogue no. 13-F0022XIE

Source: Statistics Canada, Income in Canada, Catalogue no. 13-F0022XIE

1999 Average age

49 2.5 persons 0.46 persons 0.29 1.43 0.33 23% 63 7 7 35% 49 16 18

% change in expenditures (current dollars) 1999 to 2008 % 28% 23 33 36 25 30 34 32 58 43 38 53 69 25 -10 32 43 7 41 14 26

Latest year available

7.5% 13.4% 18.2% 23.8% 37.1%

6.9% 12.6% 17.4% 23.3% 39.8%

7.1% 12.4% 17.2% 23.1% 40.2%

-0.4 pp -1.0 pp -1.0 pp -0.7 pp +3.1 pp

0.2 pp -0.2 pp -0.2 pp -0.2 pp 0.4 pp

-0.2 pp -0.2 pp -0.1 pp 0.0 pp 0.5 pp

All households All families of 2 persons or more All unattached individuals

2008 / 1990 -2.4pp -2.7 -4.1

Average Value in 2008$ 1990 2000 2010(Q3)