by R. Michael Warren
From now until October all the federal parties will be telling us how they plan to help the shrinking middle class. Much of what they are proposing is simply competing forms of income redistribution. Most of it misses the underlying causes.
The Liberals promise to tax the rich in order to reduce taxes for the middle class. The NDP will help by hiking the minimum wage and not raising personal income tax rates. They'll raise corporate taxes instead. The Conservatives say income splitting and targeted tax credits are the best way to help the middle class.
These promises are merely playing at the edges of the income stagnation and job dislocation being experienced by some of Canada's middle class. Our political leaders don't talk much about the core causes because they're short on solutions.
For example,the digital revolution is having a far reaching impact on Canada's labour market, including the middle class. "Wealth without workers, workers without wealth" - the title of an editorial in The Economist - is an apt description of the conundrum we face.
Growing connectivity, computer power, robotics and the data explosion have combined to bring unparalleled prosperity. But much of that prosperity has gone to those who control capital and the most highly skilled.
"Vast wealth is being created without many workers; and for all but an elite few, work no longer guarantees a rising income."
When Instagram, the popular photo-sharing web site, was bought by Facebook for $1 billion in 2012, it had over 30 million customers. It only employed 13 people.
Finance Canada reported the growth in real average, after tax family income from 1976 to 2010 was the smallest in the middle income group at 7%. The top quartile saw their family income grow by 27%. Contrast that with the Canadian economy. It more than doubled over the same period.
Besides fuelling income disparities, the digital revolution is also disrupting the job market. Its impact is only just begun.
Oxford University economists recently analyzed over 700 occupations to determine their susceptibility to being computerized. They concluded that 47 per cent of employment in the US is at high risk of being automated over the next 10 to 20 years.
A Pricewaterhouse study of Australia's labour market found that "digital disruption" was putting nearly half of that country's jobs at risk. This includes salespersons and a host of administrative jobs.
The study entitled, "The STEM Imperative: Future Proofing Australia's Workforce" maintains the country's education system is not equipping students with the skills they need to adapt to a rapidly changing global economy. It calls for a national summit, saying universities have to produce more people literate in science, technology, engineering and mathematics.
India and China are producing between 35 and 40 per cent STEM graduates: Canada less than half that percentage. By 2030 it's estimated that China and India will be producing three quarters of the global STEM graduates.
A recent University of Calgary study points out while some of Canada's middle class are doing well; the ones being squeezed out are at lower end with the least skills and education. Many had semi-skilled jobs in the struggling manufacturing sector.
The study points out the middle class has received considerable support in recent years in the form of tax breaks. It suggests, "Politicians who truly want to help those struggling in the 'middle class' should focus their efforts on helping them acquire more education and skills."
Others remind us that unions have helped this country build its middle class. They argue we need to strengthen the rights of trade unions to organize in the digital age. Weakened unions have contributed to the wage "race to the bottom", particularly at the lower end of the middle class.
All the federal parties make vague promises about the importance of skills training and education. But bribing us with our own money is clearly their election strategy.
Pandering to voters this way has real limits. Placing too high a tax burden on the rich or corporations will scare off the highly skilled and highly mobile capital - the very ingredients needed to drive prosperity in the digital age.
None of the major parties has a comprehensive strategy to strengthen Canada's future middle class. The party that moves beyond the current "goodies" race deserves to be rewarded at the polls.
R. Michael Warren is a former corporate director, Ontario deputy minister, TTC chief general manager and Canada Post CEO.
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