Darren Calabrese
Michael Veall is an economics professor at McMaster University
Are we better off than we were five years ago?
I like to keep my economics as far away from the partisan arena as I can but Michael Ignatieff has recently been saying that Canadians are not better off than they were five years ago, when Stephen Harper took office. Mr. Harper says we are better off. This seems like a question economists should be able to say something about.
But it is not that easy, even after interpreting "better off" narrowly as "having a higher measured standard of living".
One measure of living standards is real after-tax family income, where real means adjusted for consumer price index inflation. Statistics Canada reports its median value for families of two or more in 2008 as $63,900, meaning that half of such families received more than that and half received less.
But that was 2008, the latest value available. How about 2010? I am going to work with the guess that it didn't change in real terms. While wage data do show modest real increases over the last two years, the employment rate is down a percentage point, and somewhat more of that employment is part-time. Allowing for other factors related to the recession, a zero real change seems plausible to me.
Accepting that guess, real median after-tax income is almost 7.5 per cent higher in 2010 than in 2005, an increase of about 1.5 per cent a year.
So using this one indicator, the balance of probability suggests that Mr. Harper is right -- Canadians are better off. Critics might reasonably argue that other indicators should also be used, to capture aspects such as unemployment, underemployment, the level of government services and federal government debt.
While I accept those criticisms, let me stick to my approach but frame the issue somewhat differently. Before 1997, Canada had at least twenty years of falling median after-tax incomes. But from 1997 to 2008, median after-tax income grew at 2 per cent a year. During this period, there is no obvious difference between the Liberal years or the Conservative years. This is good news: there is reason to believe that such growth might return after the international recession ends, regardless of the choice of government.
The challenges have also persisted as governments have changed. The child poverty rate in Canada remains almost unchanged since Parliament unanimously voted to eliminate child poverty in 1989. Several of the provinces are in serious financial straits, largely because of health care spending. Canadian productivity performance has been poor. Those are among the issues I would like to see addressed in the next five years.
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