Living the Canadian Dream: National Income Mobility Trends Upwards

Most parents work hard in the hope that their children will be able to enjoy a better life than they did. A groundbreaking new study recently released by Statistics Canada shows that younger generations of Canadians may indeed be reaping the benefits of that Canadian Dream.

The StatsCan research, based on data from the Intergenerational Income Database, tracked information on the income of children and their parents from 1978 to 2014, to determine if children in Canada today enjoy better or worse economic opportunities than their parents did. The study points to some interesting and encouraging trends in income mobility across generations.

Of those who turned 30 between 2000 and 2014, 59% to 67% (depending on the specific year) had a family income equal to or greater than that of their parents at the same age. And for those born between 1963 and 1974, 61% to 67% had a higher income at age 40 than their parents did when they were the same age. This means that they probably need more tax and financial advice than their parents did as well.  That’s particularly important when we see where the income improvement strengths are coming from: family income levels were most likely to improve for children whose parents were in the lowest income percentiles, whereas the opposite was true for children with parents in the highest income percentiles. The study also observes that while absolute income mobility has declined significantly in the US for the 1980 cohort relative to those born in 1970, for the corresponding Canadian birth cohorts the rates were much more stable.

This study’s findings are interesting in light of discussions about increasing the minimum wage in some provinces. Last fall, Ontario raised the minimum wage by 15 cents, to $11.40 an hour; Alberta currently has the highest minimum wage in Canada, at $12.20, and the provincial NDP government is proposing a further hike to $15 an hour by 2018. Increases are also slated to take effect in several other provinces and territories. By late 2017, the average minimum wage in Canada was $11.43 an hour. Compared with $9.25 in 2010, that’s an increase of 23%. While policies like minimum wage legislation may have helped to contribute to improving intergenerational income trends in Canada, they also raise concerns for employers and for small businesses in particular. This could result in increased labor costs to potentially prohibitive levels, especially when much higher CPP and EI contributions paid by employers are coming in the near future.

Will the push for higher minimum income levels put too much pressure on business owners? Will it change the nature of human resources planning? Will young people be hired as employees or will costs be pushed down to them as subcontractors? Will the gains in income equality we see today be thwarted? It’s a delicate balance and an issue to watch as we all pursue the Canadian Dream.

©2017 Knowledge Bureau Inc. All Rights Reserved.

Refer a Friend	Research	Calculators	Course Trials