The U.S. Middle Class Cedes Gold to Canada

Coming as it does soon after the Olympic hockey loss to our northern neighbors, word that the U.S. middle class is no longer the wealthiest in the world—and the fact that Canadians are No. 1—is sure to draw special attention from U.S. policymakers to our rising levels of income inequality. A desire to avoid falling behind Canada may even prompt them to do something about it.

According to a survey conducted by the New York Times for its fancy new economic-data Web channel, The Upshot, the richest Americans have been getting richer faster than their brethren in other countries, while the middle and lower-middle classes have been doing worse those in other advanced countries. Since 2000, middle-class incomes have grown 19.7 percent in the U.K., 16.2 percent in Ireland, 13.9 percent in the Netherlands, and 4.1 percent in Spain, according to the Times. Those in the U.S. have not grown at all. After-tax middle-class incomes in Canada, which have also grown 19.7 percent since 2000, now appear to be higher than those in the U.S.

None of this will shock anyone who has been paying attention to economic trends over the past decade—just reading a book review section in recent weeks, where Thomas Piketty’s Capital in the Twenty-First Century has received vast amounts of attention, is enough to sense the widespread interest in inequality. The French economist’s book closely documents how the incomes of the top 1 percent of households have increased exponentially greater both before and after the financial crisis, with the income gap having now reached pre-Great Depression levels. The reasons, he argues, are largely rooted in politics.

The Times cites three factors influencing the lagging income growth of the middle class:

1. The number of Americans receiving advanced degrees has not risen as quickly as it has in other countries. Younger folk between ages 16 and 24, in particular, rank far below those in other developed countries, such as Canada, Australia, Japan, and Scandinavia, in math and technology skills.

2. A smaller share of income growth has gone to middle and lower classes. While the U.S. economy has created more wealth overall than most other countries, the vast majority of it has gone to a tiny subset of the population.

3. Canadian and European governments are much more involved in redistributing economic gains. This factor is the most overtly political. Those countries with stronger middle-class incomes have higher minimum wages, greater taxes on the wealthiest, and stronger policies to help the less fortunate. There’s little appetite for those sorts of measures in the current U.S. Congress, where attempts to raise the minimum wage and expand health care for the indigent continues to provoke battles.

Piketty predicts catastrophe if things continue on their current trajectory, but not everyone is upset about it. As Bloomberg Businessweek’s Justin Bachman reports, more and more of Boeing’s $200 million and $300 million jets are now being paid for in cash.

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