Tuesday, June 10, 2014

Trudeau and the Median Wage

Trudeau likes to point out that Medium wages have been stagnant for over 30 years now. This is just as true of Canada as it is of the US. However, Trudeau has failed to gain much traction for two reasons. One, the issue of fairness aside (productivity has gone up by nearly 47% since then), Trudeau never identifies why this is a pressing issue rather than an annoyance. After all, it would appear that the kids are alright. Your average worker is doing just as well as his 1980 counterpart. As a result, Trudeau’s remedies seem unconvincing and somewhat half baked. Local Liberals have fared no better. I recently attended a Liberal event in which the evening’s speaker, Kevin Evans, channeled Mr. Kijiji Jason Kenny and outlined the skills gap that he contended currently plagues Canada. The only problem is there is no evidence whatsoever that a skills gap exists. This was pointed out recently by Don Drummond and by the Parliamentary Budget Officer. You can read the later’s report here. As for the government's job vacancy numbers,

"the growth in job postings was almost entirely due to a rise in postings on the classified site Kijiji. The site allows the same job to be posted in numerous sections, which inflated the job numbers." 

The second problem is that the vacancy rate is not the only bad numbers the government has been flaunting. By scrapping the mandatory long form census and replacing it with the voluntary National Household Survey, the Conservatives have effectively cooked the books. According to census data, between 1980 and 2005 median income jumped a mere $53. However according to the most recent census in mere 5 years it jumped an impressive $6464 -- in midst of the Great Recession no less. To say this is a wildly improbable finding would be an understatement. Canada was not the one Western nation to see massive increases in the median wage when most nations were at best holding steady. Something else was afoot. 

 “Brian Murphy, special advisor with Statistics Canada’s income division, cautioned not to read too much into the large jump in income from 2005. “It’s a brand new survey,” he said. “I’d be looking for these long-term trends in other data sources. It’s really important for income statistics to hold the methodology constant.” 

A note attached to the new survey warns people of the change. 

 “When comparing income indicators from one source to another, users should be aware that the methodology of how the information was collected, the concepts used and response patterns can affect the comparability of income information. Given the sensitivity of most income indicators to such methodological differences, users should use caution when comparing income estimates from the NHS to other household income surveys, administrative data or 2006 or earlier censuses." 

Still people will naturally enough want to compare to the new data with the odd thinking they are making an apples to apples comparison. The Liberals need to do a far better job explaining that they are actually making an apples to oranges comparison.  They could start by pointing out the huge uptake in the non response rate between 2006 and 2011.   The non-response rate for the 2006 long form census was 6%.  This compares to a 20% non response rate in Vancouver and Montreal, 25% non response rate in Toronto for the NHS.

To add insult to injury, the Conservatives almost always talk about family median income instead of about median income. This matters a lot. For one, the number of women entering the workforce has risen steadily over the last couple of decades and with that family income has also risen even has median income has remained the same. There are more two income families than ever before. For another, Canadians are getting married ever later in life and as a result many more Canadian couples are into their peak earning years by the time they decide to tie the knot. This has impacted the numbers. For these and other reasons the Liberals bring the discussion back to median income.

That said, in order to really make hay, the Liberals at both a local level (nominations are coming up) and federal level need to switch from talking about the need to increase wages per say to talking about the need to reduce fixed costs for families. For it is fixed costs that are jacking up private debt levels and putting the Canadian economy at risk. Child care is one driver. In Vancouver it is $1200 a month. But most important of all is housing. In Vancouver the average home listing on MLS in 2000 was around $300,000. A decade later it was over $800,000. A modest increase in the median wage and or modest tax cuts are not going to do the trick. As RBC pointed out, 

"A typical Vancouver-area home buyers would need to allocate 92% of their income to carry the costs of a two-storey home".
Liberals also needs to bring the soaring costs of post secondary education into the equation. In Ontario, for example, average fees, in current dollars, have increased from $1,464 in 1990-91 to $6,348 in 2012-13. They can do this by pointing out how the ever increasing student debt levels, coupled with sky high cost of housing will ultimately worsen the coming demographic crush. Couples, especially those living in the Lowermainland, can not afford to have too many kids full stop. However, for those that can afford them, the point at which they can afford them is getting later and later in life. Indeed, more babies in Canada are born to women over 30 than under. Incidentally, the two provinces where women wait the longest to have kids, viz., Ontario and BC, also have the most expensive real estate. In 2010, 56.2% of Ontario babies were born to women over 30 and 55.7% of BC babies were born to women over 30. The Canadian average is 51.2. The longer couples wait to have kids the smaller their window for having kids

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