WHY IS MIDDLECLASS UNDER PRESSURE?

BY: PAUL YOUNG CPA, CGA

DATE: MARCH 11, 2017

AGENDA

• GDP Growth

• Job/Employment

• Middle class / World

• Liberal Party Policies/Trudeau

• Global Emissions/Carbon Pricing

GDP FORECAST

Source – Scotiabank – Mach 7, 2017

Comments:• Job creation

• Majority of the jobs the past few years have been part-time (https://www.slideshare.net/paulyoungcga/2017-february-employment-canada-jobless-rate-drops-to-66-as-canada-added-15000-jobs-in-february-2017

• Middle class has been shrinking for years• Forbes said it best “Canada cut taxes and does a

much better job of sharing the wealth through equalization payments - https://www.youtube.com/watch?v=yOl37VcG89c

• Wage growth has been about 1%/year for the past 10+ years. Wages are not keeping pace with either inflation or rise in housing prices

• Hard to compare countries due to different taxation structures• Europe emphasizes VAT (15% to 20% range)• North American (personal and corporate taxes)

• Sluggish growth since 2000• Aging populations in mature economies• Lower demand world-wide (China economy has

cooled down)

EMPLOYMENT

Stats – Canada – March 10, 2017

Wages• Goods Producing Wages/Weekly $1,438 or $75,000 (year)

– lost 85,000 jobs• Service Sector Wages/Weekly $1,055 or $55,000• Bulk of new jobs are part-time/job churning• 30% of the jobs created in the service sector were

government relatedMiddle class• No new taxes

• Hikes to tax rates (personal and payroll taxes)• No removal of tax credits• No Carbon taxes

• New private sector investment• Development of resources• Advance manufacturing• Technology (Clean Tech, Analytics, cybersecurity,

eCommerce, cloud, export farming, robotics and drones)• Revamping housing rules• Emphasis on infrastructure that both move goods to

market as well as transportation

MIDDLE CLASS 2020

Source – Brookings Institute – March 12, 2017

LIBERAL PARTY OF CANADA / JUSTIN TRUDEAU

• https://www.youtube.com/watch?v=lUZBt_qq3WY

Liberal Plan• Clean tech is $12B business or about 3.5% of the total

goods producing sector• It takes years to commercialized clean tech• SDTC has been around since early 2000s and has

help companies• Lack of access to capital is hurting startups

• Canada lacks the capacity to get natural resources to market

• Manufacturing and Resources compete for global capital• Liberals are moving to carbon tax as well as other

taxes• Australia pull the tax as it did nothing for

emissions but hurt the economy• Canada’s economy is similar to Australia

• More red tape/regulations• Only small portion of $120B infrastructure is going to

support exports• For each $1B of exports there is 5,500 jobs• Goods producing sector lost close to 80K jobs since

the liberals tool office

GLOBAL EMISSIONSWho in the top four countries have implemented carbon tax?

How is Canada carbon tax going to impact the overall emissions?

Canada middle class is already under pressure as such how is new carbon tax going to make their lives better?

SUMMARY• It is not one policy that supports the middle class, but many policies

• Taxes like carbon tax and consumption taxes hurt the middle class more as those taxes are paid with after tax income. More tax in the cost of products less money for big ticket purchases. It is consumer consumption that drives the economy.

• Housing market has many issues which are leading to affordability when it comes to first-time home buyers.

• Liberals talk balance approach to environment and development of resources. The liberals feel carbon tax will create the balance when it has been a failure

CBC – December 7, 2016