Stephen Harper: “We have seen since the great global financial crisis, Canada has the strongest economic growth, the strongest job creation record and the strongest income growth for the middle class among any of the major developed economies.”
By: Amanda Coletta on
Stephen Harper, Prime Minister and Conservative candidate for Calgary Southwest, in the Macleans leaders debate on August 6, 2015
Between the second quarter of 2009, the trough of the financial crisis, and the first quarter of 2015, it is true that Canada outperformed its peers in the G7 in economic growth and in the number of jobs created. Due to a lack of comparative data on median household incomes across the G7 over the same period, we are withholding judgment on Harper’s claim that Canada has also led the G7 in middle class income growth.FactsCan Score: True
The first leaders debate opened with the economy front and centre. In response to charges about his record, Stephen Harper said, “we have seen since the great global financial crisis, Canada has the strongest economic growth, the strongest job creation record and the strongest income growth for the middle class among any of the major developed economies.”
The Prime Minister has made this assertion before. On day one on the election trail in Laval, Quebec, Harper claimed Canada remains “head and shoulders” above its G7 partners for long-term economic growth and employment, and that Canada has “far and away the best fiscal management.”
There are three verifiable claims in Harper’s debate statement: Since the global financial crisis, out of the major developed economies, Canada has the strongest 1) economic growth, 2) job creation record, and 3) middle class income growth.
The low point in the financial crisis hit in the second quarter of 2009, around June. For the purposes of this check, the Group of Seven countries will represent “the major developed economies.”
How does Canada stack up against its peers?
According to the Bank of Canada, the real gross domestic product is the most common indicator of economic growth. Real GDP provides a measure of the total value of all goods and services produced in an economy and is adjusted for inflation.
Canada’s real GDP growth since the trough of the global financial crisis tops the G7, according to data from the Organization for Economic Cooperation and Development.
Between the second quarter of 2009 and the first quarter of 2015, Canada’s real GDP grew 13.3 per cent. The second best performer over the same period was the United States, which saw its economy grow by 11.9 per cent.
With a shorter-term view, the picture changes. Since 2012, Canada’s annual real GDP growth fell behind that of the United States, and most recently, the United Kingdom. The latest OECD projections for 2015 and 2016 show that this is a trend expected to continue, with Canada sitting middle of the pack behind the US, the UK, and Germany.
Keeping in mind the changing trend, it is true that since the global recession, Canada saw the strongest economic growth of the G7.
Again using OECD data from the second quarter of 2009 to the first quarter of 2015,* Canadian job numbers grew the most compared to G7 peers. Job creation can be measured different ways, one being employment, a method used by the International Labour Organization. The OECD measures employment in terms of thousand persons aged 15 and over who report that they have worked for at least one hour during the previous week. By this measure, Canada’s job market grew by 7.2 per cent, topping the UK (7 per cent), US (5.7 per cent), Germany (4.9 per cent), France (2.7 per cent), Japan (1 per cent), and Italy (-1.9 per cent).
Other measures of employment may exclude informal work, self-employment, employment of family members, unpaid work, etc., which can shift the statistics. The Harper government’s own 2015 budget contains a chart placing Canada second behind the US in G7 employment growth over the recovery based on monthly data collected by Haver Analytics and the Department of Finance.
The ILO method is useful for national comparisons, but as researchers Ben Fowler and Erin Markel pointed out, “it can obscure the total quantity of work created, as a job of one hour per week is counted equally to one of 40 hours per week. This also does not capture the quality of work that is created.”
In a 2014 interview with the Financial Post, Doug Porter, the chief economist of the Bank of Montreal, explained that job creation statistics do not account for changes in population size. They do not show if the number of jobs created kept up with the number of people looking for jobs.
Indicators like the employment rate and the unemployment rate, which provide a ratio of the employed or unemployed to the working age population, may paint a more accurate picture of the strength of the labour market.
The OECD’s employment rate data show Canada had the second highest average employment rate of the G7 from the second quarter of 2009 to the first quarter of 2015. Its average employment rate of 71.9 per cent was topped by Germany’s rate of 72.6 per cent over this time period. And Canada ranks fourth in the G7 when it comes to the change in the employment rate between the second quarter of 2009 and the first quarter of 2015. It is beat out by Germany, the UK and Japan.
While a more complicated picture of the relative health of Canada’s labour market emerges with other labour force indicators, Harper cited job creation specifically. On that indicator, measured since the recession, it’s true Canada ranks on top of the G7.
Middle class incomes
The final claim that Canada’s middle class saw the strongest income growth is more difficult to evaluate for two reasons.
First, there is no universal definition of the middle class. A July memo prepared by the Finance Department for Joe Oliver, the minister of finance, stated, “there is no consensus definition of ‘middle class,’ nor is there an official government definition.”
Second, there is a data problem. Brian Murphy, a special advisor with Statistics Canada’s Income Division said by email that the Prime Minister’s claim “would appear not be based on any international studies performed at Statistics Canada.” The agency is also “not aware of any recent international comparison studies dealing with income growth of the middle class.”
A widely-used source on global household income is the Luxembourg Income Study Database, compiled by a team of researchers who harmonize the statistics to allow for cross-country comparisons. A 2014 piece in the New York Times explained, “there does not appear to be any other publicly available data that allows for the comparisons that the LIS data makes possible.”
The most recent LIS data however, ends in 2010, and does not capture the time period Harper cited. In another New York Times article, the same authors wrote, “median income in Canada pulled into a tie with median United States income in 2010 and has most likely surpassed it since then” since pay in Canada has risen faster than pay in the United States.
Gallup also published a study on median household incomes in 2013. It aggregated data between 2006 and 2012 based on surveys conducted with 2,000 adults in 131 countries. To compare incomes across countries, Gallup used purchasing power parity to translate different currencies into a common currency. The study listed the median household incomes of the G7 countries in US dollars, and based on the self-reported data, Canada finished second behind the US.
- US: $43,585
- Canada: $41,280
- Japan: $34,822
- Germany: $33,333
- UK: $31,617
- France: $31,112
- Italy: $20,085
The OECD has data on gross adjusted household disposable income, which measures the average amount of money that a household earns per year after taxes. In US dollars, the per capita income for the G7 countries since the financial crisis are:
Source: OECD Data – Household Accounts
While Canada’s figures are estimated, the country has neither the highest average of household disposable income over the time period nor the fastest growing of the G7.
Relying on the OECD data is problematic because it compares average income. If incomes in the upper income brackets increase faster and more substantially than incomes in the lower brackets, average income will rise even though only a small number of individuals at the top are responsible for that increase. Median income, which provides the income of the person at the 50th percentile of distribution (someone who makes less than half of everyone else and more than half of everyone else), is a better measure of middle class income, but the OECD’s data on median disposable income is incomplete for many of the G7 countries.
Harper has not responded to requests for a data source on middle class income growth. Based on a lack of evidence, we are withholding judgement on this particular claim.
So among the G7 and since the financial crisis trough, here’s the verdict for Canada as top performer: Economic growth – true; job creation record – true; and middle class income growth – withholding judgement.
*Only Canada, Japan, and the United States have reported figures for Q2-2015.