Published in conjunction with Canada 2020

A few years ago, we began noticing a change in the way Canadians look at the economy — a growing sense that we were reaching the end of progress. The idea of a better life — what’s known south of the border as the American Dream — seemed to be slipping away. Across North America there was a growing suspicion that the middle class bargain of shared prosperity — which propelled upper North America to pinnacle status in the world economy in the last half of the twentieth century — was unravelling.

We believe that this crisis of the middle class — explored in depth in recent scholarly work by Daron Acemoğlu, Thomas Piketty, Richard Wilkinson, Miles Corak and others — is the greatest political challenge of our time. But despite a broad public consensus on the severity of the issue, and impressive empirical and expert support, many in the media and elsewhere deny the problem exists.

Yes, there is still relative prosperity in the Canadian economy — we’re not Spain, let alone Greece. But the larger trajectory is tilting toward stagnation and decline, except for those at the very top of the pyramid. Canadians aren’t deluded, nor are they hysterical. They can see it happening.

Moreover, when we track this trend across generational cohorts we can see that the unravelling becomes much more evident as we move from seniors to young Canadians. Right now the problem is one we can fix — but the longer-term trend lines point to a very gloomy prognosis.

Consider the following graph:

Most people agree that a growing and optimistic middle class is a precondition for social health and economic prosperity. Trouble is, most Canadians no longer believe that the conditions required for a growing and prosperous middle class exist in Canada. The consensus view is that the middle class is shrinking and pessimistic.

Never in our time tracking public opinion in Canada have we seen such a sombre outlook on our economic future. Never have we seen Canadians’ sense of progress so low. The point isn’t that Canada is in a state of privation and economic distress — it clearly isn’t. The point is that the factors that produced progress and success don’t seem to be working in the same way anymore. And the problem gets worse as we move down the generational ladder.

The charts above show a sharp rise in the rate of downward intergenerational mobility as we move from seniors to younger Canadians — a nearly threefold increase. The prime driver for this trend is, arguably, rising inequality, which is accelerating in all advanced western economies. And as Miles Corak points out, the incidence of upward vertical mobility across generations is dropping most sharply in those places which are becoming more unequal at an even faster pace.

The economic ladder is missing rungs in the middle — and people are less motivated to climb it with those conditions in place. Merit is less relevant as the system is now “stickier” at the top and bottom of the social ladder. This failure of the incentive system is hobbling innovation and effort and creating a more tepid growth pattern where the economic pie is growing more slowly — and where more of it is being appropriated by a shrinking cohort at the top.

Anyone who thinks this problem will correct itself needs to ponder the chart below — based on very recent numbers. Very few Canadians think their financial situation is improving — but their sense of progress seems to get smaller as we move from ten- to five- to one-year comparisons. What does it say about an economy which defines shared progress as an economic and moral imperative when fewer than one-in-five of us think out lot improved last year?

And this is not a phenomenon isolated to Canada. In broad brushstrokes, four Anglo-Saxon economies have followed the same curve — which seems to be leading to the return of the original Gilded Age of robber barons which predated the Great Depression.

Will the issue of middle class progress be an issue in the coming election? There are good reasons for thinking that, once the emotion and chauvinism surrounding issues of terrorism and culture fade, the economy will return to its position as the apex voter concern. By this fall, it’s safe to say that Canadians will once more look anxiously at a relatively moribund Canadian economy, question the prudence of a long-term bet on the short-term prospect of carbon ‘superpower’ status and ask who has the most plausible blueprint to restore the idea of middle class progress.

Frank Graves is founder and president of EKOS Polling.