Lock Consulting.- Best Business of 2024
January 24, 2024

Your income, in our view, is the single most important and overlooked economic challenge facing us, Canadians, today.  We have previously blogged about Canadian incomes, but it is still worth reviewing the data.  According to the CRA nearly 30 million Canadians filed tax returns for 2022.  Given that there are more than 40 million people living in Canada that makes sense, after all children and other dependents may not have any tax reportable income and the number of illegal immigrants has exploded in recent years.

Of that <30 million, with reported incomes, only about 16 million have full-time employment, some of the remainder may have full time income equivalency gained through multiple part time and combination gig type jobs.  The CRA reported median pretax income (the midpoint of all income earners) was about $40k indicating that 25 million Canadians earned less than $40k each before paying taxes. 

Statistics Canada and other bureaucrats prefer to report mean (the average of all reported income) income, because it is a bigger number – which for 2022 was $54k.  The government’s, relatively new, official poverty line is “half of the median income” or $20k, before income tax, which is about half of the LICO (Low Income Cut Off) – which was the previously used measure of poverty.  Contrary to official narratives, lowering the official measure of poverty does not elevate people out of poverty – it simply fails to adequately address the issue.

Take a minute to read that again, the government’s official poverty line is 50% of the median income.  Therefore, if we used the mean value of all citizens who fell below the median as an indication, 63% of the country would be deemed to be living in poverty.  The reason for pointing this out is that the government does exactly the opposite – instead of acknowledging the severity of diminishing Canadian incomes, politicians brag that mean income for Canadians is $54k therefore the meanhousehold income” is $108k.  

There are various estimates of how many people work for different levels of government.  What is clear, however, is the number has grown substantially in recent years and continues to grow as the government creates new departments.  In 2015 the Fraser Institute estimated that about 21% of the workforce works for some level of government.  In all likelihood Canada’s bureaucracy is larger than Russia’s.

Overall, it is safe to assume that somewhere around 25% of the workforce works for some level of government and are therefore a drain on the rest of the workforce who generate the taxes used to pay their salaries.   That comment is not meant to be disparaging of the work that is done by government employments but rather to point out the absurdity that a quarter of the workforce effectively does not pay any (new) tax.

The cost, to taxpayers, of government employees is far greater than the sum of their salaries, taxes paid by workers in the private sector are also used to fund pensions, healthcare benefits, workplaces, and equipment, as well as the bureaucratic rules and regulations that impose restrictions on economic growth and development.  Ironically, incomes of government workers typically exceed those of private sector workers and increase more rapidly.

At the end of the day, regardless of whether you are in the private or public sector, your income is still going backwards relative to inflation.  Inflationary calculations by the government frequently leave out measures such as housing, transportation, and food.  Corporate welfare is a huge culprit in the devastation of the middleclass in Canada and is an issue that could easily be addressed, that would facilitate massive reductions in taxation to working people freeing up more income to inject into the economy.  But more on that in another blog.