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Why Canadians are dependent on credit

September 5, 2017

It is no mystery – statistics can help unravel the causes.

Between 1950 and 1975 Canadian family incomes rose exponentially. In fact, wages grew by about 1,000% while the cost of living only rose by about 375%. This was the first (and only) time in the history of capitalism when men dominated the workforce. It is the only time in history when Canadian families could live comfortably on the income generated by one family member.

During that time span about 30% of women were engaged in the workforce but more than 75% of men were working. After the mid 1970s came a time of deregulation and union busting, women re-entered the workforce giving employers a larger labour pool and inadvertently adding to the already downward pressure on wages.

If you were fortunate enough to have developed and grown your career during the golden years (1950s onward) you would have earned enough money to have lived comfortably and to have amassed a decent pension plan. Gone are the days of defined benefit plans, gone are the days of wages outpacing living expenses.

Since the 1970s Canadians consumers have found that their taxes have doubled, driving incomes lower faster. The family that in 1967 was supported by a single income not only earned more money than the same size family, supported by two incomes, fifty years later but it also paid half as much tax.

Prior to the late 1970s credit cards were relatively scarce since the early 1990s their use has skyrocketed – the poorer people have become the more they have relied on debt to fund what probably ought to be a very ordinary lifestyle.

Statistics, particularly provided by Stats Can, are very misleading – they often change methodology which will, deliberately or otherwise, obfuscate poor government practices and decisions. Meaningfully comparing year over year data is a complex task because of the differences in data used and the lack of available information.

Nonetheless, we do know that more Canadians are unemployed and underemployed than ever before, we do know that wages continue to fall behind inflation and that debt loads continue to increase.

What can you do about it? Not a lot quite frankly, economic change will come from political will which seems to be lacking at pretty much every level of government. Bringing back more stringent banking regulations that impede the usurious zeitgeist pervading our financial system might be a good starting point. But perhaps more important than that focusing on consumer protection, reducing taxes and implementing a policy of a living wage.

As Licensed Insolvency Trustees we are required to provide education about budgeting and money management as well as on the use of credit and raising awareness about the causes of financial problems fits nicely into that niche. Awareness itself, however, doesn’t create change but it does create the opportunity to re-examine our own thoughts and habits and provides the ability to contemplate possible alternatives in lifestyle.