Poverty as a Middle Class Issue

There are many points in Canadian history that are the key milestones in defining who we are as a country. Many historians point to the completion of the transcontinental railway, the Battle for Vimy Ridge, or 1921, the year when the majority of Canadians were found to be living in urban, rather than rural, areas of the country, as the key milestones in our evolution.

As with the demographic change noted in 1921, these milestones can be subtle. However, they are no less important than the key dates we commemorate or teach in our schools.

The economic recession of 1989 to 1993 was one of these key milestones. In addition to being a “Made in Canada” recession aimed at cooling an Ontario economy that was deemed to be overheating, this recession was significant because it revealed that most members of the Canadian Middle Class were one paycheque away from living in poverty.

For the first time in our history, the bulwark of our society was found to be vulnerable to fast-moving economic conditions. Although the Great Depression of the 1930s was a deeper and more prolonged economic downturn, it took several years for the most negative impacts to occur. Most families could rely on social networks, savings or other assets to tide them over in the short-term. As these assets were drained, and it became evident that the economy would not rebound, poverty and unemployment spread and the social crisis deepened.

The Great Depression taught a generation of Canadians of the need for personal savings, frugality and self-sufficiency. The hardship and rationing of the Second World War reinforced these lessons and assisted in the creation of a “savings culture” across the country. Even the heady years of post-war economic expansion could not rock the wide-spread belief that individuals and families needed to set aside money for a rainy day.

For many years, social scientists pontificated on this unique attribute of Canadian society. It was used as an example of our inherent conservatism. Some economists commented that the high levels of personal savings hurt our economic growth because it was withholding funds necessary for investment.

By the 1980’s, the belief in personal savings was in serious decline. Between rampant inflation, the easy availability of credit, and the rise of entrepreneurship, Canada had moved from a “savings culture” to a “credit culture.” As long as the monthly payments could be met, Canadians were encouraged to borrow more to sustain the consumer economy.

When the recession hit in 1989, the Canadian manufacturing sector was the hardest hit. Thousands of Canadians earning higher-than-average wages immediately lost their jobs and many thousands more were faced with layoffs and uncertainty. These job losses rippled through our economy. Instead of having personal savings to mitigate the short-term impact, these Canadians were faced with monthly mortgage, car loan and credit card payments.

In contrast to the Great Depression, the impact on these families, and on the country as a whole, was immediate. Further, while the Great Depression had its greatest impact on rural Canadians and the economically vulnerable, this recession had its greatest impact on the urban Middle Class. For the first time in our history, the possibility of a life in poverty became a reality for moderately affluent and previously secure Canadians. 

Although Canada and the global economy continue to experience turmoil, the lessons of this particular recession still remain. Even if it is driven by self-interest, the Canadian Middle-Class has been sensitized to the issue of poverty in our society. In addition to increasing support for voluntary organizations dealing with the economically vulnerable, there is an increased focus on finding solutions to poverty.

Since the Middle Class dominates the electorate, governments have also had to respond to the increased level of concern about poverty issues. Although New Brunswick has pursued the most comprehensive approach in this regard, most Canadian provinces have adopted or are moving to adopt specific poverty reduction strategies.

Although increasing social assistance rates or providing support for food banks can help mitigate the problems of poverty, the search for sustainable, long-term solutions to poverty in our society has become the goal.

The recession of ’89 to ’93 may only be a historical footnote of interest to a few. This event did create a new social consensus to strengthen the social safety net and bring about a greater awareness and sensitivity towards poverty. Twenty years later, we can see the evidence of pro-active and long-lasting measures to address poverty. If this momentum is sustained, and poverty is reduced significantly, this would indeed be an important milestone in Canadian history.

Originally published in the Telegraph Journal October 14, 2011