Do you consider yourself middle-class? You’ll often hear this term mentioned in financial articles, the nightly news, and the latest hot take on Twitter.
What is the actual definition of the middle class, though?
The Organization For Economic Co-Operation Development (OECD) stated that 58% of Canada was considered middle-class in a 2019 report. However, it’s hard to define what middle class means with income data alone.
Below, I’ll unpack what the middle-class income bracket in Canada looks like, outline some of the key identifying factors of the middle class, and discuss some of the challenges that the middle class currently faces.
- According to the Organization For Economic Co-Operation Development (OECD), 58% of Canada was considered middle-class as per a 2019 report.
- Middle-class income in Canada likely ranges between $53,359 and $106,717, which is identified as the second federal tax bracket.
- The cost of living and average salaries can vary significantly from province to province in Canada, impacting what could be considered a middle-class lifestyle.
When you think of your average middle-class family in Canada, you may envision the stereotypical family that owns a cookie-cutter house with two somewhat-new cars. Perhaps they enjoy grilling on the weekends or taking their kids to sports practice.
At least, that’s what many of us saw in movies and TV shows growing up.
While many middle-class families still live this lifestyle, today’s middle class has become more diverse and often harder to identify.
For example, homeownership rates are lower than they were in the past. In 2011, 69% of Canadians owned their home, while 66.5% owned a home in 2021, according to a Statistics Canada report.
A more striking statistic from the same report showed that the growth in renter households doubled compared to that in homeowner households between 2011 and 2021.
The middle class is often correlated with tax brackets. Simply put, if you’re in “the middle,” you’re in between the higher and lowest tax brackets.
If you look at the CRA’s 2023 federal income tax brackets below, you can see that this definition is a bit vague, though:
|Income||CRA Federal Tax Rate (2023)|
|$53,359 or less||15%|
|$53,359 – $106,717||20.5%|
|$106,717 – $165,430||26%|
|$165,430 – $235,675||29%|
Looking at the middle tax brackets alone (20.5% and 26% tax rates), the middle class could be considered any income between $53,359 and $165,430.
This is an incredibly wide range, so tax brackets alone aren’t good for measuring middle-class income. It’s also worth noting that only 15% of Canadians under the age of 45 have an annual income over $97,415.
If only 15% of Canadians earn more than this amount, then income over $100,000 can hardly be considered a “normal” middle-class income. Especially if we take the OECD’s statistic that 58% of Canadians can be classified as middle class.
This is why it’s important to look deeper into other factors if we want to have a more accurate classification of what it means to be middle-class.
Related Reading: Tips To Pay Less Tax In Canada
The median post-tax household income in Canada is $66,800, according to 2020 Census data. Just over 3 million Canadians (8.05% of the population) earn more than $100,000 per year, per the same 2020 Census.
With only 8.05% earning more than $100,000 pler year, it’s safe to say that the majority of the middle-class population earns less than this.
I’d be inclined to say that middle-class income in Canada could range between $53,359 and $106,717, which are identified as the second federal tax bracket (see the chart above).
Related Reading: 15 Fascinating Canadian Income Statistics
Another important factor to keep in mind when discussing the middle class is where they live. For example, the cost to rent an apartment in Toronto, ON is $2,443 per month, while the cost to rent an apartment in Halifax, NS is just $1,725 per month (a 41.6% difference).
In addition to rent, you also have to consider other living factors, such as:
- Utility costs
- The real estate market
- Transportation costs
- Average salaries in the region
Here’s a quick table outlining the average monthly and annual costs of living by province:
|Province or Territory||Monthly Cost of Living||Annual Cost of Living|
|Newfoundland and Labrador||$4,897||$58,768|
|Prince Edward Island||$4,722||$56,662|
- Sources: Statistics Canada reports Household spending, Canada, regions and provinces (2019) & Household spending, three territories
If you’re living in a more expensive city like Vancouver, Toronto, or Calgary, a middle-class lifestyle will cost you significantly more than if you were living in Montreal, Halifax, or Moncton.
One of the more interesting trends that I’ve noticed is that an increasing number of Canadians are flocking out of the Toronto area to neighbouring provinces and cities, where the cost of living is lower.
This is, in part, made possible by remote work opportunities that allow people to work independently of a central office location.
If you’re working remotely, one of the best ways to save more (and live more comfortably) is to simply relocate to a city with lower living costs.
Related Reading: How Much Money You Need To Live As A Digital Nomad
The Middle Class: Identifying Factors
Now, let’s take a look at some of the key identifying factors that correlate with Canada’s middle class.
However, keep in mind that many of these factors are subjective.
For example, it’s not uncommon for people to overstretch their resources. A single person earning $60,000 per year could have all of the appearances of being middle class (newer-model car, a nice condo or house, the latest tech, designer clothes), but could have little to no retirement savings.
All of these outward “signs” of the middle class mean very little when the same individual is forced to live primarily on government benefits when they get to their retirement age.
That being said, let’s take a quick look at some examples that could be used to identify middle-class living in Canada.
Middle-class individuals often have some form of post-secondary education or vocational training, equipping them with specialized skills or knowledge.
Thanks to their higher level of education, the middle class is able to earn a higher income through working in specialized positions, whether they’re white-collar accountants or blue-collar welders. Both career paths can be equally profitable and offer fair benefits.
Alternatively, many small business owners could also fall into the middle class.
There are over 1.22 million small to medium-sized businesses in Canada, and it’s not uncommon for small business owners to take home anywhere between $60,000 and $100,000 per year in personal profits after paying their employees, business taxes, and overhead.
Related Reading: Best Business Ideas To Start In Canada
Homeownership is a common trend among the middle class. While their homes may not be completely paid off, there’s a good chance that middle-class individuals and families own rather than rent their homes.
As I mentioned earlier, though, homeownership has declined.
This is largely due to the increasing costs associated with buying, owning, and upkeep a home. Also, renting offers the middle class greater economic mobility, as it’s easier for them to move to find better-paying job opportunities. This has led an increasing number of middle-class Canadians to rent their primary residence.
Traditionally, the middle class can expect to retire between the age of 60 and 65 with healthy retirement savings, a fully (or mostly) paid-off house, and live comfortably.
The good news is that Canadians, as a whole, are still on track to retire comfortably. A recent Statistics Canada report showed that total RRSP contributions increased by 12.2% between 2020 and 2023.
While the pandemic certainly had some negative effects on taxpayers’ income, government benefits and work-from-home policies allowed many Canadians to continue earning.
Since opportunities to go out and spend money were limited, though, Canadians were able to save more money, according to a report by RBCs Thought Leadership Group.
The middle class often appears to live a life of relative comfort. They tend to drive newer vehicles (and might even have a recreational vehicle), have well-maintained homes, have the latest technology, and have a better-than-average wardrobe.
However, buy-now-pay-later platforms and access to easy financing have blurred the lines when it comes to middle-class lifestyle.
For example, I’ve seen many young college students rocking the latest name-brand fashion with $200 shoes, $1,000+ smartphones, and $3,000+ laptops, while they’re likely only working a part-time job and receiving menial government benefits.
In the past, these were lifestyle items that would be more commonly associated with middle-class graduates who have a full-time career, not college students living on under $30,000 a year.
On the flip side, I’ve had conversations with millionaires who drive a used car, have a five-year-old phone, and dress simply.
This goes back to my point that appearances can be deceiving.
Reaching the middle class is a goal shared by many young working-age Canadians and students. However, many believe that the middle class is gradually fading and becoming smaller as the income gap continues to increase.
Here are some of the most prominent issues that today’s middle class currently faces.
The cost of living has been steadily increasing throughout Canada. Homes have become more expensive, rental rates have increased, and everyday expenses like groceries and fuel have increased.
This is due to a number of factors, including:
- High-interest rates
- The current housing crisis
Education has become increasingly more expensive, which has led many young Canadians to reconsider attending university.
There appears to be a greater number of employment opportunities for Canadians between 25 and 54, while unemployment has drastically decreased (77,000 jobs lost) for younger Canadians between 17 and 25, according to a Statistics Canada’s May 2023 employment report.
This could create problems as these younger Canadians grow older and find it more difficult to find profitable employment with less work experience.
We also have to consider the advent of generative AI and its effect on the workforce. An increasing number of tech jobs, content creation, and customer support positions are being replaced by AI applications.
Instead, a few key “promp engineers” who understand how to program AI to complete jobs that once required full-time salaried employees.
The next few years will undoubtedly bring new opportunities and changes (both positive and negative). Many believe that the middle class is fading, while others believe that it’s stronger than ever.
What do you think? How would you define middle class, in your own terms? Let me know below!
One of the key traits of the middle class is that they actively invest into their retirement. Keep on reading to see my list of the top ten RRSP retirement savings plans next!