The Decline of Canada's Middle Class

                I was sitting at the dog park eavesdropping to the conversation at the bench next to me.  The couple, clean-cut and most likely in their late 30’s, were discussing the decline of the middle class. Both sported a large Starbucks coffee.   

                Whether the middle class is actually declining is open for debate.  Statistics provide evidence that it is not actually happening, because the majority of Canadians remain within an average income bracket used most often to describe the middle class.  In fact, the average household income in Canada increased 8% between 2005 and 2009.  However, it can be said that it is becoming poorer. 

                Perhaps what those who believe in the declining middle class should concentrate on is the loss of purchasing power realized by the majority.  Incomes have increased with the “rate of inflation” over time.  But, the prices of many things have increased faster.  As a result, the middle class can no longer afford goods in the quantity and size we have grown accustomed to.  Shelter and food being the most often debated.

                There is no doubt that the world has become smaller.  Today, consumers are able to purchase goods from all over the world with relative ease.  As a result, many consumer brands have started dominating the global market.  There are many benefits to this; manufacturing en-masse lowers the per-unit cost and the savings are passed onto the consumer via lower prices.  This is evident in computers, travel, and clothing to name a few.  However, by favoring an international brand that has no manufacturing ties to your community, province or country, one is essentially guilty of contributing to what many believe is a shrinking middle class.     

                One of the easiest ways one can contribute to a wealthier middle class is by being conscious of where one spends money.  Depending on the product, buying local may cost a little more but the profits will more than likely stay within the community.  It is these profits that create a wealthy middle class as the local profits trickle down creating investment and jobs.

                At the beginning of the article I noted the two were drinking Starbucks.  I found it ironic that these two could be concerned about Canada’s middle class while consuming a coffee whose profit is exported to Seattle.  As of the last annual report (October 2011), Starbucks had 17,003 stores.  None of these are considered franchises where the profits remain with the franchisee.  However, 47% are “licensed” to large institutions such as those in grocery stores and Home Depots. These outlets account for only 9% of the company’s total revenue.  The profit realized from these outlets is exported to the host company’s head office. 

                The remaining stores, the numerous ones you see around town, sometime one across the street from another, are all corporate and the revenue from these stores represented 82% of total revenue in 2011. For arguments sake, we will assume the same for profit.       

                Assuming that profits are in line with revenues, the 82% of profits realized by the 9,031 corporate stores averaged a profit per store of $113,100 in its fiscal 2011 year.  This profit would be better utilized within one’s own community; instead it is used by Starbucks to expand in other markets, leaving little-to-no economic benefit to the host community other than a few jobs that can still exist via a mom-and-pop shop or a franchised brand.

                This is transferable to many products and retailers. We as Canadians should educate ourselves to become more conscious consumers and try and support those products created in Canada before any other. We need to walk past the Starbucks to the family owned. Keeping profits as close to home as possible is the easiest way to support a stronger middle class in your community.