Business news was abuzz this week with reports of “inverted yield curves” in the U.S. bond market — a reliable indicator of incoming recession. Combined with an escalating tariff battle between the U.S. and China, many analysts believe an economic downturn is likely within the next year or so.

What does that mean for Canadians? Well, any recession is almost certain to hit working people the hardest. Household debt has reached $2.16 trillion — the highest private debt load as a share of GDP of any G7 country. People are already feeling squeezed. In the first three months of 2019, 31,900 people filed for insolvency. That’s more than any time since the depths of the Great Recession in 2010. Delinquencies on car payments hit 0.97% in 2018, also matching Great Recession levels for the first time.

Plenty of politicians and self-righteous personal finance gurus will blame Canadians themselves for taking on these higher debt loads. We must live within our means, they’ll say. They’ll tut-tut that people should be more responsible with their borrowing.

But how does one “live within one’s means” when one’s means haven’t changed in 40 years and the cost of living has spiked? Is it really moral weakness that leads people to run up credit card debts when the alternative is missing mortgage payments or having your car re-possessed? This is absurd. The real reason Canadians are taking on debt is simple: they have to in order to get by.

Four decades of fundamental changes to our economy have forced people to assume more and more personal debt. Wages have barely budged while the cost of living has skyrocketed. At the same time, governments have cut back spending on services, forcing Canadians to pay privately for things (like a university education) that used to be publicly funded.

All of this is an inconvenient truth for those who want to blame ordinary Canadians for what are actually structural problems with the economy, but the numbers don’t lie.

In 1977, the average inflation-adjusted hourly wage for a Canadian worker was $24 per hour. In 2017, it was $25.79.

Meanwhile, the cost of basic necessities has grown well beyond what this meagre $1.57 pay raise can cover.

Take housing. In 1984 the average cost to buy a house was $154,000 in today’s dollars. It’s now $369,000. Keep in mind that wages have remained about the same, so it’s more than twice as difficult to afford shelter now as it was 35 years ago.

Post-secondary education is another expense which is now not only a requirement to get virtually any job, but has also become much more expensive. Tuition costs have nearly doubled since the early 90s, from $3,500 to $6,500 in 2017-18. As a consequence, people are graduating with larger student debts: on average $23,000 in 2017 compared to $16,000 in 1976. 

More people are using food banks. This shouldn’t come as a surprise. The average family of four spends $220 per week on groceries. Even with two full-time workers earning the average hourly wage, that chews up about 10% of the household’s income — just to put food on the table.

We also have to take a hard look at our tax system. Over the past few decades the burden of paying taxes to fund our services has shifted increasingly onto the backs of working people and off corporations and the rich.

In the 50s — what now looks like a golden age of Western capitalism — corporations and people paid roughly the same amount of tax. Now people pay 3.5 times more than corporations — for every dollar they put in, we put in $3.50. 

Of course, corporate profits have never been greater, so what is the reason for this? Simple: it’s never been easier for corporations to shift their profits into tax havens around the world, essentially putting it beyond the reach of any country to tax. Exploiting loopholes and the growth of global finance, corporations hire expensive legal and accounting teams that allow them to easily dodge billions in taxes every year. 

Governments have made up the difference in two ways: by taxing working people more, and cutting back on services those same people use. Both of these changes have ramped up the financial pressure on Canadians.

Housing, education, food, taxes. Factor in heating bills, car payments, fuel, and you’re not left with much at the end of the month. It’s no wonder that almost half of Canadians say they’re less than $200 away from insolvency. 

Think on that for a moment. If a loved one died across the country, half of the people in Canada — one of the richest countries on Earth — wouldn’t be able to buy a plane ticket to attend their funeral. 

This is why when politicians crow that the economy is doing great because GDP is growing and unemployment is low, nobody believes them. What good is GDP growth if all the gains are being captured by the rich? What good is a job if it doesn’t pay enough to cover the basic cost of living? These are basic questions that our political class doesn’t seem interested in discussing.

All of this may soon become impossible to ignore. When a recession hits and those top-line trends of growth and jobs turn south, things will of course become even more dire for ordinary Canadians. People will lose their jobs, their houses, their cars. Collection agencies will come calling.

What will our political leaders do then? When the foreclosures start, will they chide people for their reckless borrowing? Or will someone finally start dealing with the actual causes of our economic dysfunction?

Naturally, the corporations and super-rich who stash their wealth in the Cayman Islands will be fine. They always are. For them, recessions (as our former Prime Minister Stephen Harper once said) are just “good buying opportunities.”

For everyone else, however, it’s a catastrophe. The usual suspects will try to pin the blame for that on people who have taken on debt just to survive. They always do. And, as usual, they will be wrong. Don’t blame regular Canadians — blame the economic system that is sucking all the wealth to the very top, and leaving nothing for anyone else.