[url]https://policyoptions.irpp.org/magazines/april-2025/canada-alabama/[/url]
The perils of per capita GDP: No, Canada is not poorer than Alabama
Despite lower economic growth per person, most Canadians earn more, live longer and fare better than Americans.?
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"Prosperity depends not just on how much is produced, but how it is distributed. Bank of Canada research shows most of the U.S. advantage in per capita GDP is concentrated among high income earners.
Three-quarters of the gap in per capita output is captured by higher incomes for the top 10 per cent of Americans. There is little difference in incomes between the bottom 90 per cent in the two countries. The richest 10 per cent of Americans receive almost half ([url]https://wid.world/data/[/url]) of all pre-tax income, so their wealth significantly inflates the overall per capita average.
In fact, most Canadian workers earn higher wages than those in the U.S. It is most accurate to measure typical incomes by the median wage (the halfway point in a distribution), not the average (which can be distorted by very high incomes at the top).
The median hourly wage in Canada in 2023 was C$28.79 or US$24.61 at the OECD’s purchasing power parity exchange rate. The median hourly wage in the U.S. in 2023 was US$23.11. The typical Canadian worker thus earned 6.5 per cent more than their U.S. counterpart, despite lower per capita GDP.
Perhaps surprisingly, the Canadian worker also paid a lower marginal federal tax rate than their U.S. counterpart.
Of course, public services, not just private incomes, are also important to living standards. Canada’s more extensive health care, public education and other services enhance the quality of life in ways not captured by per capita GDP.
For example, eight per cent of Americans have no health insurance ([url]https://www.commonwealthfund.org/publications/surveys/2024/nov/state-health-insurance-coverage-us-2024-biennial-survey[/url]) and one-quarter are underinsured (facing out-of-pocket costs that force many to skip needed care). That takes much of the shine off a higher GDP.
For all these reasons, it is clear the typical Canadian has a higher standard of living than the typical American. We are healthier face much less inequality and are happier. These outcomes are not accidents. They reflect deliberate policy choices (including regulation, taxes and public programs) that shape both production and distribution to improve well-being.
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The perils of per capita GDP: No, Canada is not poorer than Alabama
Despite lower economic growth per person, most Canadians earn more, live longer and fare better than Americans.?
?
"Prosperity depends not just on how much is produced, but how it is distributed. Bank of Canada research shows most of the U.S. advantage in per capita GDP is concentrated among high income earners.
Three-quarters of the gap in per capita output is captured by higher incomes for the top 10 per cent of Americans. There is little difference in incomes between the bottom 90 per cent in the two countries. The richest 10 per cent of Americans receive almost half ([url]https://wid.world/data/[/url]) of all pre-tax income, so their wealth significantly inflates the overall per capita average.
In fact, most Canadian workers earn higher wages than those in the U.S. It is most accurate to measure typical incomes by the median wage (the halfway point in a distribution), not the average (which can be distorted by very high incomes at the top).
The median hourly wage in Canada in 2023 was C$28.79 or US$24.61 at the OECD’s purchasing power parity exchange rate. The median hourly wage in the U.S. in 2023 was US$23.11. The typical Canadian worker thus earned 6.5 per cent more than their U.S. counterpart, despite lower per capita GDP.
Perhaps surprisingly, the Canadian worker also paid a lower marginal federal tax rate than their U.S. counterpart.
Of course, public services, not just private incomes, are also important to living standards. Canada’s more extensive health care, public education and other services enhance the quality of life in ways not captured by per capita GDP.
For example, eight per cent of Americans have no health insurance ([url]https://www.commonwealthfund.org/publications/surveys/2024/nov/state-health-insurance-coverage-us-2024-biennial-survey[/url]) and one-quarter are underinsured (facing out-of-pocket costs that force many to skip needed care). That takes much of the shine off a higher GDP.
For all these reasons, it is clear the typical Canadian has a higher standard of living than the typical American. We are healthier face much less inequality and are happier. These outcomes are not accidents. They reflect deliberate policy choices (including regulation, taxes and public programs) that shape both production and distribution to improve well-being.
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