Wait. Canadians make more money than Americans? Yep.
David Zetland passes along some income figures via Aguanomics (re posted). (Dan here…There are more American billionaires and millionaires, so not to worry) :
Cornelia and I were discussing household income and living standards, and I mentioned that median wages in the US were around $35,000.* She was shocked, saying that they were much higher in Canada.
Wait. Canadians make more money than Americans? Yep.
[1] USD** Median household income
50,050 USA
71,300 Canada
Household size
2.6 USA
2.5 Canada
[2] USD GDP per capita (2011 nominal)
48,400 USA
50,400 Canada
USD GDP per capita (2011 Purchasing-power-parity)
48,400 USA
40,500 Canada
[3] Gini Coefficient (CIA, 100 = most unequal)
45 USA
32 Canada
So here’s how I reconcile these numbers:
- Median household income is nearly 40 percent higher in Canada, even after adjusting for the number of people in the household.
- PPP GDP per capita is higher in the US by nearly 25 percent. This number, mind you, refers to total economic activity and cost of living, not income to individuals.
- These numbers are reconciled via inequality: Canada is more egalitarian (similar to Spain and Italy) than the US (similar to Bulgaria and Iran), circa 2005-2007. I reckon that inequality has recently worsened in the US.
So it seems that the income derived from economic activities in the US is skewed in distribution — with more going to rich people than the average person — compared to Canada.**
Bottom Line: Canadians are well known for their higher levels of social harmony. This harmony may be due to a fairer distribution of income, but it’s also accompanied by a higher average incomes.*** Americans are both poorer AND less equal than their neighbors.
* Average wages in 2011 are $42,000 in the US and $32,600 in Canada, but those numbers do not account for employment (66.7% and 71.5%, respectively) or the distribution of wages/capital gains. Right, Mitt?
** Gross income is not the same as income net of taxes, and total taxes are 27% of GDP in the US and 32% of GDP in Canada, but those rates ALSO do not take the distribution of the tax burden into account.
*** My definition of the American Dream — “being able to do what you want” — does not match common definitions that include upward mobility. That dream is — relative to the past and relative to other countries — more dream than reality [pdf].
I would only add that not only are Canadians richer than Americans, they are typically more secure financially than us.
Hints: The rate of medical expense triggered personal bankruptcies is zero. Canadian banks are some of the safest in the world. etc.
http://ftalphaville.ft.com/2012/10/12/1205371/whats-the-average-adult-worth/
Here is a a link worth scanning
[3] Gini Coefficient (CIA, 100 = most unequal)
45 USA
32 Canada
That’s wrong I’m afraid.
They are the numbers the CIA reorts I know, but they’re still wrong.
The US number is before the redistributive effect of the tax and benefit system. The Canadian one is after it.
“So it seems that the income derived from economic activities in the US is skewed in distribution — with more going to rich people than the average person — compared to Canada.”
That is indeed true but it’s nowhere near as stark as you think.
Canada also offers more opportunity to climb the socio-economic ladder.
Go North, Young Man!
im,
“No where near as stark”
Is the difference in gini scores according to CIA data stark? What would ‘not’ stark look like? Any links to data that reflects your idea that gives perspective?
For the last few years, the canadian dollar have appreciated against the U.S. dollar but the relative retail prices have been slow to adjust. That partially explain why the canadians seem earning less when using the PPP. Currently, its a good time for canadians to shop south of the border.
Considerably more wealthy at median as well, 3-4 times as wealthy, IRC, as are Australians and even Italians.
Lord: Yes, this is correct. I covered these studies back in July: http://middleclasspoliticaleconomist.blogspot.com/2012/07/us-trails-at-least-15-oecd-countries-in.html
If the US contribution to income for health insurance is added then the difference is no less.
Medicare and Medicaid “incomes” are inflated by the huge costs of sustaining insurance companies sucking off the inefficient and less effective US health system.
The Canadians accrue about half the government support for health as the US, but have better outcomes.
Unless you damn their system because an old guy waits longer to get a viagra perscription.
Is the difference in gini scores according to CIA data stark? What would ‘not’ stark look like? Any links to data that reflects your idea that gives perspective?
Starting from the beginning…..it’s extraordinarily difficult to have a gini over about .60. The global one, from peasants in Cambodia to the Master of Wall Street, is only about .70.
We’ve also not really seen one below about .25. That’s Sweden and that’s about the most redistributive society anyone’s really managed to build. For any length of time that is.
So our real range is .25 to .60, something like that.
And it’s smaller than that too. The gini of market incomes seems to range from .35, .38 perhaps, up to .50 and a bit.
The gini of post tax post benefits incomes ranges from .25 to perhaps .40. There are outliers, yes, but the point I’m trying to get across is that we’re not really operating in the range 0 to 100, or 0.0 to 1.0. Much more like in 0.25 to 0.5 as a real world range.
And then we come to the other issue. We have an entire spectrum of possible ways to measure inequality. On pure market incomes, on those plus government cash, on that plus taxes taken off the rich, on that plus benefits in kind offered to the poor and we can even go all the way and look at inequality after all the effects of all government services (education say, or health care in Europe).
Every society will have a lower gini the further along that measurement spectrum we go. So, pointing to the gini by one method on that spectrum and comparing it to another later on is very useful indeed in the context of one society. It tells us how much inequality is being reduced by various actions.
However, using a measurement for one country from one place on the spectrum and comparing it to that of another country using another part of the measurement spectrum doesn’t in fact look all that useful.
And that’s what I was complaining about above. That .45 figure for the US is market incomes. That .32 figure for Canada is after all the tax and benefit systems. Just not comparable figures.
As an example, an entirely different way of measuring something very similar. How many times higher are the incomes of the top 10% than the bottom 10%? In the UK, by market incomes alone, about 30 times higher. By the time we’ve included taxes, tax credits, cash benefits, housing subsidies, free (at point of use) health care, free education and so on, the difference is about 7 times. Either might be too high or too low. But if we wanted to compare France and the UK we would want to make sure that we used the same calculation method each time, no? Compare the UK 30 times with the French market incomes, not with the French after everything the government does numbers?
The real comparison would be, I think I’m right in saying, 0.32 for Canada and about 0.37, 0.38 for the US. Using the same system of measurement in each place.
Please note, I’m not saying that either system is the right one. That inequality is too high in one, or too low in the other. I’m very simply trying to point out a problem with the measurements themselves.
This paper is a good introduction:
http://www.oecd.org/els/socialpoliciesanddata/49499779.pdf
@Tim — good exposition of the problems with statistics, etc., but Canada is STILL more egalitarian than the US, right? So richer and more equal, right?
Or are you just conceding that, yet elaborating on how the result is robust?
Via wikipedia (yes, I am lazy) we can see that Canada *is* more equal than the US in 4/4 measures…
http://en.wikipedia.org/wiki/List_of_countries_by_income_equality
The difference in health care costs is enormously important, and I am sure the effect is much more pronounced than you would think just looking at the dollar comparisons.
Even a moderate health crisis in the US can kick a family down to the bottom of the economic ladder, a hit from which they may never recover.
In crisis, some charity happens, because people care for each other. As people near the bottom of the ladder scramble to help, whether family taking time off or communities holding fundraisers, they too deflate their own resources. Over time the bottom layer collapses like a squashed pancake, becoming either unable or unwilling to help each other in crisis. Any people adhering to that community either use up any savings or spare energy they might have, or detach from that community.
There used to be an additional choice, that of retreating from the money economy and subsisting on gardening, a few chickens, firewood from a woodlot nearby, lodging the kids with relatives, and so on. Much less human effort was expended in supporting the Laputans. Today, this avenue of retreat is blocked for most people. True, the Laputans these days don’t derive much benefit from the pancake layer, but they aren’t threatened by them, either.
Noni
“Median household income is nearly 40 percent higher in Canada”
I call BS on this.
For one thing GDP per capita is nearly equal. Second, searching the www can only find comparisons that the US ranks ahead of Canada on most income related measures, much less 40% lower.
http://en.wikipedia.org/wiki/List_of_countries_by_household_income
“For one thing GDP per capita is nearly equal.” – Yes, but wages and benefits have comprised a smaller and smaller share of GDP each year since 1980. Basically, the US has two economies. A stagnant or shrinking one in which most of us live, and the other one which is doing very well with all its government coddling and subsidies.
“good exposition of the problems with statistics, etc., but Canada is STILL more egalitarian than the US, right? So richer and more equal, right? “
I certainly think it’s fair to say that Canada is, post tax and post benefits, more equal than the US, yes.
I would point to one other confounding factor though. We would rather expect there to be more inequality among 300 million people than among 30 million. Larger sample sizes will always show more variation after all.
Just as an example I tracked down the inequality figures for the European Union recently. Measuring them the same way as we do for the US. They’re about the same. Sure, inequality within each EU country is lower than it is in the US. But right across the EU it’s about the same.
This most certainly does not explain all of the difference between Canada and the US. Canada is very definitely a more redistributive economy than the US.
As to richer, I’m not quite sure. I have a feeling that there’s a very big exchange rate explanation in those figures. I’ve not looked it up but I would certainly bet on PPP figures being very different from market exchange rate ones.
Bottom line: Canada is indeed more equal than the US. But the details of the figures show it to be less of a gap than what we were originally presented with.
This is a long running theme of mine I’m afraid: the US economic statistics on poverty and inequality and so on are calculated very differently from those of most other countries. And thus direct comparison of those statistics has to be taken with a very large pinch of salt.