Canada's income per person grew twice as fast as that in the United States over the past four years, according to a study released Tuesday.
|Per-capita income (2008)||US $|
CIBC World Markets Inc. said the country's real personal disposable income — what you get to spend once you subtract price increases — has risen $2,600 since 2005, double the $1,300 US gain that Americans enjoyed.
The bank said Canada's stellar per-capita income performance was almost enough to wipe out the disparity between U.S. and Canadian earnings levels that had built up during the previous 15 years.
"This trend is a complete reversal of the trajectory seen in the 1990s when Canadian incomes stagnated alongside surging U.S. incomes," said Benjamin Tal, CIBC economist and author of the study.
"[Canada's income] is still below but much less than it was," he said.
Canada benefited from superior national economic growth fuelled by higher commodity prices, Tal said. As a result, real wages in Canada grew by 10 per cent over the five-year period, more than twice the pace experienced by U.S. workers.
In addition, Canada saw strong job growth that led to a 4.5 per cent increase in the number of high-paying jobs during the period. By contrast, high-paying work in the United States fell by four per cent.
Thus, more Canadians were working and at higher paying jobs where the salaries were rising twice as fast as those in the Untied States, CIBC said.
Better still, Canada's per-capita income acceleration should continue as economies on both side of the border recover, Tal said. "Our view that the recent retraction in commodity prices is just a correction … suggests … Canadians will continue to collect more and larger paycheques than their neighbours to the south," he said.
The current situation represents a marked contrast to the 1990s, when Canadian incomes lagged those in the United States to such an extent that some critics said Canada's per-capita figures were behind even lowly Mississippi.
United States still ranks ahead
The CIBC places Canada's per-person income at approximately 90 per cent of the U.S. average. That represented an improvement compared with past rankings but still indicated that Americans could buy more with their incomes than could Canadians.
In dollar figures, the U.S. Central Intelligence Agency estimated per-capita income in the United States at $47,000 US in 2008 versus Canada's $39,300 US for the same year.
Comparing non-Middle Eastern oil-rich economies, Norway ranked ahead of the United States in terms of per-person money at $55,200 in 2008, according to the spy agency.
As well, Ireland, the once-formidable Celtic Tiger that has fallen on tough economic times in the past year, had individual income which, at $46,200 U.S., almost equalled that of the United States.
On the other end of the scale, Zimbabwe was the poorest country on the planet at $200 US.
Comparing the incomes of countries, however, is an art that has long devilled economists. One factor is the years involved.
In the case of the CIA estimates, for example, the data used was for the 2008 calendar year, not bad for current comparisons.
However, sometimes groups are forced to use data that might be a couple of years old, information of dubious quality since the worst recession since the Great Depression hit the global economy in 2008.
As well, the quality of the data can vary among countries.
Canada, for instance, often releases national statistics with more complete — but older — data. By contrast, Washington puts out preliminary information in a more timely manner, including statistics that sometimes are subjected to large revisions.
Apples and oranges
Many groups also try to compare incomes using U.S. dollars as the common denominator. However, that means that any estimates of income levels among countries often bounce around depending upon the value of the national currency in relation to the American dollar.
"The values and derived rankings are subject to greater volatility due to variations in exchange rates. Inter-country comparisons based on GDP at market prices should, therefore, be treated with caution," the World Bank said in an April examination of incomes for 2007.
Finally, you can have trouble figuring out a "meaningful" basket of goods that is compared among countries. Indeed, this method usually ignores products and services that are only consumed within a country's borders and are not traded internationally, experts said.
Economists often note that comparing home values among countries does not yield much useful information since these residences are not traded internationally.
As well, people in a poorer country might use barter as a way of getting their necessities, a trade that will not be captured by traditional measures of income.