Canadian vs. US Income Growth

Topic Box from the 2009 Ninth Annual Benchmark Report

Real personal disposable income (PDI) per capita grew twice as fast in Canada as in the US over the last four years. After similar growth for the early part of the decade, real PDI per capita in Canada rose 11 percent since late 2004 but by less than five percent in the US. This is a reverse of the stagnation that occurred in Canada in the 1990s while US incomes surged.

Differences are attributed to relative performance on labour income and other income (which includes self-employment). Labour income growth in Canada was 11 percent and was two percent in the US. Investment income performance was roughly the same in the two countries and government transfers grew more in the US. Further, the direct impact of taxation was not a factor in explaining the better Canadian growth as both gross and post-tax income show similar patterns.

Canada has had better labour income growth because it has outperformed the US on real average wage, job creation and the sectoral distribution of employment. Since 2005: Canada's real average hourly wage has risen by ten percent (more than double the US); Canada's employment grew by 5.5 percent (with virtually no change in the US); and, the number of jobs created in high paying industries grew by 4.5 percent in Canada (and actually fell by four percent in the US).