Stagnant wages, part-time workers widen U.S.-Canada income gap

(Bloomberg) — Canada has seen faster population growth than its southern neighbour thanks to robust immigration but this hasn’t translated into higher income. In fact, the income gap between the two countries has widened.

Over the past four decades, average real annual disposable income per capita in Canada grew at 1.3 per cent, notably slower than the 1.9 per cent growth in the U.S., according to Benjamin Tal, deputy chief economist at Canadian Imperial Bank of Commerce in Toronto.

Part of the gap can be attributed to differences in the makeup of the labour force, as Canada added more part-time and self-employed workers who, on average, earn less than full-time employees. Both nations are seeing fairly robust job creation, yet wages are growing more slowly in Canada.

Two other factors behind the widening gap include faster growth in taxes in Canada, and also lower income from rentals, interest and dividends relative to the U.S., Tal said in a research note.

Canada’s underperformance relative to the U.S. has “important implications,” Tal said. Had income growth been able to keep pace, the Canadian household debt-to-income ratio would have been 150%, as opposed to more than 170% currently.