Canada's Good Life: On a Par With US
CANADA'S national health insurance system has won considerable praise in the United States recently. It covers every resident at less cost than the US system.Skip to next paragraph
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But Canada has other economic achievements that are less recognized. "Canadians should be a little more proud of their economy than they are," says Princeton University economist David Card - a Canadian himself.
In a new book coedited with Richard Freeman, a Harvard University economist (Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, University of Chicago Press), Mr. Card notes:
* Canada's more generous social safety net has produced markedly lower poverty rates. This is especially so for single parents and their children. In Canada, 33 percent of single parents are poor, compared to 45 percent in the US. (In the study, poverty is defined in the same manner in both countries.)
While family income inequality and poverty rates both increased in the US over the 1980s, they fell in Canada. But income transfer programs (unemployment insurance, welfare, etc.) cost Canadians two to three times more per person than in the US. Overall, Canadian government at all levels takes about 40 percent of national income in taxes; US government 36 percent. For those extra taxes, Canadians get "some bang for their buck," Card says. They get government-paid health benefits. The Canadian income tran sfer system is more effective. It reduces the poverty rate by 5.7 percentage points. The US system chops 1.9 points.
One reason for this effectiveness is that the Canadian welfare system makes payments to poor single mothers, regardless of whether a male is present or not. Among single-parent families, the transfer system lowers poverty by 14.3 percentage points in Canada compared to 5.2 points in the US.
* In the US, wage inequality between those with a college education and those with high school or less increased decidedly in the 1980s. That happened to a much lesser degree in Canada. One reason is that in Canada the ratio of college to high school graduates increased rapidly in the 1980s, whereas in the US the trend was the opposite. Another cause may be that Canadian trade unions are more powerful, with proportionately twice as many employees unionized in Canada as in the US.
* Income inequality among families increased in the US but not in Canada during the 1980s. The primary explanation is the more generous income transfer system in Canada. Also, the decline of unionism in the US contributed to the more rapid growth of earnings inequality in that country.
* Canada's immigration system produces a more-skilled flow of immigrants than does the system in the US. Canada permits entry on the basis of a point system that takes account of education and other skills among applicants. The US immigration system is based to a larger degree on family unification.
As a result, Canada has been getting a greater proportion of its immigrants from Europe and Asia (together 66 percent) compared to the US (54.3 percent) and a lower proportion from central and South America (27.3 percent Canada; 42.7 percent US) where people have lower education and income levels. On average, Canadian immigrants have a year more schooling.
With this system, Canadian immigrants soon are earning more than native Canadians; it is vice versa in the US.
On the negative side, Canada has an unemployment rate of close to 11.5 percent and the US a rate of just under 7 percent. Yet the proportion of those employed to the total population is about the same in both countries. Canadian women caught up to American women in their desire to join the paid labor force during the 1980s. Most of the unemployment rate difference arises because individuals who are not working in Canada are more likely to be classified as unemployed than is the case in the US. A greater proportion of jobless workers in Canada receive unemployment insurance than in the US. And Canadian benefits are more generous and usually of longer duration, encouraging the jobless to register as unemployed.
Canadians have a slightly lower economic standard of living, but far less crime. Nonetheless, the two nations are as close economically and socially as any pair of countries in the world.