The American Dream Is In Canada

America's middle class is vanishing, millions of us are falling through the cracks every year, but north of the border our Canadian neighbors are finding the opportunities that have permanently passed a generation of Americans by.

Everybody knows that the U.S. version of capitalism is rougher and tougher than is the norm in other affluent countries. The rich are richer here, the poor poorer and the welfare state less exhaustive. Not surprisingly, the U.S. scores poorly versus other rich nations in terms of health outcomes, education levels and other such metrics.

Defenders of the U.S. approach can point, though, to the fact that per-capita gross domestic product has remained higher in the U.S. than in all but a few small nations with unique characteristics (Qatar, Luxembourg, Singapore, Switzerland, Norway, etc.) — so much higher that even with the less-equal income distribution here, most Americans continue to have higher incomes than their peers in other large, affluent countries.

Times may be changing, though, and international income comparisons are definitely getting more precise. Five years ago, David Leonhardt and Kevin Quealy of the New York Times showed using numbers from the Luxembourg Income Study Database that the median income in Canada had caught up with that of the U.S. as of 2010, and speculated that Canada had probably passed the U.S. since. (The median is the income of a person in the middle of the income distribution, with as many people earning more as earning less.)

Now there’s more evidence. A report released this summer by the Centre for the Study of Living Standards, an Ottawa nonprofit, contends that as of 2016 Canada had in fact pulled ahead of the U.S. in median household income, with a $59,438 to $58,849 advantage in U.S. dollars if (and this is a reasonably big if) you use the Canadian government statistical agency’s formula for converting Canadian dollars into U.S. ones. The study also compares incomes in every percentile of the income distribution, and finds that up through the 56th percentile Canadians are better off than their U.S. counterparts.

Canada's middle class is growing.  America's is shrinking.  And it's not just Canada who has caught up to us.

It’s not just in Canada that those in the middle of the income distribution have been gaining on their American peers. From 1990 through 2018, according to the World Bank, per-capita real gross domestic product grew at the same 1.5% annual rate in the U.S., the European Union and the OECD, which counts 36 affluent democracies on five continents as members. 1 In other words, the rough-and-tough U.S. approach to capitalism hasn’t delivered faster per-capita growth, and because growth in the U.S. has been concentrated at the very top of the income distribution, that means Americans in the middle and the bottom have been losing ground to their counterparts in other countries.

As of the mid-1980s, according to Luxembourg Income Study data originally compiled for the Times’ 2014 article, those in the bottom 20% of the income distribution in Canada and at least five European countries were on average better off than the bottom 20% in the U.S., but by the fourth decile (30th percentile to 40th percentile), average U.S. incomes were higher than all but Luxembourg’s. By 2010, U.S. fourth-decilers had also fallen behind Norway, Denmark, the Netherlands and Canada.

Given the excruciatingly slow pace of economic growth in Europe after 2010, I would guess that the continent’s catch-up march has slowed or stalled since then. My reading of another data source, the World Inequality Database created by French economist Thomas Piketty and several collaborators, 2 is that the middle 40% of the income distribution (the 30th percentile to the 70th percentile) in the Netherlands passed the U.S. middle 40% in 2007, then fell behind again in 2013. Still, the long-run trend is important.

The bottom line: When it comes to improving the lives of the middle class, other rich countries have been doing a better job than the United States.

Obama did what he could considering the massive recession Bush 43 handed him, but America's middle class destruction has only gotten worse in the age of Trump.