The real income per capita of Canadians grew much faster that that of Americans in recent years. Between 2000 and 2006, real income per capita increased 9.1% in the US, while in Canada it increased 15.5%—two-thirds faster. Statistics Canada attributes this mainly to sharp gains in commodity prices since the turn of the new millennium.
At the same time, real GDP per capita increased only slightly more in Canada than in the US, while labour productivity (GDP per hour worked) in the Canadian economy went down relative to labour productivity in the US.
In terms of income per capita, the Canadian economy grew significantly faster than the US economy between 2000 and 2006. Real income per capita in the United States grew by 9.1% during this period, while in Canada real income per capita grew 15.5%, nearly two-thirds faster than the US rate.
This is exactly the opposite of the situation prior to the turn of the millennium, when commodity prices were weak and the Canadian dollar was depreciating, according to a new study.
The study showed that a long downward trend in Canada's fortunes prior to 1999 was reversed in very short order. In three short years, real income relative to the United States returned toward levels not seen since the mid-1980s. And much of this "reversal of fortunes" has been due to Canada's resource economy.
Since 2000, increasing commodity prices drove up the value of Canada’s exports relative to imports. This was accompanied by a sharp rise in the value of the Canadian dollar and falling world prices for manufactured goods. Also, Canada has seen big increases in international investment income between 2000 and 2006.
These changes reversed the long-term decline of Canada’s economy relative to the US economy that was in evidence before 2000, which is largely attributable to a declining resource sector.
After 2000, real income levels returned to levels not seen since the mid-1980s. And
much of this has been due to the much maligned resource economy. Studies of the Canadian economy in the late 1990s often emphasized that the salvation of the Canadian economy lay in high-tech growth in the manufacturing sector—partly because of the high rates of growth in this sector in the United States, partly because the prices of the commodities provided by the resource sector seemed to be in secular decline.
Canada has profited greatly from maintaining a diversified economy with a significant resource sector. The Canadian economy has behaved like a diversified investment portfolio. While some sectors have faltered, the resource sector has seen a spectacular rebound.
Sources:
Macdonald, Ryan, 2007. “Canadian and U.S. Real Income Growth Pre and Post 2000: A Reversal of Fortunes”, Economic Analysis Research Paper Series. Statistics Canada catalogue no. 11F0027MIE No. 048, November 2007. http://www.statcan.ca/english/research/11F0027MIE/11F0027MIE2007048.pdf (accessed 22 November 2007).
Statistics Canada, 2007. “Study: Growth in real income in Canada and the United States, 1980 to 2006”. The Daily, 22 November. Statistics Canada catalogue no. 11-001-XIE. http://www.statcan.ca/Daily/English/071122/d071122b.htm (accessed 22 November 2007).
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