By: Marc Lee

  When comparing incomes in Canada and the US, averages can be very deceiving. For example, we often hear about higher after-tax incomes on average in the US compared to Canada. A look at the numbers verifies this: average family disposable income in 1995 was $35,200 in Canada and $37,400 in the US.
  [Note: US figures have been converted to Canadian dollars at the OECD's purchasing power parity rate of 83 US cents per Canadian dollar. This is the rate used by StatsCan to compensate for the fact that many goods and services in the US are more expensive than in Canada, as this series has demonstrated. An American with US $83 can purchase the same "basket" of goods and services in the US, as could be purchased with C $100 in Canada.]
 

StatsCan says the median after-tax income for these typical Canadian families in 1995 was $30,200. Similar families in the US could claim $29,500.

  Average incomes don't tell the whole story of average families, though. That's because the US has a higher degree of income inequality than Canada -- the rich are richer and the poor are poorer. Having a concentration of income at the high end means that the "average" income gets pulled up.
  To get a better picture of what it's like for typical families, you need look at median incomes. At the median level, half of all families are making more and half of all families are making less.
  On this measure, a different story emerges. Median income after tax for these typical Canadian families in 1995 was $30,200. That's $700 higher than $29,500, the median after-tax income in the US.
  As a group, the only people making more money, after taxes, in the U.S. than in Canada are the top 20% of families. The bottom 80% or so of families actually have higher after-tax income in Canada, according to Statistics Canada. And Canadians have another advantage as well: tax dollars are handed back to Canadians in the form of publicly-provided services (like health care). If the value of these services was added onto disposable income, the gap in favour of Canada would be even larger.
  In spite of all the tax cut mania, when the labour market, tax and transfer system and social programs are taken together, most Canadians are better off in Canada, and would actually lose out by moving to the US.

Marc Lee is a research economist with the BC Office of the Canadian Centre for Policy Alternatives.