Why the American dream is easier to achieve in Canada - MoneySense

Is the American dream easier to achieve in Canada?

America is seen as the land of opportunity. But recent studies show that Canada is actually a better place to achieve the American dream. Here’s why

american dream

(Getty Images)

If you listen to what economists are saying these days, then the Unites States is no longer the much-vaunted land of opportunity that Americans boast—and hasn’t been for several years now, reports The Huffington Post.

In fact, recent studies show that the highly sought-after “American Dream” is much more affordable in Canada. “There’s different notions of what the American dream is,” says University of Ottawa professor of policy and international affairs Miles Corak. “It refers to how quickly a child can go up and down the income ladder, regardless of what their parents earned at the same stage in life. So when it comes to intergenerational income mobility—when a generation makes more money than the one before it—Canada ranks high.”

According to the Conference Board of Canada, Canada is ranked fourth out of 13 peer countries when it comes to income mobility between generations. “If there were no intergenerational mobility at all, all poor children would become poor adults and all rich children would become rich adults” the study says. Denmark and Norway rank highest while the U.S. ranks much lower down at 11th.

Mobility by economists is measured by calculating the difference in earnings between a parent and their children. “There is less relationship between a family’s background in Canada and the adult incomes of that family’s children. Only 19% of a family’s disadvantage is passed on to their children. That means, for example, that if a family earns $10,000 less income than the average, the children will earn $1,900 less than average,” according to the study.

In comparison, a family in the United States earning $10,000 less income than average would have children that earn $4,700 less—meaning a child from a poor family will have twice the success in Canada than she or he would have in the United States. “What this means in practice is that a child’s chances of breaking out from poverty are much better in Canada than in the U.S.,” says Corak.

There are several reasons for this. Part of it is the job market and the other is immigrant parents’ push for their kids to attend post-secondary school and achieve more than they were able to in their countries of origin. “But government policies also play a big role,” notes Corak. “In fact, education policies and health care in this country are the two big benefits that distinguish Canada from our U.S. partner. All kids here have access to great quality schooling and health care throughout their lives—starting from when they’re preschoolers and onwards.”

As well, Croak notes that there’s greater job inequality in the U.S. For instance, in Canada, equalization payments between the provinces have helped make the steps on the ladder that you need to climb less wide than in the U.S. “In comparison, the U.S. has several pockets of poverty, especially in the South,” says Corak. In fact, Canada’s tax system and its structure—not level—of tax is a better tool for helping all citizens reach their income dream. “The tax system in Canada really levels the playing field,” says Corak. “So intergenerational mobility is much the same from province to province—benefiting everyone.”

But while both Canada and the U.S. agree on what the income dream is, views differ on the role government should play in helping its citizens achieve it. “In the U.S., there’s a view that governments hinder a person’s struggle for the good life and that it’s not effective in helping them achieve their goals,” says Corak. “But in Canada, we see government as a helping resource and this is reflected in the country’s excellent social policy.”

What does that mean for Canadians? Equal opportunity for more to climb the income ladder. That’s a robust reality in Canada and something we should all feel good about.

Read more: