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Income Per Capita in the United States and the Provinces of Canada

by gbaf mag

In most economic discussions, income per capita is one of the first numbers mentioned. This measure is also known as the gross domestic product (GDP) per capita. It is the standard way of measuring economic performance around the world. The idea behind this number is that the value of what is produced by a country is partly determined by the amount of what is spent by another country.

Income per capita or national income measures the annual average income earned by a single person in a particular geographical area during a year. It is also calculated by multiplying the national income of a territory by its population. Most international comparisons of the incomes of countries take into account the value of what is produced by the labour market and the prices paid for other inputs by enterprises within each territory.

A separate index is made for providences or provinces. These consist of two columns: the first, which represents provincial incomes per capita; and the second, provinces’ average per capita earnings of the non-farming class of workers. All the variables are normally classified by the type of labour market: private-service and state-based. This way, even if two provinces with similar characteristics have very different wages, their average incomes per capita are compared.

Many researchers concentrate on the differences in provincial characteristics such as technological advances and land ownership. While they provide some statistical insight, it is important to note that changes in the composition of inhabitants do not necessarily affect the comparability of income per capita incomes. Also, labour productivity varies across provinces. Some provinces have high levels of skilled workers, while others have low levels. Although some argue that the income gap between the richest and poorest regions narrows between provinces, this income gap actually becomes larger between regions of high levels of taxation and unemployment. This narrowing of the income gap between labour productivity and relative deprivation is an important but unresolved question.

The provinces with the highest income per capita grades are also the most populous and also contain the largest population, giving rise to a correspondingly larger regional population and a corresponding larger regional concentration of potential investors. Provinces with lower income grades have a much smaller concentration of investors, which limits the amount of venture capital available to the economy. In effect, provinces with lower income grade rates have more inefficient economies because the opportunities for new ventures are fewer.

Income has become an increasingly important defining characteristic of Canadians since the 1970’s. Two aspects account for this. One is an increase in the quality of life that goes along with an increasing standard of living. The other is the impact of the global and local markets on income levels. Between these two forces, the future income per capita income of Canadians is predicted to rise considerably in the coming years. Given the context of the global and local economy in the early and mid-20century, this increase in income is expected to continue into the next decade, reaching potentially very high levels.

The process of identifying and evaluating income per capita in the peer countries has developed over the past several years. Surveys of incomes within the peer countries were first introduced in Canada in the early 1970s. These surveys provided detailed profiles of the incomes and differences among provinces, allowing researchers to compare the performance of provinces with that of the US. More detailed studies were conducted on the performance of provinces across the Atlantic region in the late 1990s. These studies provided important insights into the nature of Canadian inequality. The focus was on differences in income between provinces that were then compared with the performance of the US.

Canada’s experience with these international comparisons provides significant lessons for other countries hoping to develop comprehensive economic policies to reduce inequality. First, the comparisons provide a rich source of evidence on the differences in levels of income per capita across the various countries. Second, the analysis provides important insights into the determinants of income gaps. Third, the results can be used to construct policies that target particular areas of concern and improve the performance of particular provinces or sectors. In the case of Canada, the focus has been on reducing the income gap between the provinces that are most similar to the United States.

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