Canada-U.S. income gap doubles since 1999: report

What’s behind Canada’s ‘languishing living standards’?

Canadian HR professionals need to act now on retention and compensation strategy if they want Canadian workers to stay in Canada, according to a recent report. 

A new Fraser Institute study shows the living-standards gap between Canada and the U.S. has more than doubled since 1999, with no sign of reversing, and employers who wait risk losing skilled workers to American offers.

The report, Squandering the Canadian Century Part 1: Comparing Economic Performance in Canada and the United States, was authored by Grady Munro, Jake Fuss, and Joel Emes, published by the Fraser Institute. GDP per person in the U.S. exceeded Canada’s by CA$10,766 in 1999; by 2024, that gap had widened to CA$23,757.

“When comparing the economic performance of Canada relative to the U.S. since the beginning of the 21st century, it’s abundantly clear that Canadian policymakers have failed to create an environment where we can prosper,” said Jake Fuss, director of fiscal studies at the Fraser Institute and co-author.

Income gap widens

Median income data, available from 2010 onward, tell a similar story: the gap stood at CA$6,126 in 2010 and grew to CA$8,663 by 2024, per the Fraser Institute’s calculations.

The trend was not always one-directional — from 2010 to 2014, Canada’s income growth outpaced the U.S., briefly narrowing the gap to CA$4,220. After 2015, American incomes pulled ahead again while Canada’s stagnated.

As Canada continues to deal with a productivity crisis, the country seems to be falling even further behind the U.S. when it comes to businesses’ investment on workers, according to a previous report. Business investment per worker in Canada declined from 87.3 per cent of the U.S. level in 2014 to 54 per cent in 2024.

Public-sector job growth outpacing private sector

Canada’s employment growth since 1999 has leaned more heavily on government jobs than private-sector jobs, a pattern reversed in the U.S. — a signal of a shrinking pool of comparable employers and a tighter commercial labour market, according to the Fraser Institute. 

Government-sector employment in Canada grew 2 per cent annually from 1999 to 2024, versus 1.3 per cent in the private sector. In the U.S., private-sector job creation (0.8 per cent) outpaced government growth (0.6 per cent).

Private-sector employment as a share of total employment fell from 81.2 per cent in 1999 to 78.5 per cent in 2024, while the U.S. share rose from 85.8 per cent to 86.5 per cent Fuss, and Emes

Weak investment and productivity growth

Business investment per worker in Canada dropped 4.9 per cent from 2007 to 2024, while U.S. investment climbed 57.9 per cent, undercutting the tools available to Canadian workers, according to the Fraser Institute report.

Labour productivity — a key driver of wage growth — rose just 26.7 per cent in Canada from 1999 to 2025, versus 67.9 per cent in the U.S. “The ability [to] transform raw materials and other inputs into demanded goods and services increased by more than a factor of 2.0 in the U.S. compared to Canada, which explains much of our languishing living standards,” said Fuss.

Grady Munro, senior policy analyst at the Fraser Institute and co-author, said the findings demand action: “After squandering the first quarter of the 21st century, it’s up to policymakers in Canada to enact bold economic reforms to make the most of the rest of this century.”

Canada’s productivity problem will continue and may even worsen in the future due to low business investment, according to a previous report.

What can HR professionals do to help close the gap?

HR professionals cannot reverse national productivity trends on their own, but the data point to four concrete actions within their control. Since business investment per worker and labour productivity show the widest gap with the U.S., HR professionals must treat workplace training and capital-investment advocacy as direct levers, not side projects, according to the Fraser Institute.

Here are some things HR professionals can do:

1. Benchmark your compensation and total rewards against U.S. postings for hard-to-fill roles, before you lose candidates to cross-border offers.

2. Build the business case for capital and technology investment, using the Fraser Institute’s per-worker investment figures — you are often best positioned to link tool and software gaps to recruitment and retention difficulty.

3. Target upskilling programs at the occupations most affected by skills shortages — health care, trades, and technical roles — as identified by the Conference Board of Canada and Future Skills Centre.

4. Check your training budget against sector benchmarks: if your organization is not maintaining or increasing training spend, you are falling behind the roughly four in five Canadian businesses that are.

Use the data points below to make your case internally.