For many years, I was convinced that Canada should be more like the U.S. They were wealthier, more productive, and they created more successful corporations. Their average household income was higher, as was their average household net worth. But then Canada pulled ahead on the net worth front, and I started thinking that before we adopt American-style policies, we might want to take a closer look at what those policies are doing to Americans.
I recently had the opportunity to do just that when I went to see a presentation by Roger Martin, dean of the Rotman School of Management and chairman of the Institute for Competitiveness & Prosperity. He was speaking at the annual Canadian Business Leadership Forum in Toronto, and he clearly feels that Americans are still far more prosperous than us.
He has lots of hard evidence to back it up, too: if you measure prosperity in terms of gross domestic product (GDP) per capita, not only has Canada been lagging the States for years, but lately that “prosperity gap” has grown bigger—reaching about $8,900 as of 2010. Martin says that as individual Canadians, we’ll all be richer if we close that gap, so he has spent many years trying to figure out what’s causing it.
He identified four major contributors to prosperity. The most important one is productivity, which is all about investing in education and technology and other things that help us work smarter. That’s the main area where Canada is lagging. But there are three other factors as well: There’s “profile,” which is the proportion of the population that is young and can work, “utilization,” the percentage of those who are able to work who are actually working, and “intensity,” which measures how hard we work when we have a job.
Interestingly, Canada beats the U.S. hands down when it comes to both profile and utilization. Aside from productivity, then, the main area where we fall short is “intensity.” In other words, we’re lazy. Our workweeks are shorter, and we take more vacations. The average hours worked per employed person in Canada has been trending down since the late 1980s, while it has remained steady to up in the States. We now work 167 fewer hours per year than they do, and the more we’re paid, the more we slack off.
One way to interpret this would be to conclude that we should work harder to catch up, but it got me wondering about how we define success in the first place. Martin uses GDP per capita as his benchmark. But if we see success as having more leisure time, then we’re already winning.
Similarly, one of Martin’s suggestions for increasing our prosperity is to spend less money on publicly funded health care and more on education. Which would likely lead to higher GDP per capita over the long run, but also a less healthy population. That seems to be the route that the States has taken, and it has resulted in higher private health care costs and a lower life expectancy. So again, how would you define success here?
For me, the biggest disconnect of all is the fact that while Americans are more prosperous by Martin’s measure, Canadians now have a higher average household net worth. (As of 2011, ours is $363,202 and theirs is $319,970.) By Martin’s definition of success, we’re still way behind—but it seems to me that having wealthier citizens is more meaningful. Either way, it’s useful for all of us to consider how we want to measure Canadian prosperity before we go any further. Because if we don’t even know where we’re going, we’re never going to get there.
Duncan Hood is the Editor of Canadian Business magazine.