Politics & Policy

Canada’s Blueprint for Prosperity

(Nagy-bagoly Ilona/Dreamstime)
Measures supporting strong families and home ownership are key elements of Canada's social policy.

Yuval Levin’s compelling new book, The Fractured Republic, contends that nostalgic thinking is the reason Republicans and Democrats can diagnose the problem of middle-class stagnation but cannot articulate constructive visions to reverse it. And the two presumptive presidential nominees have thus far provided plenty of evidence to back up his thesis. The nascent campaign has been marked by reactionary ideas to restore the conditions thought necessary for social mobility in the United States.

The solutions may lie not in the past but to the north. Canada’s impressive record of wage growth and social mobility offers a blueprint with which U.S. policymakers — including the presidential candidates — ought to acquaint themselves. Its newfound title as the home of the world’s richest middle class is the result of a political consensus in favor of sound public policy. Washington has something to learn from Ottawa.

For most NRO readers, this will feel like the world turned on its head. Social mobility is at the heart of the American experiment. It was behind the settlement of the North American continent and contributed to the ideals of the American founding, which placed “the pursuit of happiness” over Old World priorities such as hierarchy or order. U.S. history is replete with the stories of Horatio Alger and Bill Gates figures climbing the economic and social ladder.

Mention Canada to an American, by contrast, and he is far more likely to think of state-run health care than of a wellspring of economic opportunity. It has been called Soviet Canuckistan by Pat Buchanan and was even the subject of a satirical bombing by Jonah Goldberg for its anti-Americanism and “absurd socialist policies.”

Yet those images have been overtaken by recent events. As U.S. policymakers grapple with wage stagnation and social immobility, Canada has moved in the opposite direction — marked by higher levels of wage growth, social mobility, and wealth accumulation.

Consider that Canada’s median household income (before taxes, including government transfers and adjusted for inflation) lagged that of the U.S. for most of the past 30 years. The gap reached its peak in 1998, when median household income in the United States was 10 percent higher than in Canada. But since then, middle-class incomes have stagnated in the U.S., while they have experienced a solid pace of growth north of the border. The result is that not only has Canada erased the 20-year gap, it created a 9 percent income advantage by 2010.

Canadians now enjoy more social mobility than Americans, too. Canadian boys born into the lowest income decile have a 38 percent chance of reaching the top half of the income distribution by adulthood, and only 16 percent of them will remain on the bottom rung as adults. The odds of a low-income American boy climbing to the top of income distribution are 29 percent, and 22 percent will remain stuck in place at the bottom.

These divergent trends point to one clear conclusion: Economic opportunity is now less widely available in the United States than it is in Canada. As Canadian-born George Mason University scholar Frank Buckley has put it, the American dream seems to have migrated to Canada.

And so as the presidential campaign unfolds, it is worth asking if Canada’s success is transferable.

Canada does a better job than the United States in using public policy to support strong, stable families.

These are big issues that require big thinking that exceeds the space available here. Canadian public policy is far from perfect, but broadly speaking, it has been effective at establishing the conditions for social mobility. A combination of policies including generally competitive taxation, relatively sound public finances, a high-quality education system, a shift to more economic-oriented immigration, and a mostly stable and transparent regulatory regime are part of the Canadian story. But there are two key ideas worth highlighting.

Strong families are the foundation of economic and social mobility, and Canada does a better job than the United States in using public policy to support strong, stable families. Direct transfers to families to offset child-care costs, generous maternity-leave laws and benefits, and a tax and transfer system that reflects the cost of raising children are key ingredients of Canada’s pro-mobility agenda, which enjoy cross-party support. American policymakers should examine the applicability of these policies for the U.S. context in order to strengthen and sustain the next generation of families.

Home ownership is another key determinant of social mobility, and here Canada’s policy is also fairer and more responsible than that of the United States. Canada’s exemption of capital gains on the sale of primary homes has contributed to a higher home-ownership rate than the U.S. policy of mortgage-interest deductibility. But the major difference is that the Canadian tax treatment rewards families for building up equity in their homes rather than accumulating debt. Reforming U.S. policy along Canadian lines can help to restore homeownership as a bedrock of middle-classism and wealth accumulation.

Republicans and Democrats lament wage stagnation and social immobility in the United States but are failing to put forward constructive, forward-looking ideas to reverse them. A policy agenda that draws from Canada’s recent experience of expanding economic opportunity can help to restore the conditions for social mobility. It is something that progressives and conservatives might even agree on.

— Brian Lee Crowley is the managing director and Sean Speer is a senior fellow at the Macdonald-Laurier Institute, a Canadian-based public-policy think tank.


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