The living standards gap between Canada and the United States has more than doubled over the past 25 years as Canada increasingly falls behind its southern neighbour, a new study suggests.
The steepest drop, however, occurred post-2014, according to a newly released report from the Fraser Institute.
Up until then, Canada maintained a comparable performance to the United States and, in some cases, even outperformed it across several indicators, said Fraser Institute director of fiscal studies Jake Fuss in the report he co-authored with senior policy analyst Grady Munro and senior economist Joel Emes.
The authors said there was optimism at the turn of the 21st century that the period could usher in a “Canadian Century,” in which Canada’s economic development might match that of its southern neighbour.
“This proposition appeared to have some merit in the first decade and a half, as Canada’s growth in individual living standards and incomes generally outpaced those measures in the United States until 2014, while improvement in business investment per worker was relatively comparable between the two nations over the same timeframe,” they wrote.
“Since 2014, however, Canada has largely squandered any progress it made relative to its southern neighbour up to that point.”
Canada has progressively fallen behind the United States in every category ever since, the authors said.
The research analyzes the economic results in both countries by examining various economic indicators, particularly living standards, income levels, employment rates, investment activities, and productivity in Canada and the United States.
For example, the increase in both median employment income and gross domestic product (GDP) per capita in Canada decelerated after 2014, but gained momentum in the United States.
In total, U.S. GDP per capita grew 1.7 times faster than Canada’s over roughly the first quarter of the century, the study found. The U.S. figure was CA$10,766 higher than Canada’s in 1999, with the gap widening to CA$23,757 by 2024—more than double the difference.
The inflation-adjusted GDP per person in Canada stood at CA$48,076 in 1999 while the United States sat at CA$58,842, the authors said. Fast forward to 2024, and the GDP per person in the United States had surged to $83,286, in comparison to Canada’s $59,529.
Data from the year 2010 showed the inflation-adjusted median employment income in the United States exceeded that of Canada by CA$6,126. By 2024, this difference had grown to CA$8,663.
The share of private-sector employment in total employment has fallen in Canada, while the reverse trend has been observed in the United States, the report said.
Business investment in Canada also saw a decline from nearly 90 cents per worker for each dollar invested in the United States to 54 cents per worker from 2007 to 2024, the report said.
At the same time, labour productivity increased by 67.9 percent in the United States from 1999 to 2025, in contrast to Canada’s 26.7 percent increase during the same timeframe, the authors wrote. Labour productivity is considered a key driver of income growth.
“Despite some early hopes prior to 2014, Canada has made virtually no economic progress relative to its southern neighbour and has instead fallen further behind where it stood at the turn of the century,” the report said.
“If Canadian policymakers truly want to realize this goal from more than 120 years ago, they are going to have to implement bold fiscal and economic reforms to dig the country out of the hole produced in the first quarter of the 21st century.”
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