Prosperity study: Canada trails U.S.
Let tuition rise, Rotman head urges Richest Canadians the furthest
Toronto Star
By Steven Theobald
Canada is falling behind the United States in prosperity, and a key solution is to allow tuition to rise and eliminate governments’ monopoly on universities, the head of the University of Toronto’s business school has concluded in a study.
Moreover, the “prosperity gap” is concentrated in the richest 20 per cent of households, according to the report funded by the Ontario government.
Roger Martin, dean of the Rotman School of Business and chair of the Institute of Competitiveness and Prosperity, is slated to present his findings today at the World Economic Forum in Davos, Switzerland.
As measured by 2003 per capita gross domestic product, adjusted for purchasing power, Canada lags the United States by 16 per cent — $38,500 versus $45,700 — according to the report, Realizing Canada’s Prosperity Potential.
On the bright side, Canada is solidly in the Number 2 spot, with the Netherlands in third place with $35,500.
Even more encouraging, the report shows income is distributed more evenly in Canada, with the bottom 60 per cent of households having higher average incomes than their American counterparts.
A 6.4 per cent gap does open in the second highest quintile, with average Canadian household income in that group at $75,300, compared with $80,100 in the U.S.
But the prosperity gap balloons to 24 per cent among Canada’s top 20 per cent of households. Their income averages $137,800, compared with $171,000 in the United States.
Though some people may not be concerned about the data, particularly those not in the upper income class, the trend is a concern, said Jim Milway, executive director of the institute.
In 1974, 90 per cent of Canadians enjoyed higher incomes than their southern neighbours, compared with 60 per cent today, Milway said.
“We don’t want to be all doom and gloom — we are the second most prosperous country and we do have a good distribution of income — but the gap has widened considerably.”
The report offers several policy recommendations to increase incomes by raising productivity. Higher education tops the list, followed by lower corporate taxes to encourage investment and better integration of educated immigrants.
While Canada boasts roughly the same percentage of people holding undergraduate degrees, the U.S. opens up a wide lead in awarding masters degrees, the report said.
“We encourage current students to recognize that supporting the freeze of regulated tuitions, while attractive to them in the short run, helps guarantee the long-run underfunding of higher education,” the report said.
It calls for former students to contribute “more generously” to their alma maters.
Investment in education would also increase if the private sector was less hindered.
Milway dismisses suggestions that U of T’s Martin is using the report to lobby for higher tuition and unshackle universities from government controls.
“He’s advocating more competition for places like U of T, isn’t he?” Milway said.
Interestingly, half of Canada’s prosperity gap is due to the country’s geography.
The report estimates that lower levels of urbanization account for $3,300, or 46 per cent, of the Canada-U.S. income gap.
“It’s a feature of our country that works against our prosperity,” Milway said.
“In past reports we have chided governments for standing in the way of urbanization, but we didn’t discuss that in this report.”
Ontario’s Ministry of Economic Development and Trade funds the Toronto-based Institute of Competitiveness and Prosperity.
Auto parts giant Magna International Inc. and Microsoft Canada sponsored the report.
