Skip to main content

North American median Income...growth

I've been thinking about this for a while, I've often written that there are fundamental difference between Canada and the U.S. and these are widening (despite what the Conservative government thinks) rather than narrowing.  

  • First, is the nature of the Canadian economy:  small and open energy and resource export driven economy.  Canada is no Qatar or Kuwait, where energy is 99% of its exports, it is far more balanced that  that, energy exports are important but not dominant, but it remains that Canada's strength lays in "heavy things that hurt when you drop them".  
  • Socially Canada is more homogeneous, and the Caucasian majority doesn't feel threatened...it is important to note that in the U.S. the Caucasian majority is only a few years away from no longer being the majority [BTW I'm not inferring any preference here, but note that the U.S. Tea party was mostly "Angry Whites" -- realizing that their "position" in America's economic system was eroding (the FoxNews "take-back" talk was "code" for "whitey man the barricades!"].  
  • Canada is not a military "super-power" (in fact we are hardly a military power -- we have been relying on america for our defense -- truth hurts, but its true nevertheless).  
  • The healthcare issue is supported by a wide consensus (of course some people will always complain) but the reality of our Southern neighbors with regards to health care is not enticing.  U.S. healthcare system is a cautionary tail:  Maybe our system is not "good enough" or "perfect" but one thing for sure the U.S. system is a disaster! and not something anyone should emulate.

The past 10 years have been very good to Canada and to Canadians in general, for while Canada does have income disparity, it is no where near the scope of what is found in America.  which brings me to the meat of my topic:  Median Income.

Median income is generally hated by politicians because it represents the absolute middle income -- literally half the population earns more and the other half earns less.  Unlike average which can be pulled by the rich getting a lot richer!   The American reality is that median income has been static (read falling) for more than a decade.  


(source: Medicare Tax Base)

Importantly, from this figure Americans must also subtract health care expenses -- which have been rising at nearly 7% p.a. for over a decade.  The earning power of the median American has dropped dramatically.

Looking at Canada:


(Source:  StatsCan)

Shows a very different picture.  It is important to note that the '90s were not kind -- Canadian income suffered under Paul Martin's 1995 massive debt correction (our version of Greece), so there is some catching up here.  Also the numbers are not strictly comparable, first because we are looking at family and not individual income, and also because of the health care component -- BTW these figures are after tax in both cases!

The housing bubble in the U.S. was driven by "median" American's attempt at maintaining the fiction of income growth (according to some, median income has been stagnant for nearly two decades -- but inflation and other adjustment can make data say anything) that simply didn't exist.  As such it is remarkable that Greenspan never did a 2+2 analysis of the data -- which was apparent, house prices were rising while income was stagnant, the only factor that "improved" where interest rates -- by definition there is a lower limit to interest rates (zero if you doubt to thought process).  In a sense, Republican politicians are correct that the house crisis "began in Washington".  The bubble would have lasted much longer (less intense) had Wall Street not gone crazy in 2004 and refrained from lending money to people who had no means to make even the first mortgage payment!

However, the median income data shows one thing very clearly, is that the Canadian situation (based on our resource rich economy) is very different to that of the Americans  doesn't mean we are out of the woods (by any stretch of the imagination), but it does show that those who borrow have seen an absolute increase in the income (average income will grow more quickly), it doesn't mean that Canada's housing market is now near or at bubble level -- Toronto and Vancouver in particular are very frothy. 


Comments

Post a Comment

Popular posts from this blog

Ok so I lied...a little (revised)

When we began looking at farming in 2013/14 as something we both wanted to do as a "second career" we invested time and money to understand what sector of farming was profitable.  A few things emerged, First, high-quality, source-proven, organic farm products consistently have much higher profit margins.  Secondly, transformation accounted for nearly 80% of total profits, and production and distribution accounted for 20% of profits: Farmers and retailers have low profit margins and the middle bits make all the money. A profitable farm operation needs to be involved in the transformation of its produce.  The low-hanging fruits: cheese and butter.  Milk, generates a profit margin of 5% to 8%, depending on milk quality.  Transformed into cheese and butter, and the profit margin rises to 40% (Taking into account all costs).  Second:  20% of a steer carcass is ground beef quality.  The price is low, because (a) a high percentage of the carcass, and (b) ground beef requires process
Post a Comment
Read more

21st century milk parlour

When we first looked at building our farm in 2018, we made a few money-saving decisions, the most important is that we purchased our milk herd from a retiring farmer and we also purchased his milking parlour equipment.  It was the right decision at the time.  The equipment dates from around 2004/05 and was perfectly serviceable, our installers replaced some tubing but otherwise, the milking parlour was in good shape.  It is a mature technology. Now, we are building a brand new milk parlour because our milking cows are moving from the old farm to the new farm.  So we are looking at brand new equipment this time because, after 20 years of daily service, the old cattle parlour's systems need to be replaced.  Fear not it will not be destroyed instead good chunks will end up on Facebook's marketplace and be sold to other farmers for spare parts or expansion of their current systems. All our cattle are chipped, nothing unusual there, we have sensors throughout the farm, and our milki
Post a Comment
Read more

So we sold surplus electricity one time last summer...(Update)

I guess that we will be buying an additional tank for our methane after all.   Over the past few months, we've had several electricity utilities/distributors which operate in our region come to the farm to "inspect our power plant facilities, to ensure they conform to their requirements".  This is entirely my fault.  Last summer we were accumulating too much methane for our tankage capacity, and so instead of selling the excess gas, that would have cost us some money, we (and I mean me) decided to produce excess electricity and sell it to the grid.  Because of all the rules and regulations, we had to specify our overall capacity and timing for the sale of electricity (our capacity is almost 200 Kw) which is a lot but more importantly, it's available 24/7, because it's gas powered.  It should be noted that the two generators are large because we burn methane and smaller generators are difficult to adapt to burn unconventional gas, plus they are advanced and can &qu
Post a Comment
Read more