When you think of Canada, what do you think? I think wonderful skiing in Whistler, hockey, maple leaves, free healthcare, cold weather, Hong Kongnese buying up Vancouver, French Quebec, McGill University and Blackberry devices. Seldom do images of extravagance and wealth come up.
So it is with great surprise to find out our brothers and sisters up north are ROCKING it in the financial front with an average household net worth of $400,151 at the end of 2012, and close to $450,000 in 2015! Vancouverites (West Coast represent) boast the highest net worth of all Canadians at roughly $662,600 last year. The report was conducted by consulting and research firm Environics Analytics and also goes on to mention the US average household net worth lagging at only $381,086.
That’s right folks. Despite the perception that America is the land of opportunity, we are falling behind with even The Associated Press saying that 4 out of 5 Americans are at risk of living in poverty or near-poverty at some point in our lives. That’s pretty sobering news given how hard we work.
I’ve argued why Socialism could be a means to a brighter future to much disdain by readers everywhere. However, with this latest data about Canadian household net worth coupled with the research I conducted abroad in Socialist Europe, it’s become evident that Capitalism is not the only means to wealth.
LET’S TRY TO COMPREHEND WHY CANADIANS ARE SO RICH
* Real estate is booming. The average home price of $378,000 in Canada is 62% higher than the average US home price of $233,000. The chart below either says that Canadian home prices are at risk of a correction, or US home prices are severely undervalued. There’s probably some truth to both. $378,000 equates to 94.5% of the current average household Canadian net worth, which means the average household net worth is at risk of sharp movements in either direction. Other studies show that 60-65% of assets are tied into real estate. Either way, anything over 50% is quite risky after a certain age.
* Social safety net. When you’ve got free health care, strong unions, and deep support for the unemployed you are more likely to be less stressed and do a better job at work or on your business. We’ve talked about extending unemployment benefits to the 5 Year Shock & Awe Yeah program to encourage Americans to take more risks and go for glory. When the worst thing that can happen is five years of unemployment benefits while living at home, life can’t be that bad.
* Debt in a bull market. Canadian household debt runs roughly 160% of disposable income, one of the highest in the world. The debt is largely mortgage debt which has been going up in a relatively steady fashion for well over a decade.
* Smaller population. With a population of only 34 million in Canada, it’s much easier for the Central Government to govern and take care of its people. The Low Income Cutoff (LICO) is around 10% in Canada compared to around 16% of Americans living in poverty as of 2012 according to the US Census Bureau.
* Lower military spend. When you’ve got America as your neighbor, you don’t have to spend as much on F-35 fighter jets to protect your country. The US will scramble their jets and switch on ARC Net in no time. When you’re not the World’s Police, butting in every other country’s business, military spend isn’t as big a priority either. Canada spends roughly $20 billion a year on the military compared to $860 billion a year in the US. Americans say they are Canadians when they travel to some countries for a reason. It pays to be more peaceful.
* More open immigration policy. According to the Canadian government, 21% of the total population was foreign born in 2011, the highest proportion among any G8 country. Canada is a hot spot for immigration because they have major worker shortages in hospitality and skilled industries. With Vancouver as the closest North American international airport to Asia, Vancouver is able to garner wealthy Asian traffic that bring with them strong savings customs. In the US, we put up fences, pass discriminatory laws, enact trade embargoes and speak negatively about the Chinese. We also don’t seem to get along well with the French.
* Natural resources. When you’ve got oil, minerals, and gold, what more do you need? Canada is resource rich, providing a never ending source of wealth. There’s this enormous debate about the Keystone Pipeline project that would ship crude oil and bitumen all the way down to the refineries in Texas. Big bucks. Big dependency. Six figure jobs abound! It’s kind of like the Saudis ruling the world just because they’ve got so much oil. It’s nice to inherit great wealth.
* Slightly higher tax rates at lower income levels. The top Federal marginal tax rate in the US is now 39.6% on single income of over $400,000 and couple income of over $450,000 a year. Just last year in 2012 the highest Federal marginal tax rate was 36%. The top Canadian “Federal” tax rate is 29% of taxable income over just $135,054. The closest bracket we’ve got is a 28% tax rate on taxable income over $87,850 and up to $183,250. Canadians also pay Provincial tax rates of 10%-16.7% on incomes as little as $67,000+. In comparison, California taxes income between $46,766 and $1 million at 9.3%, and California is one of the highest tax states. By having a lower income threshold and slightly higher taxes, this means that more people contribute to ensure a healthier system. There is no constant droning on about how half of Americans don’t pay any Federal taxes. Oh, and Canadians don’t have estate tax either.
Despite long work hours, tremendous opportunity, and inventing so much of what we use every day (iPhone, Android Phone, iPad, Chromebook, Intel processor, Nike shoes, Google, Yahoo, YouTube, AirBnB, Pandora, etc) Americans are not the wealthiest ones in North America. Canadians are King and Queen thanks to their extraordinarily strong housing market and Social system of governance. With stronger governance comes better managed financial institutions. A wider taxation net also helps ensure that a country is more united.
Although it might be hard to name a handful of Canadian billionaires, portending to a lack of extremely wealthy success stories, having a household net worth of $400,000 in your mid 30s to early 40s is not too bad at all, especially if your health care is covered when you retire. If the average $400,000 household can keep working for the next 20 years, there’s a good chance that many of them will be millionaires.
Americans can look forward to more Canadianized America given the redistribution of wealth and the ever growing size of the government. Americans should think twice about working so hard and taking so much career and financial risk when it comes to starting a business. Although there are risks with owning real estate, it’s clear that over the long run real estate has helped more people get wealthy than not.
WEALTH BUILDING RECOMMENDATION
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Updated for 2016