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‘It’s directly related to productivity’: Alicia Planincic on why U.S. graduates earn so much more than Canadians

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The intersection of Broad and Wall streets, Oct. 1, 2024, in New York. Peter Morgan/AP Photo.

Based on the latest data, Canadians over age 25 with a bachelor’s degree typically earn around $57,000 USD, while Americans with the same qualification make over $67,000 USD. These earnings gaps suggest that business training and capital investment are key to translating educational attainment into broad-based economic gains.

To break down the numbers, Alicia Planincic of the Alberta Business Council joins Up to Speed to share her analysis and insights.

You can read Alicia Planincic’s full article here.

The following is an automated transcript. If you are quoting from or referencing this episode, please refer to the audio to verify.

RUDYARD GRIFFITHS: Welcome to the program. Alicia Planincic, she is a economist working with the Alberta Business Council, and someone we rely on a lot at The Hub for great kind of bite sized, thoughtful insights into all things economic. let’s have you walk our audience through what we’re looking at.

ALICIA PLANINCIC: Yeah, so this is a really fascinating one. You know, so much of the conversation lately around Canada and the US have obviously been around trade and the potential for tariffs, but what we really wanted to do, or we’re interested in, is we know that Canada has really seen a lot of economic weakness relative to the US. And so our question was, really, how does this actually play out in terms of what Canadians can expect to earn versus Americans? And so what we did is we split the data based on the degree. So whether you have a high school degree, college, Masters or PhD, and we just look to see, you know, what can you expect to make in Canada versus what are your American counterparts making for that same degree? And to be honest, I was quite surprised to actually see the data just how large the gap is. I mean, we were not surprised to see a gap, but the variance is so big that basically, we found that an American can go to school for just two years and earn almost as much as a Canadian who’s been to school for four years.

RUDYARD GRIFFITHS: Wow, wow, that’s amazing. Now let’s go through these individual levels of educational attainment, because what interested me was the variations in the gap so that certain degrees, like a PhD and a Master’s really kind of unleashed some additional earning power on the part of Americans over Canadians. So explain that gap to us and maybe why it’s happening. Why do higher levels of educational attainment. I think we all understand they can lead to higher incomes, but they seem to increase the gap over, you know, comparing American undergrads versus Canadian undergrads and and their incomes.

ALICIA PLANINCIC: Sure, yeah, you’re right. So we see a little bit of this difference in inequality, the US versus Canada, which maybe won’t surprise people, but the gap, you’re right, it’s actually smallest for a high school grad. So high school educated Americans aren’t going to earn that much more than Canadians. But really, where you start to see that gap, gap grow is any sort of post secondary is really going to make you quite a lot more money in the US than in Canada. And I think the reason why probably two pieces is that businesses are just investing more in those workers, whether that be more on the job training that happens, you know, after, after the degree and kind of continues out their career. But also, and we know this to be a big piece of the puzzle in terms of productivity, is capital investment. So basically, what are the tool what? What are the tools that workers in the US have at their disposal to do a really good job, right? Whether that be, you know, in my job at things like computers and the software that I have and, you know, the number of screens to see all that data, whereas somebody that’s working in manufacturing, it’s maybe more about the tools and equipment, and we know that in the US, there’s much more investment in terms of the capital investment per worker. So workers just have more more the tools that they need to do more work, which basically means that businesses can afford to pay them more.

RUDYARD GRIFFITHS: So Alicia, would it be correct to say that this really is a part of the productivity story, part of the productivity gap between Canada United States, which has widened over the years, and it has consequences related not only to you know, our purchasing power and the competitiveness our economy is literally showing up in your income versus your educational attainment. It effectively, it’s the theory of everything.

ALICIA PLANINCIC: It’s directly related to that productivity theory, right? We know that incomes tie very closely with an economy’s productivity. So when an economy becomes more productive, incomes rise, and vice versa. And so this is just a way of, I think, putting it into perspective for you know, the regular Canadian, in terms of, what does this actually mean? And the results are really fascinating. In fact, the other thing that we notice is basically, if you’re a Canadian thinking about getting a master’s degree, you would technically be financially better off by pursuing immigration to the US and. While, I wouldn’t encourage anyone to do that, it does really make us think about, you know, the flow of immigration and where highly skilled people are going to choose to go. You know, politics is one thing, but how much you can expect to earn for your family that is king. That’s really going to be the number one driving force in terms of where people want to live,

RUDYARD GRIFFITHS: yeah, and to understand that these gaps exist year after year after year through your working career. So what you’re compounding over the course of a 20, 30, year career, these numbers really do add up. Final question, Alicia, if we wanted to close this gap, because I think what’s so interesting about this study is it suggests that, yes, we can invest in education, and that’s important, and we often take a lot of kudos that Canada is supposedly having one of the most highly educated workforces in the world. But what you’re showing here is that policy solutions have to go beyond education. That really we do have to get at this productivity problem, don’t we?

ALICIA PLANINCIC: Yes, I think that is very, very clear that it’s not just about education or encouraging Canadians to pursue more education. That’s not really where the problem lies. The problem is in business investment. And how do we actually encourage more of that?

RUDYARD GRIFFITHS: For sure, Alicia Planincic, thank you so much for coming on up to speed today, you can get all of Alicia’s great analysis and insights on the hub’s website, triple W, the hub.ca including her most recent piece for us on these disparities of income by educational attainment, Canada versus the United States.

The Hub Staff

The Hub’s mission is to create and curate news, analysis, and insights about a dynamic and better future for Canada in a single online information source.

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