The US and Canada are the two neighbours that have so many things in common and yet are very different. While the US is better in some areas, Canada is superior in others. If you’re planning to move, you might have a hard time choosing between the two. But one of the things that could make your decision easier is to consider the work conditions. So, are salaries higher in the US or Canada?
Salaries are higher in the US than in Canada. The average annual salary in the US is USD56,630, but that of Canada is USD43,867. But this isn’t a general thing. The lower salaries in Canada are due to factors such as higher operating costs, demand and supply, cost of living, and weak VC culture.
However, wages in Canada aren’t that bad. Canada is still one of the highest-paying countries globally. This article examines the employment conditions in both countries and why salaries are higher in Canada.
What is the Average Salary in Canada and the US?
One of the easiest ways to determine salaries is to look at the annual average salary since this represents how much an average worker earns in the country. In Canada, the annual average salary for full-time workers is about CAD54,630, equivalent to USD43,867. On the other hand, the average annual wage in the US is $56,310. This shows that salaries are much higher in the US compared to Canada.
The effect of the higher salaries in the US reflects on the median household income in the country, which is equally higher than that of Canada. In Canada, the median household income after taxes is CAD62,900, while it’s USD67,521 in the US.
However, it’s not in every case that Canadian workers earn less than US workers. Research has shown that while workers with university education and above earn more in the US than in Canada, those with below high school earn more in Canada than in the US. Moreover, for workers with high school or some post-secondary education, it appears they earn similar salaries in both countries.
There are, of course, other factors at play when it comes to which countries pay higher salaries. Factors such as the industry, geographical location, profession, etc., can affect how much a worker earns, even in Canada itself. For example, teachers in Canada earn more than those in the US.
Why are Salaries Lower in Canada
Workers in Canada earn less on average than their American counterparts. Here are some of the likely reasons for lower salaries in Canada.
1. Higher Operating Costs
One of the factors blamed for the lower salaries in Canada is that the operating costs for most businesses are higher in Canada than in the US. In Canada, companies have to obey different rules and regulations, and there are various tariffs and taxes on their operations. Due to this increased cost of doing business, businesses in Canada have less money at hand to pay higher salaries.
2. Venture Capital Culture
The United States has a very strong venture capital culture and it’s where VC investment is highest all over the world. In 2019, technology businesses in the US raised USD116 billion, far ahead of any other country by miles. The strong VC culture means most businesses, including startups, in the US, have sufficient funding to hire workers and pay very high salaries for them compared to other countries.
3. Demand and Supply
The population of either country also has a telling effect on the ability of the employers to pay a certain amount as salary. While the US has over 300 million residents, Canada is slightly above 10% of that at less than 40 million. This means that businesses in the US have a wider market to operate in, which means far higher demand for their products and services.
Even though there are millions of professionals in various fields in the US, the demand for workers is equally high. As a result, thousands of employers need the services of these professionals and have to compete with other employers to get the best.
Hence, they can easily afford to pay higher salaries to attract the workers they need. This appears to be the case with most tech companies such as Apple, Amazon, Google, Facebook, etc. In addition, most international companies pay their workers based on location and local market rate. Since the market rate is higher in the US than in Canada, it goes without saying that salaries would be too.
4. Cost of Living
Another factor that influences the difference in salary is that the cost of living is higher in the US than in Canada. This is especially true for the major cities. For example, the most expensive cities in Canada are easily Toronto and Vancouver. But the cost of living in these cities doesn’t compare to that of New York City or San Francisco, which are far more expensive.
Overall, rent prices in the US are 22.72% above that of Canada, and overall consumer prices are 6.54% higher. Although the cost of living doesn’t necessarily influence the salaries, employers usually consider it when determining their salary structure to remain competitive.
Highest Paying Jobs in Canada
Even though Canada has a lower salary on average than the US, several jobs still pay very highly. This is mostly because there’s high demand for them. Such professions include doctors, especially surgeons, lawyers, judges, leadership roles in companies, pilots, data scientists, computer scientists, and engineers. However, with most of these jobs, there are usually opportunities for better payments in the US.
Canada has a lower average salary than the US, which shows that most Canadian workers earn less than their US counterparts. But this isn’t a blanket statement. Some professions pay more in Canada than in the US. A good example is teaching. Regardless, several factors contribute to the higher wages in the US.