Canadian Politics from Canada's Centre

Monday, February 20, 2006

Impact of NAFTA: Canadian Government Muddled?

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The impact of NAFTA can be divided into two broad categories, economic and social. As I was researching the economic impact of the North American Fair Trade Agreement (for long), NAFTA at 10, a Canadian government report had this interesting statistic:
When measured using market exchange rates, the U.S. posts the highest GDP per capita at US$36.2 thousand per person. Canada lags somewhat at US$23.4 thousand, while Mexico trails significantly at US$6.3 thousand per head.
Excuse me? Canada's GDP per capita is US$23,400 (then ~32K)? That means that the average Canadian is working full time for about 17$/hour (about double minimum wage; the minimum wage is extraordinarily low). That figure is arrived at based on a 40 hour workweek, and four weeks total vacation yearly (including christmas). I know people who work at upscale department stores selling cosmetics earn about that much. Is the government saying then that the average Canadian works for Holt Renfrew selling eyeliner?

Well, ironically enough, the government seems to disagree with itself on that point. Statscan has published a piece in its daily letter saying that average after-tax income is ~$30,000. Correct me if I'm wrong, but the GDP/capita doesn't look at after-tax incomes, does it (please correct me with some comments if I'm wrong)? Assuming I'm right and that GDP per capita considers pre-tax income, the problem here is that the Department of Foreign Affairs is contradicting Statscan. The primary impact of NAFTA is confusion amongst government economists.


At 10:13 a.m., Canadian Politico Blogger Dave T. said:

The US$32800 figure is at PPP. The US$23400 figure is not.

At 9:48 p.m., Canadian Politico Blogger lecentre said:

You're on the mark, as usual Dave. I'd point out, however, that even with the purchasing power parity figures (the PPP Dave was talking about for the uninitiated), there's still a low average income. I don't know where you live, but here in Montreal, that type of income (PPP) still means a small to medium apartment (3 rooms) and long hours.


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