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June 24, 2021

Incomes rise more sharply here than in U.S.

By Gordon Powers, Sympatico / MSN Finance

The average Canadian’s income has grown much faster than that of U.S. workers over the past four years, according to a recent study from CIBC World Markets.

That explains the big line-ups at the Dairy Queen.

Disposable income – the money left over after paying the bills – here has grown at twice the pace south of the border, rising $2,600 Cdn. versus $1,300 U.S. after adjusting for inflation, says Benjamin Tal, the author of the study.

This trend is a complete reversal of the previous decade when Canadian incomes stagnated compared to their surging U.S. counterparts. So quick has been the revival this side of the border that we’ve been able to wipe out roughly 15 years of income underperformance versus the U.S. in just four years, Tal says. Despite this, overall income levels here are still about 90 per cent of the U.S. average.

He ties this reversal in fortune to the rise in commodity values, and energy prices in particular – a trend, despite this week's sell off, he expects to continue as demand for Canada's resources recovers from the global recession. 

Great for some of us, but does this rosy picture describe anyone you actually know? Most of the people I talk to are pretty gloomy right now, looking to cut expenses wherever they can.  

The truth is, Canadians are sitting on a mounting pile of idle cash, suggests Tal in another recent report. It’s just not very well distributed within the population.  

While many consumers are cautious thanks to fears of unemployment and a continuing suspicion of stock markets, those who have most of the excess cash aren’t the ones who usually do most of the spending anyway.

Tal's analysis suggests that about 80 per cent of the excess cash is held by people more than 50 years old. Those people aren't Canada's main spenders, nor are they the main debt-holders, he says. All of which suggests that the money this group is sitting on is more likely to find its way into stocks eventually rather than being used to pay down debt or buy another car. 

So, where do you fit in all this?



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...