BUSINESS

The American Dream Is Easier To Achieve In Canada

01/23/2017 08:45 EST

The United States is called the "land of opportunity." But economists say the American dream is actually much easier to achieve in Canada.

When U.S. President Donald Trump announced his election bid, he claimed "the American dream is dead," The Washington Post reported.

On the latest episode of the "Freakonomics" podcast, economist Raj Chetty explained that Trump's claim might be true — but that opportunity might have simply moved north.

"You’re twice as likely to realize the American Dream if you’re growing up in Canada rather than the U.S.," Chetty said.

Chetty explains intergenerational income mobility. Article continues below.

When it comes to intergenerational income mobility — when a generation makes more money than the one before it — Canada is near the top of the chart.

According to The Conference Board of Canada, the U.S. is ranked 11th of 13 peer countries, while Canada is ranked fourth.

"If there were no intergenerational mobility at all ... all poor children would become poor adults and all rich children would become rich adults," the study explains.

Mobility is measured by calculating the difference in earnings between a parent and their children. The more elastic that ratio is, the easier for a person to move outside of the class they were born in.

"There is less relationship between a family’s background in Canada and the adult incomes of that family’s children. Only 19 per cent of a family’s disadvantage is passed on to their children. This means, for example, that if a family earns $10,000 less income than the average, the children will earn $1,900 less than the average."

In contrast, a family in the U.S. earning $10,000 less income than average would have children that earn $4,700 less — meaning a child from a poor family will have twice the success in Canada than she or he would in the U.S.

"Many Americans may hold the belief that hard work is what it takes to get ahead, but in actual fact the playing field is a good deal stickier than it appears," writes University of Ottawa economics professor Miles Corak, in a paper on income mobility in the U.S.

One of the reasons Canada has such higher income mobility than the U.S. might be racial integration, Chetty suggests.

“Segregation seems to correlate strongly with differences in opportunity,” the economist told Wired magazine, noting that infrastructure and education also play major roles.

income mobility chart

Canada is ranked fourth out of 13 peer countries when it comes to intergenerational income mobility. (Chart: Conference Board of Canada)

The U.S. isn't the lowest on the list. The U.K. had the worst class mobility out of all countries studied by the conference board, and while the U.S. opportunity gap has plateaued, the one in the U.K. is actually getting worse.

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