Canada is in trouble. Its economy is stagnant and at least one of its most prosperous provinces, Alberta, is seriously considering secession. The Bank of Canada analyzed that country’s economic performance, which is anemic compared to the United States:
Gross domestic product (GDP) per adult in Canada fluctuated between 70% and 90% of that of the United States between 1960 and 2020. Behind this gap lie large, systematic differences in relative incomes across the Canadian and US income distributions. There are small differences in average incomes among lower percentiles of the income distribution while large gaps exist for high-income earners, with larger gaps for business owners and the university-educated.
That is to say that high income-earners in the U.S. make considerably more than high income-earners in Canada. The result is a brain drain of remarkable proportions:
Our work suggests that selective emigration of high-ability workers—
commonly referred to as brain drain—to the United States may play a significant role in accounting for the gaps in GDP per adult and labour productivity.
One consequence is that there is little innovation in Canada:
The lower level of innovative activities in Canada is consistent with larger income gaps for high-income earners.
So, how many potential top earners does Canada lose to the U.S.? The answer is astonishing:
[H]igh-income emigrants have a large impact on the income gap by simultaneously reducing average Canadian income and raising that of the United States. Indeed, the cross-country differences in the distribution of income suggest that at least 40 percent of Canadians whose ability would place them in the top income percentile reside outside of Canada.
The overwhelming majority of them live in the U.S. The numbers are also terrible for the second highest-income cohort:
[T]he striking pattern of implied net out-migration for Canadians in the top 2–10 percentiles is similar to that in the top 1 percent, though the relative magnitudes are smaller. Implied net migration suggests that roughly one-third to one-half of these earners resided in the United States between 1960–1970, while just over 20 percent chose to do so by the early 2000s. Since then, this fraction is predicted to have risen to 30–50 percent.
The Bank of Canada acknowledges that these findings are stunning:
The high rates of net migration among high-income earners implied by our analysis may seem somewhat shocking. However, they are consistent with the findings of other studies of Canada and the United Kingdom. For example, Cockburn et al. (2023) document suggestive evidence that inventor migration explains the weaker relationship between productivity and patenting in Canada. Likewise, Damas de Matos and Parent (2019) report that among male immigrants to Canada aged 30–39 with a postgraduate degree, over 18 percent move to the United States within a five-year window of arrival. Damas de Matos and Parent (2019) argue that these migration patterns would be even larger for a longer time period, and thus the evidence points toward large outflows from Canada to the United States of young, highly skilled immigrants.
The bottom line is that liberal policies impoverish everyone. Incentives matter, and the most productive people will seek fair compensation for their work. One “solution” is to prevent them from moving. This is what East Germany did, with concrete and barbed wire. It is what North Korea does today. It is what states like California are contemplating–a wealth tax, coupled with an exit tax. And now something similar is being proposed in Canada:
Are you a Canadian considering improving your situation after graduating by moving abroad for better, higher paying opportunities? A guest speaker at the federal Liberal party convention on Friday just suggested that, in order to defeat Canada’s brain-drain problem, our best and brightest either stay put or cough up half a million dollars, what he suggests is the cost of their taxpayer-subsidized education, before they can pursue opportunities outside of Canada.
Sure, that’ll work. Liberals hate freedom so much that they will do pretty much anything rather than liberate their own people to maximize their productivity and the rewards of that productivity.
