Canada vs Alabama: The Comparison Canadians Don’t Want to Hear

GDP comparisons sparked outrage. But the real story is Canada’s declining living standards and a growing generational divide.

A controversial comparison between Canada and Alabama recently sparked outrage across the country, but the data behind it tells a deeper and more uncomfortable story. In this episode, Sabrina Maddeaux and Mike Moffatt unpack the debate that erupted after a claim that Canada’s GDP per capita has fallen to levels similar to, or even below, that of Alabama.

While many Canadians dismissed the comparison outright, arguing that GDP per capita doesn’t capture quality of life, the discussion reveals broader questions about Canada’s economic trajectory and whether the country is becoming complacent about declining prosperity.

Sabrina and Mike also explore the cultural and political factors shaping Canada’s economic mindset, including the country’s tendency to compare itself primarily with the United States and its reluctance to acknowledge declining performance relative to other developed nations. They discuss how this mindset can create complacency and make it harder to recognize problems early enough to fix them.

Is Canada still as prosperous as we think, or are we becoming complacent about a slow decline?

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Below is an AI-generated transcript of the Missing Middle podcast, lightly edited.

Sabrina Maddeaux: The Globe and Mail recently published a big piece with the headline, Out of Nowhere Canada Became Poorer Than Alabama, and the reaction from a lot of Canadians was basically, How dare you!?

People were dunking on the comparison, saying GDP per capita is meaningless, pointing to our health care system, our gun laws, our social programs, etc., etc., but I wrote a response in the National Post arguing that this exact reaction - the pearl clutching the smugness - actually proves the problem. Canada has developed this really dangerous economic hubris that’s caused, and will continue to cause, a massive decline in living standards and prosperity.

Let’s start with the basics: The globe piece is based on GDP per capita, which is the size of the economy divided by the number of people. And it’s often used to measure a country’s standard of living. And by that measure, Canada has, at least temporarily, fallen below Alabama. But a lot of economists pushed back and said, that’s not the whole picture.

So, Mike, I’m curious. Is Canada actually poorer than Alabama? What does the data really show? And is GDP per capita the right thing for us to be looking at?

Mike Moffatt: Okay, so it’s time for Professor Mike to get some definitions out of the way here. So GDP per capita measures the total monetary value of all the final goods and services produced within a country’s borders within a year, divided by the population. That’s the per capita. That’s important. It’s an important measure because it measures how much economic activity is occurring within a country. And you need that economic activity to support life, to generate tax revenue, to pay for everything we need. That said, GDP per capita is not the same thing as well-being or quality of life, though it is obviously strongly correlated with it.

When it comes to the actual comparison, there are different ways of measuring GDP to take into account relative prices and things like that.

The basic claim here is true: that Canada’s per capita GDP, which used to be well ahead of Alabama’s, is now at or below, depending on the definition of GDP used.

Sabrina Maddeaux: So the immediate Canadian response was basically: Fine! Maybe the GDP number is true, but GDP per capita doesn’t capture everything. We have public health care, stronger social programs, and more equality.

But I think that reaction is exactly the problem and doesn’t really capture the decline in quality of life experienced by a lot of Canadians, but especially younger Canadians locked out of asset wealth via homeownership.

We both wrote columns on this issue. Yours was at The Hub, and mine was in the National Post, and we’ll link to them in the show notes. Yours looked at broader quality of life measures and showed that Canada isn’t doing as well as people think. What did you find?

Mike Moffatt: So there’s one side to this whole Canada-Alabama argument that diminishes the importance of GDP. And they suggest GDP is important. But we need to be looking at things like life expectancy, crime, clean air and so on. And they argue that if you look at well-being through a broader lens, Canada looks better. And that’s probably true relative to Alabama, but it’s actually 100% wrong when we compare ourselves to 200 other countries around the world, because GDP per capita is, in fact, one of the areas where we excel.

So we need to look at different measures of well-being, and there are a few different ones we can look at. The UN has its human development index: 30 years ago, we ranked fourth in the world, and today we’re 16th. The measure does show that quality of life in Canada has increased over time, but we’ve made little progress in the last decade. And while other countries have continued to make progress, they’ve passed us in the rankings, which is why we’re now 16th.

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There is another measure which comes from a different UN initiative called The World Happiness Report, and that combines economic data with polling data from the World Gallup survey. When that report was first released in 2012, we ranked fifth in the world in the latest release. We’re all the way down to 18th.

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A year ago, the report examined happiness by age group. Canadians over the age of 60 were the eighth-happiest in the world relative to their peers. But young people, those aged below 30, ranked 58th globally.

A big reason for that is the affordability crisis that’s plaguing young people, who lack the freedom to buy a home or move to a big city because they’ve been priced out.

I know I threw a lot of data at you, I’ve got one more. The OECD also measures 38 of the world's richest countries in its well-being monitor. On most measures, we finished middle of the pack, though some we do quite well in. Ironically, one area in which we excel is household wealth, thanks to our out-of-control home prices. So, folks like me, who bought a home 20 years ago, we’ve got a whole lot of household wealth, and that’s showing up in the data.

So, we have these three different indicators that use three very different methodologies that all basically say the same thing, specifically that Canada used to excel at well-being. But now we’re ranked in that 14 to 20 range, globally.

And they all point to the same reasons: high inequality, high gender wage gaps, high rates of deaths of despair, and a generation of young people who are being blocked from truly contributing to Canada’s society and our economy.

Sabrina Maddeaux: Your breakdown of the Happiness Index is so key, in my view, of Canada’s current situation, and that a lot of people look at overall medians or overall trends, but the experience of living in Canada and wealth in Canada is so vastly different. Based on your age group at this point, unless you break it down into younger generations versus older, you really aren’t getting a picture of how dire things are for younger Canadians in particular; they’re practically living in a different country than older Canadians.

Mike Moffatt: I think that’s absolutely right. And one of the areas where we do particularly poorly on that index is freedom. But it’s not freedom in the way that we traditionally think about it - the government saying that you can’t smoke weed or can’t do this or can’t do that, but it’s based on your options. It’s based on the things you can do. So it’s not your freedom to drive a car in the sense of government saying you can and can’t do that, but rather your freedom - your ability - to own a car, and the sort of economic and social indicators around that.

And there we fare quite poorly, particularly among young people, because we’ve priced young people out of taking a great job, moving to a new city and so on.

But that’s enough about my column. Let’s discuss yours, because you had a fantastic one as well. And you made a specific comparison that I thought was really striking. You wrote that a 28-year-old in Alabama can still hope to own a home and build a family if they don’t have both already, but the same can’t be said for a lot of their peers in Canada.

Now, Alabama has a lot of problems, and we’re not trying to gloss over that. But as you point out, this floor is different from Canada. So walk us through your argument.

Sabrina Maddeaux: Alabama’s floor is very low, but it’s stable. It’s their current trajectory, which will hopefully raise that floor and continue to raise it for people. But Canada is different because ours is falling for large portions of the population. And it keeps falling, especially for young people. So that floor is getting lower and lower and lower. And the most visible version of this is housing.

Median home value in Alabama is around 315,000 CAD. Yet in Canada, the average is around 650,000 CAD. But it’s not just housing on its own. Housing is the entry point to the whole package of what a middle-class life is supposed to look like. It has looked like this for a very long time in Canada, particularly when starting a family.

So when you’re locked out of homeownership, you’re also delaying family formation - having kids. You have no wealth-building mechanism. You can’t see yourself retiring. You’re much more economically precarious. And this isn’t hitting everyone equally.

Older Canadians are largely insulated because they were able to get into the market in a very different era. And from their vantage point, the country looks fine. The status quo is actually quite good. But the floor is falling out from under young people, and we’re in a state of remarkably rapid decline for them.

Some examples here: food bank use is growing among employed people with degrees. Homelessness in Ontario is up 8% last year alone, with 85,000 people. The idea that in Canada, a university degree leads to a full-time job or a stable life, and a so-called middle-class salary, isn’t true anymore; you’re still locked out of that middle-class lifestyle.

So this generational split is, in my view, key to understanding why so many Canadians refuse to see the problem and are actually offended by the Alabama comparison, because the inequality here isn’t rich versus poor. It’s not based on income in the traditional sense, as it is in Alabama. It’s old versus young, asset owners versus renters. Our wealth split is very different.

So I’m curious if you can actually walk us through what that looks like in data.

Mike Moffatt: Absolutely.

The numbers are pretty stark. In the 1980s, the typical senior in Canada was about four times wealthier than the average person in their 20s. Today, seniors are nine times richer than their millennial grandchildren. For the first time, men past retirement age are actually earning more than men aged 25 to 34. That’s a complete reversal from a few decades ago. (That’s something we’ve talked about in a previous episode.)

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Seniors’ poverty has dropped to 5%, and that’s a genuine success story. That’s amazing. That’s something that Canada should be very, very proud of. But child poverty is triple that. More than 40% of Canadian millionaires are aged 65 and older. Real incomes for Canadians in their prime working years have stagnated.

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So as the OECD well-being data shows, we’re near the top of the world for household wealth, but we ranked particularly poorly for housing affordability and inequality. And ironically, all three of those have the same root cause, which is home prices that have become detached from incomes.

But I’d like to pivot back to your column. Economists have a concept known as a resource curse, where a country blessed with a lot of natural resources, such as Canada, can experience low economic growth and high inequality as the wealth generated by the resource sector can crowd out other parts of the economy. And to be clear, that doesn’t have to happen. It only happens under certain conditions. But it’s a well-known phenomenon that economists study.

Now, you didn’t phrase it this way. I’m interpreting this through an economist's lens, but your piece seems to be making the argument that Canada is experiencing the costs of a resource curse without the actual benefits. Can you walk us through that?

Sabrina Maddeaux: That’s exactly it.

Countries with abundant natural resources often fail to diversify. They underinvest in productivity and develop a built-in excuse for not competing as hard because their resource wealth becomes a crutch, and they become complacent. In Canada, it takes an average of 17.9 years to get a new mining project off the ground. And we still lack a credible path to new pipelines. So we are complacent. The assets are there, but we can’t, or won’t, convert them.

Canada is unique. The really weird part here is that we’ve developed the psychology of a complacent, resource-rich nation without even having the actual receipts, or riches, to show for it. Usually, when a country gets lazy, it’s at least cashing in on these natural resources. Meanwhile, we’ve managed to internalize all the complacency and none of the wealth. A nd our version of the excuse isn’t: We’re rich, so why hustle? It’s: We’re good people with good values, why hustle?

So we’ve substituted this moral self-image for economic performance. And the cruellest part is that the good intentions actually justified a lot of the specific policy choices that are directly responsible for the outcomes we’re now living with. Which makes me curious, with you being an actual economist, what’s your take on Canada’s economic psychology?

Mike Moffatt: There’s this old criticism of economists that when we can’t explain something with economics or data, we turn into amateur sociologists and we throw up our hands and say: Oh, it’s a cultural problem. The head criticism of economists is 100% accurate. So let me commit some amateur sociology.

I happen to think our biggest problem, particularly here in the Ottawa policy bubble where I reside, is that we can’t stop comparing ourselves to the Americans. There’s this mindset that there are only two solutions to any problem. It could be health care, inequality, crime, what have you. Either we keep doing what we do, or we do what the Americans do, and there’s no other possible solution.

And when you do that, Canada does look pretty good on measures of inequality, crime and child mortality and things like that. When we compare ourselves to the United States. But when I point out that other countries are doing better and have found workable solutions to these problems, it’s dismissed. Particularly if that data to those solutions doesn’t come from a G7 country.

As someone who has worked in government and advised political leaders, I can tell you the fastest way to get ignored is to talk about some great thing, or some great piece of data, from New Zealand or Denmark or a place like that. Nobody cares. It’s absolutely maddening. So we’d rather dunk on the Americans than try to take lessons from other countries.

And things, in my view, won’t change until we get rid of that mindset.

Sabrina Maddeaux: So, let’s end with this: is it fixable? Because the problems we’re talking about aren’t new. A lot of them have been getting worse, particularly over the last decade. So, what actually has to change? And what does Canada look like if it doesn’t?

Mike Moffatt: Well, go back to my previous answer. The first thing that we need is a mindset change. The single biggest thing we could do to improve our situation is to stop comparing ourselves to the Americans. And I know that’s going to be really difficult, but we’ve got to try. It’s a big world with 200 different countries, and surely the other 198 have something that they can teach us.

The second thing we need to do is get out of this mindset that if we’re critical of Canadian performance, it’s that we hate Canada. I’m hard on Canada because I love Canada and I want it to do better. We really should be the best country in the world, and we’re squandering that potential. I believe in Canada, so I know that this isn’t the best that we can do.

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We really are our own worst enemies, and that’s reflected in our policy. A lot of what we need to do is simply get out of our own way. We need to harmonize the regulations, we need to make it easier to build, and we need to recognize that having more gatekeepers and more rules doesn’t make us safer. It just creates more complex systems that are less likely to be monitored and more likely to break down.

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And most importantly, we need to start caring about people who aren’t us. Boomers and Gen Xers like me need to start making ourselves aware of what’s happening to Millennials, Gen Z and Gen Alphas and the little Gen Betas, and commit to creating a better Canada for all of them.

So that’s my take. I’d love to get yours.

Sabrina Maddeaux: You hit on something really important to me. Criticism isn’t just okay, it’s good. If done in a healthy and constructive fashion, it doesn’t mean you’re not patriotic or that you’re a hater. It’s acknowledging that Canada has very real problems, and if we don’t fix them or acknowledge them, things are going to get even uglier really quickly. So that first step, in my mind, is getting rid of that complacency in that sense of superiority.

Because you can’t fix a problem that you refuse to admit you have. The Alabama comparison stings precisely because it cuts through that self-image we hold so dear. And we’re no longer better than Alabama in the ways that really matter most to a 28-year-old trying to build a life. And that’s a big problem. That should be something we have a lot of urgency to fix.

Thank you so much, everyone, for watching and listening. And to our amazing producer, Meredith Martin and our editor, Sean Foreman.

Mike Moffatt: Now, if you have any thoughts or questions about Alabama or the best things to order at Waffle House, please send us an email to the Missing Middle podcast at gmail.com.

Sabrina Maddeaux: We’ll see you next time.

Additional Reading/Listening that Helped Inform the Episode:

Sabrina Maddeaux: Canada didn’t become poorer than Alabama ‘out of nowhere'

Canada’s global performance rankings are in freefall

How Canada became poorer than Alabama

World Happiness Report 2025

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