Factors That Determine Cost Of Living In Canada And America

GDP as a Determinant of Cost of Living

Question:

Discuss about the Comparison of life in America and Canada.

The wellbeing of an individual is determined by the cost of living in a particular area that is total amount of money that an individual needs to sustain the living standard. It concerns the basic needs such as food, housing, clothing, healthcare and many others (Atalla, Bigerna, Bollino, & Fuentes 2017, p. 116). Different cities have different cost of living and are affected by various factors such as the country’s economic, social, and environmental factors (Tan 2016, p. 23). The paper explores, the various factors that determine the cost of living in both Canada and America, and the come up with a conclusive recommendation to determine the best city to hail in.

Canada is located on the northern side of the North America content covering an area of about 9.98 million square kilometers, thereby making the country to the second largest in the world and most of the areas are covered by forest, rocky mountains and tundra. The Canada has ten provinces and is sparsely populated with approximately 35,151,728 people ranking the country at number 38 as the most populated in the world. Canada is a major supplier of the agricultural products and leading energy exporter. Canada ranks as the fifteenth in the nominal per capita income global rating and tenth in the human development index ranking. These factors are attributed to the low level of corruption, civil liberties, high level, of education, economic freedom and many others that eventually affect the quality and cost of living (Bricker, Dettling, Henriques, Hsu, , Jacobs, Moore, Pack, Sabelhaus, Thompson, & Windle 2017, p. 89). America also known as the United States of America is situated in the Northern American continent too, and covers about 3,805,927 square miles with a population of about 320,061,700. America is the third largest country, with a mixed economy (Koth & Debeaumont 2017).

The two countries appear remarkably similar as both display impressive infrastructure system, high socioeconomic profile, diverse ethnicity, and sprawl. However, when the factors are further broken down into smaller traits and analyzed, they show big contrast that brings a difference in the level of living standard and well being of an individual.

Gross Domestic Product

The standard of living in a nation is mostly determined by the GDP. GDP is the monetary value of all the finished products and services within a country’s border at a specific time frame and helps in determining the economic activity of a nation (Chien & Mistry 2013, p. 9). GDP includes the consumption, government expenditure, investment, and export fewer imports (James Ming 2015, p. 20). The mode for measuring GDP is uniform, making possible for economics to determine and compare the cost of living of various nations. The GDP is calculated using based on two approaches that are production and income based. The production approach determines the value of a finished product regarding the cost of the material and services involved, while the income approach determines the GDP about the amount of the coins spent to acquire a product or a service. However, some countries have invested in the international market; their economic health is the best measure of Gross National Income that covers both the domestic and foreign investments (James 2015). The prices of goods differ in countries, and this is always determined using the real GDP by comparing the prices of a product or service between current and base year.

Food and Housing

According to the Bureau of Economic Analysis (BEA), the formula for real GDP per capita is real GDP/population. The inflation of a country always fluctuates in different parts of the year and therefore, if the GDP stays in the negative then the county’s economy tends to recess, and if the time continues, the country goes into depression, then prices of goods and services tend to inflate (James 2015). The GDP tends to impact directly on the personal finance, investment and the availability of employment. This in return affects the cost of living.

The table 1 shows   Canadian GDP   from 2012 to 2018, projecting to 2022. In 2017 the gross domestic product per capita in Canada was about 43,611.26 U.S dollars. In 2014 Canada had one of the largest GDP per capita values in the world. It shows steady growth from 2010 to 2013 with a difference of about 1.2% and then dropped up to 2017. On the other hand, table 2 shows America GDP, that tends to advance annually too from 2010 with about 1.8 % till 2014 that it dropped, ringing the value to negative (Tan 2016, p. 7). From 2016 the GDP the started increasing again and is projected to increase steadily by 2.5% up to 2020.  From the statistic it is notable that the GDP of an American is higher than that of a Canadian, this high percentage cannot translate to the well being of the most of the Americans since the per capita GDP is much higher.  The high GDP makes the standard of living to go higher while obtaining key elements such as water, food shelter, and health service.

Figure 1: Shows GDP of Canada

Figure 2: Shows GDP of America

Disposable Income

The cost of living in an area at an individual level is most appropriately determined by the amount of salary received since money determines the amount and quality of services and products received (Smith 2012, p.5). When an individual has low disposable income, the quality of services received is also low, and when the deposable incomes are more, the quality and amount of the products increases. Several studies shows that rich people tend to have higher well-being compared to individuals who are poor, therefore the latter are always less happy (Eksi & Kaya 2017). The difference in the amount of disposable income varies per job specifications, country, and employer. The average salary for both Canadian and an American are perceived to be most of the same amount (George & Rhodes 2017, p. 7). After taxation, a Canadian averagely receives $2,773.50 while an America gets $ 3,258.85 per month ranking them number 24 and 12 respectively in the whole world.

Healthcare Services

Food

Food is the basic need of a human being as it’s the source of energy.   Unavailability of adequate and good quality food, results into poor feeding styles that eventually translate into diseases such as kwashiorkor, cancer, obesity, cardiovascular disease and many others (Eksi & Kaya 2017, p.34). Food and drinks cost are always priced about the item and the area and are relatively the same in both united states and Canada. However, the average value of the food is cheaper in Canada than in America (Korth & DeBeaumont 2017, p. 51). Agriculture production being one of the major economies in Canada makes more agricultural products such as fruits to be less expensive in the country than in America, and on the other hand, America is a mixed economy with various processing companies experience cheaper processed food items than in Canadians. From the average of the randomly picked food items below, it is observed that the total cost of those food items is less in Canada with a small margin.

Table 1: Shows Comparison of essential food items between America and Canada

Housing

Housing or shelter is one of the fundamental needs of a human being and is also a determinant used to measure the well being of an individual and the whole country. Unavailability of shelter poses an individual to various threats such burglary and diseases such as pneumonia. When the number of houses in a country is less than the total population, then the cost of housing tends to go up. This eventually translates to a high living standard in a country.

Table 2:  Shows comparison accommodation rate in Canada and America

From the table, it is evident that the prices of houses in Canada are much lower than in America, a factor that was contributed by the huge mortgage in America in the past years. All the houses that were privately owned in America were taken by the government entities such Federal Housing Administration and the U.S Department of Veterans Affairs that all regulate the system of housing making it too complicated, encouraging homeownership (Whaples 2011, p. 34). While in Canada, housing policy promotes the access to the house through a variety of tenure: whereby it does not explicitly encourage homeownership.

In Canada, the conventional mortgages are the five-year fixed rate closed mortgage unlike in the U.S the 30-year fixed-rate open mortgage has been the most common(Dupras 2017, p. 6). The type of mortgage in the U.S, therefore, makes many residents own their own homes, making it difficult for the non-residents to get a house. The few houses in America left for renting eventually becomes more expensive since the demand is very high.

Conclusion

Health Services

Health services entail the availability of affordable health services to a person.  The quality and quantity of health services determine the life expectancy of an individual. America and Canadian contains some of the well-known health services in the world, however, according to the 2012 OECD Health data study, America ranks as number one the most expensive healthcare services with a per capita of $ 8,233, and Canada with health care per capita of $ 4,300 is cheaper than America. According to the U.S National Research Council, the Canadians tends to live longer than the Americans, an indication that latter are less healthy. The report further estimates that a Canadian born in 2007 is expected to live to about 79.3 for men and 82.3 years for girls, much more compared to 75.6 and 80.1 respectively in America (Whaples 2011, p. 90).

The difference in life expectancy is brought about by the common smoking habit of Americans and availability of fat and fatty foods that causes cardiovascular disease and obesity ranking it to number 26 and Canada as number 10 in the whole world according to OECD. The smoking habit eventually affects the infant life expectancy in America. Most of the infants record low birth weight and tend to have a high mortality rate. However much the mortality rate Is high, and the life expectancy is low, amerce commands the best doctors that are capable of treating so many chronic diseases such as cancer, making a large number of patients to travel to America in search of the services. As it is human nature, the habit is more likely to be adopted by an immigrant or a newcomer that will eventually die before the right time. Finally, Americans tend to pay more money from their Gross domestic product towards health care by about 17% than the Canadians that pay about 11%.

Figure 3: Shows the Life Expectancy of America and Canada

Infrastructure

Infrastructure is very essential as it allows the movement of people, products, and services from one place to another. In a situation of inadequate infrastructure system, the movement tends to be difficult and expensive. United States infrastructure is one of the most intricate transportation networks in the world (Morris 2016). The country has over 4million highways that extend to thousand, miles, numerous airports and railways lines that are capable of getting more people and goods to more various places than any country in the world. The Interstate Highway System dictates over one percent of the America transportation networks

On the same note, Canada’s infrastructure is one of the best-developed in the world since it meets the standard needed for high-tech business and international trade. These are about 36,114 kilometers of railways, 901,902 kilometers of roads that access all the major cities of Canada the developed highways and rails allow approximately 400 million tons of goods into and out of the country enabling good business. The excellent infrastructure favors the bus travelers who are always charged for about 1.75 CAD/km. However, the total miles of the road stretch is only about 648,000 that is far less to that of America.

Education

Apart from the basic needs of human being, the secondary requirements such as the cost of educations determine the level of living standards of a country.  A well-educated individual is perceived to have a better lifestyle than an educated individual. The cost of tuition varies from country to country and also depends on the level and quality of education offered by the service provider. A large number of students tend to cross across borders in search of better academic services. The cost of these educational services tends to vary by the country and the level of education perceived.

A large number of students are always in big debts resulting from the search of education in America that is higher than other countries. In America, it cost averagely about $ 37,600 in average public college and above $ 160, 000 in prestigious schools such as Harvard (Tan 2016). In the other hand, the average cost for a degree level starts at $ 8,000 to about $ 28,000, with about $ 50,000 in the most prestigious colleges, which is approximately one-third of a degree pursued in Harvard University. Moreover, Canada provides free public education to all citizens and permanent residents all way from the kindergarten to secondary school. This makes Canada cheaper than America in education provision, hence making it a destination for many students across the world that cannot afford to go America.

Job Opportunities

A large percentage of immigrants always cross borders in search of better employment opportunities.  Securing a job ensures that an individual is capable of sustaining the needs such as food, clothing, and shelter. The rate of employment differs in various countries and are determined by various factors (Morris 2016).Canada currently tends to have strong employment market than the United States of America; that is experiencing the worst spell of unemployment for almost the past 20 years and continues to grow even into other parts of Europeans nations. The employment rate measures the number of working people per the available population. In Canada is averagely at 65.30 percent that has remained unchanged since 1976, only coming low in 2008 up to 56%. The American average employment rate is at 55.1 that have been dropping. Fortunately, the catastrophe of unemployment that is widespread in other Europeans countries does not affect Canada that offers a good environment for experts who are in search of job opportunity.

Table 3: Shows the rate of employment between America and Canada

The immigration policies of a country determine the opportunity an individual can have to move to that particular country. Unite states being the superpower with good infrastructure, education, health services, the stable economy made a large number of immigrants to move to America. The massive inflow of people created differences in the American attitude towards the immigrants: while some perceive the newcomers as beneficial to the country, a large number of Americans see and feel it as a threat to their life. The fear is brought about by frequents terrorist threats and attacks on the American soil.  In addition to the terrorist scare, the population of American is very high, and therefore, allowing more other people from other countries tend to affect the sustainability (Koth & Debeaumont 2017). These fears and doubts have made the American government under the leadership of Donald Trump have strengthened the immigration policies, making it difficult even to the genuine people who are in search of healthcare services to gain entry.

Among the changed policies include the “catch and release” that allowed people found crossing into the American soil illegally released into the American while their asylum request was being processed since the government had nowhere to hold the detainees. The government has changed the policy and has embarked on expanding the detainees’ facilities. Another policy that has been modified is the Privacy Act that bared sharing of information of undocumented persons gained by government agencies such as Internal Revenue Service’s to Immigration Services. The policy aimed at allowing the undocumented people who have stayed in America for quite a long time to gain American citizenship. However, the situation is different in Canada that is sparsely populated, have more job opportunities, and have less  restrictions in gaining into the country and the Canadian citizenship.

Country Political stability and Crime rate Accident Rate

The political stability of a country is influenced by various factors that are both internal and external (Beaumont 2017). It is defined as the resilience to adapt to the external factors and resume to the normal position by a country and determines the number of people traveling in and out of the state. When the country’s government unstable, the availability of business leaders and entrepreneurs from other countries tends to be affected. The United States and other British Commonwealth countries have enjoyed political balance for quite an extended period making them the most appropriate countries for investors(Eksi & Kaya 2017). However, the ranking by the Global Peace Index place Canada was ranked eight as the most peaceful country in the world with the United States appearing at number 100. The index measured factors such the number of jailed citizens, political participation, and freedom to press, militarization, and other factors that identified the trend of peace over a given period.

 Notably, the number of prison-sentences in Canada was approximately 38,700 people, translating to 114 for every 100,000 citizens unlike in the United States that averagely 716 people from every 100,000 citizens are locked up every year. According to the survey political violence, gun-related violence, terrorism, and overseas conflicts were high than their wealthy comparisons such as Europe, Asian, and Canada.  The American political instability is majorly caused by the involvement of the government with other countries such as Iraq, Syria and South Korea. Other U.S.-designated terrorist organizations such as Islamic State of Iraq and the Levant (ISIL), the indigenous Revolutionary People's Liberation Party–Front (DHKP/C), and TAK also increased attacks in American soil. The government tends to spend a lot of money in the militarization, breaking the economic stability too. Consequently, the country is also on the verge of being attacked by terrorist anytime making any newcomer fear for their lives.

Competitiveness

Competitiveness is the set of institutions, policies, and factors that influence the level of productivity of a country. According to World Economic Forum’s Global Competitive report, (2015-2016)America is ranked the seventh – a most economically competitive country in the globe. The country has a Global Competitive Index of 18 out of 144. The excellent universities, the flexible labor market, innovativeness, and quality of the infrastructure affect the rating. On the other hand, Canada is ranked on number 11, a position affected by the availability of quality electricity supply. Canada has Global Competitive Index of 14 out of 144. The rating shows that it is more competitive in America than in Canada. Therefore, a business person will opt to venture into Canada where there is a high probability of succeeding due to less competition.

The major factor affecting the cost of living is the prices of goods and services that are also determined by various factors such as the demand and supply of the products and services, the Gross deistic product, and many others. America is considered as the most prestigious country and therefore, most people dream to live in America than other parts of the world. It is the human nature to compare their well-being   to others, in relation to the quality of services and products received and that extends to the country level. Richer countries are always more happier than poor counties since the availability of the superior feeling among the residents.

Utility cost

Utility cost entails the expenses incurred on the items such as water and electricity. These items are essential since their unavailability make life difficult is such towns. The costs vary according to the region and the service provider. In America, the average monthly cost of the utilities are much higher than in Canada, a factor favored by the availability of mountains and water bodies in Canada. The energy is also cheap because Canada is a major producer of energy that is also exported to other countries.  These utility costs tend to be higher in America than in Canada making the same people with equal disposable income in these respective counties to spend quite much in America than in Canada.

Table 4: Shows the comparison of Utilities in America and Canada

Rights to live

Every country has its constitution that entails different rights such right of freedom, right to live, right to move and many others (Arthur 2013). These rights vary and differ, for example in Canada the right to live were strengthened when the government abolished the capital punishment in 1976, unlike in the United States that still practices and charge inmate with death sentences. Being on the wrong side of the government is that every person should evade, but at times when one accidentally falls into a mistake then the ultimate judgment should not be death.

Conclusion

To most people, income is always the determinant of well being, a notion that is not true. Well, being is determined by many factors that have been discussed above, and each varies by the region, city, and service provider. To anybody who might be having difficulty in choosing which country between America and Canada is most suitable then I will recommend Canada. As much the healthcare services of the two countries are of good quality, I prefer living in Canada where the life expectancy at birth is much higher than in America. The life expectancy factor in Canada will allow anyone who is thinking of starting a family and putting them all through to education system, and then Canada is the best shot. Canada offers peaceful mind than America that has a high rate of gun violence and high probability of terrorist attack, due to the increased interaction of America and other countries that hood terrorist. It is quite easier to acquire entry into Canada than in America for those in search of job opportunities, that is quite unavailable in America. To an investor, Canada is the best shot, as much as it has lower Global Competitive Index than America, probability of a business thriving is very high than in America, since there is no stiff competition and the favorable work environment.

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