Is Canada on your mind these days?
Americans have a long history of moving to Canada for political reasons, as The Economist’s graph of American permanent resident admissions demonstrates.
Whatever your reasons, Canada is a practical choice for Americans seeking the expat experience. English is one of the official languages, the economy is one of the world’s strongest, and there are a variety of urban and rural areas to choose from. Toronto, Vancouver, and Montreal routinely rank higher than all US cities in quality of life surveys.
Despite its proximity, emigrating from the United States to Canada can be quite difficult. In particular, Canada limits immigration to those who possess a work-related skill that is in high demand. This could include professions such as engineers, some IT functions, and certain medical professions.
Assuming you get into Canada and have a job, is it really cheaper to live in Canada? What about taxes? Are Canadian cities such as Toronto as expensive as their counterparts in the United States such as New York and Seattle?
Before you assume everything will be rosier across the border, let’s examine how a move to Canada would affect your wallet.
Canada vs. Europe vs. the United States
If the United States is generally believed to have the lowest level of social safety net spending, and the democracies of Western Europe invest more in this area, then Canada is somewhere in the middle.
One example of this is with paid maternity or paternity leave. The United States is the only country of its economic stature that does not guarantee any paid leave for new parents. Conversely, in some countries in Europe paid maternity leave can last years.
In Canada, most employers offer between 17 weeks and one full year of leave. Parents can share up to 35 weeks of employment insurance, which covers 55% of wages up to a maximum of $543 per week. In the United States, some states have similar arrangements but there is no mandate from the federal government to provide this benefit.
So starting a family would probably be cheaper in Canada, but what about things that Canadians pay more for?
Food, gas, and consumer goods are all more expensive in Canada
Consumer goods and food tend to be considerably more expensive in Canada, with price increases of 25% to 50% over that in the United States. While some items are less expensive, you can generally count on paying more for staple goods.
Gasoline also costs a lot more in Canada. In 2015, the price of gasoline in America dropped by 90 cents per gallon compared to 41 cents in Canada. This is due to the relative weakness of the Canadian dollar compared to the American dollar.
To put these differences in perspective, a person spending $80 a month on gas and $150 a week on food in the US could expect to spend closer to $100-$120 and $200 a week on these items (that’s a total difference of roughly $680 versus $900). For a family of four, the difference widens: $1,050 over four weeks versus $1,350. When your post-tax income is an average entry-level salary of $3,000 or $4,000 a month, this is a considerable difference.
However, you can always save money by ditching your car for a bike, and these increased costs might have some offsets. Let’s check them out.
What’s less expensive in Canada?
Medical care
The cost of Canada’s universal healthcare is somewhat hidden from consumers. While Canada does in fact spend a great deal of money on healthcare—about $4,500 per capita in 2015, ranking sixth in the world for most expensive healthcare—the United States ranks first with a system that spent about $8,200 per capita.
When one considers that the US dollar is about 20% stronger than the Canadian dollar in terms of valuation, the difference in expense becomes even greater.
Americans basically pay this cost out of their pockets (after taxes), with insurance premiums that vary greatly in price both on the private market and through employer-subsidized plans. An employee who buys insurance through an employer for a family (spouse and one child) can easily spend more than $1,000 a month in the US—or roughly $500+ more than the tax burden Canadians are levied for universal care.
College education
Canadian universities cost about half what American universities do, reducing the potential burden of student loans and extensive family saving to pay for it. However, it should be noted that international students in Canada do not benefit from this.
| University (city, state) | Cost per year |
|---|---|
| Ryerson University (Toronto, Ontario, CA) | $6,213 |
| McGill University (Montreal, Quebec, CA) | $4,855-$6,441 |
| University of Ottawa (Ottawa, Ontario, CA) | $6,376 (undergraduate arts degree) |
| University of Virginia (Charlottesville, Virginia, US) | $15,714 (in Virginia), $45,058 (non-Virginia) |
| University of Pennsylvania* (Philadelphia, PA, US) | $51,464 |
| Princeton University* | $45,320 |
* Indicates private school (i.e., no funding assistance from the state). Costs are for domestic students (international student costs not shown, but are considerably more expensive; for example, for McGill University these are $19,000-$44,000 annually).
Utilities
Canada has basically nationalized its utilities, leading to slightly lower costs than in the United States, even though electricity itself is more expensive than in the United States, as is natural gas. However, by and large the difference in cost between the two countries is negligible.
Some costs depend on where you live or the lifestyle choices you make
Tax structure
In general, Canada has somewhat higher taxes than the United States. However, this isn’t solely due to the overall income tax, which actually has price brackets similar to that of the United States.
Canada has something called a harmonized sales tax that is considerably higher than any sales tax one might expect to see in the United States.
The harmonized sales tax is a type of consumption tax that combines the federal goods and services tax and the provincial sales tax. The harmonized sales tax in Ontario (the most-populated province in Canada) is 13%. By point of comparison, the combined sales tax for some of the most expensive cities in the United States is:
- 9.6% in Seattle
- 9% in Los Angeles
- 8.88% in New York
- 8.75% in San Francisco
Cities versus suburbs/rural areas
The biggest differences in cost between cities, suburbs, and more rural areas are in housing costs. Toronto, Vancouver, Calgary (Alberta), Montreal, and Halifax (Nova Scotia) are expensive, but cities such as New York and San Francisco (with median rents of $3,000 to $4,000 USD for one bedroom apartments in their downtown areas) are considerably more expensive than their Canadian counterparts, both with respect to rent and purchasing property.
One should also note that, in spite of recent rate hikes, the interest rates Canada charges on mortgages (25-year amortization period vs the typical 30-year in the United States) are slightly lower than in the US, though they are clearly comparable.
A vacation could help you make up your mind
Reading the abstract numbers is one thing. But going to different neighborhoods in a place you are thinking of relocating to is vital.
Plan a week or two of travel to more than one destination in Canada before you apply for permanent residency. You may see that not only do you really love (or not love) Canada more than you thought you would, you might be surprised by the everyday cost of living.
Summary
Canada is cheaper than the US in some aspects, but not others. You’ll be paying less for health insurance and rent, but what you’ll pay in utilities, gas, and consumer goods will increase. You’ll have to decide what you’re willing to pay more for and what you aren’t. And that’s if you can manage to get the visas required to work and live in Canada.
