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For decades prior to the 1981-82 recession, the national unemployment rates of Canada and the United States had been nearly identical. Since then, a persistent 'unemployment rate gap' has emerged. Throughout most of the 1980s, Canada's unemployment rate has consistently been about 2 percentage points higher than in the United States. The gap developed in spite of very similar economic performances across the two countries: the growth rate of real per capita incomes has been virtually identical since 1976. However, now, well into the 90s, the gap has widened much more significantly. In the last five years, the United States average has actually fallen from 6.7% to 6.5%, with a current rate of 5.2%, while the Canadian rate has and still remains at 9.4%, with a current rate of 9.7%. This substantial difference in Canada's unemployment rate can be attributed mostly to the safety net which the government provides, including generous payments of unemployment insurance and other social services; but also to the high payroll taxes; and the under performing Canadian economy.
There is no single reason for the persistent gap in the unemployment rates of Canada and the U.S., but rather a combination of the above factors.
'No society can be flourishing and happy, of which the far greater part of the members are poor and miserable.' (Adam Smith) This is the theory behind the creation of social services such as unemployment insurance and welfare payments in many countries. The Canadian government provides a substantial 'social safety net' for its population. At first, this seems like a fair and proper thing to do, as it is in the best interests of society as a whole. However, when this generosity is taken advantage of by undeserving recipients, problems...