Wages and salaries lower in Alberta than every U.S. state

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According to a recent study, the median employment earnings—wages, salaries and self-employment income—of workers were lower in Alberta than in every state in the United States in 2022 (the latest year of available data). While there’s certainly a combination of reasons for the province’s relatively low incomes, Alberta’s uncompetitive personal income tax rates don’t help.

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Let’s take a closer look at the numbers.

Albertan workers earn less compared to American workers, regardless of the state. Specifically, in Alberta, median employment earnings in 2022 (stated in Canadian dollars and adjusted for inflation) were $38,969, lagging behind every U.S. state including Mississippi ($42,430), Louisiana ($43,318) and Texas ($44,223). In fact, compared to Texas, a fellow oil-producing jurisdiction, median employment earnings were 11.9 per cent lower in Alberta.

Equally concerning is Alberta’s relative decline over time. In 2010, earnings in Alberta were 13th-highest in North America. However, Alberta was the only jurisdiction in Canada and the U.S. to experience a decline in earnings between 2010 and 2022. Consequently, while Alberta was still Canada’s richest province in 2022, it only ranked 51st out of 60 provinces and U.S. states for median employment earnings.

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High personal income tax rates are at least partly to blame.

As recently as 2014, Alberta had the lowest top combined (that is, provincial and federal) personal income tax (PIT) rate in North America. Paired with a low business income tax rate and no sales tax, Alberta had a powerful tax advantage that made the province a very attractive place to work and invest, which translated into relatively high incomes.

Back in 2015, however, the NDP government replaced Alberta’s single personal income tax rate of 10 per cent with a five-bracket system including a top marginal rate of 15 per cent. Now Alberta has the 10th-highest combined PIT rate in North America. According to a significant body of research, high and increasing tax rates discourage economic growth by reducing the reward from productive activities such as entrepreneurship, work and investment. And when deciding where to live and work, high-skilled workers including doctors, engineers and entrepreneurs consider (among other factors) personal income tax rates. Crucially, we’re less competitive than key U.S. energy jurisdictions such as Texas, Wyoming, Oklahoma, Colorado, Louisiana, North Dakota and Alaska, which compete with Alberta for talent and investment.

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Obviously, jurisdictions with lower tax rates have an advantage in attracting and retaining these high-skilled and productive people who fuel economic growth, which is closely connected to incomes and living standards. Finally, while the Smith government has promised to create a new 8 per cent tax bracket for personal income below $60,000, this tax change alone won’t restore Alberta’s tax competitiveness or meaningfully reduce taxes on professionals, entrepreneurs and businessowners.

The sharp decline in Alberta’s employment earnings relative to other jurisdictions in North America should concern all Albertans. To fuel higher incomes and living standards, policymakers in Alberta should make economic growth a top priority. That means finally undoing the NDP tax hikes and reducing personal income taxes.

Tegan Hill and Alex Whalen are economists with the Fraser Institute.

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