Millenials wealthier than their age group has been in 40 years
Critics feel the report failed to show the larger picture. They feel only the wealthy have made more money but it's not the trend for everyone.
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If you believe the prevailing stereotypes about millennials, today’s young adults are celebrity-obsessed, selfie-taking, spoiled slackers. If you believe a recent federal government report, they’re also very rich.
According to a 2015 internal finance department study, the current generation of young Canadians is, on average, wealthier than people their age have been for at least 40 years.
Based on wealth surveys conducted between 1977 and 2012, the report examined wealth accumulation of Canadians in their “early working years,” or between the ages of 28 and 34. It determined that Canadians born in the first half of the 1980s had an average net worth of close to $93,000 per adult, while, adjusted for inflation, people born between the early 1940s to early 1970s were worth only $60,000 when they were the same age — 35 per cent less.
Finance department analysts attributed young Canadians’ robust financial health to “sustained growth in income in the 2000s.” They also wrote that the 2008 recession hadn’t had a drastic effect on the wealth or earning potential of the young middle class, and that home ownership — a major driver of wealth accumulation — has rebounded since a decade ago, in part because of low interest rates.
Yet word of millennials’ historic wealth comes as a surprise to people like Laura Nguyen. The 24-year-old Toronto resident said she doesn’t feel like she’s part of Canada’s richest generation, and she doesn’t anticipate she or any of her friends will be worth $93,000 any time soon.
“That’s insane! That’s insane. I don’t think I know anyone that makes that much money,” she said.
Nguyen held part-time retail jobs all through university in order to pay her expenses. But when she graduated Ryerson last year with an undergrad degree in cultural studies, she still had $30,000 in student loans. She now has a part-time contract job doing office work that pays $20,000 a year.
She said she makes enough to pay her rent of $730 a month for the apartment she shares with two roommates, and to make payments on her student loan. But because of the high cost of living in Toronto, “there’s absolutely no room to save.”
Asked what she thinks her financial situation will be in 10 years, Nguyen said she doesn’t know. “That’s the question mark for a lot of people, because of just how expensive things are in the city and just how hard it is to find good work, you can’t really plan for anything more than a few months (in advance).”
She doesn’t believe that previous generations had it tougher financially than she and her friends. “They weren’t living in Toronto in 2016,” she said.
Some economic experts criticized the government report for failing to show the bigger picture. Louis Philippe Rochon, an associate professor of economics at Laurentian University, argued that its conclusions were skewed by the fact that while the richest young people have leveraged their assets to get richer, wealth hasn’t increased for the majority.
“The data shows that they’re increasingly in debt, that wages have remained stagnant,” he said. He noted that jobs that used to provide young Canadians with a living wage, like those in the manufacturing sector, have been replaced by more precarious and lower-paying positions in the service industry.
Thomas Lemieux, school director at the Vancouver School of Economics at the University of British Columbia, didn’t dispute the government report’s findings. But he said it’s important to note that the data it relied on was based on the average wealth of households, which can include young couples.
“Households have been doing better over time in good part because female participation rates have been increasing . . . . Earnings of women relative to men have also been growing. Looking at the same numbers at the individual level (for men only, in particular) would show a less rosy picture,” he wrote in an email.
He also said that rising costs of housing, especially in cities like Vancouver and Toronto, means that millennials’ money doesn’t go as far as their parents’ did.
A 2015 study of young homeowners by the Canadian Centre for Policy Alternatives found that the average debt-to-income ratio of people in their 30s was the highest of any age group, and had almost doubled since 1999.
Some young Canadians do feel like they’re better off than their parents were at their age. Nadine Rashad is 29. She lives in a condo near Liberty Village that cost over $300,000 and works as a manager of client services at Mosaic, a Toronto event-promotion firm.
She said she’s kept herself in the black by choosing a career path early on that she knew could earn her a decent living. But she also acknowledges she had a leg up over previous generations, thanks to her parents’ hard work.
When her mom and dad immigrated to Canada from Egypt decades ago, they immediately plunged themselves into debt by going to university, she said. But by the time she was old enough for a post-secondary education herself, her parents had earned enough money to help her out, and she graduated six years ago without student loans. Her parents never had the option of having their own mother and father pay the cost of their schooling.
“I ended up coming out even,” she said.