Growing generational divisions are a worrying millennial shift

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Generalizations about millennials are convenient narratives, even if the scripts keep changing. Not long ago, the common grumbling refrain was about young adults living en masse in their parents' basements, as if tossed down there until they got their acts together. The more recent line is that necessity forces twenty- and thirtysomethings to remain home while they pay down student debt and wait out a meagre job market. Safely ensconced, smart millennials, as Bank of Canada Governor Stephen Poloz infamously advised last year, could work for free to pad their resumes for an economy in which university degrees do not guarantee careers. And don't worry: There's always family to erase student debt, cover cellphone bills and produce mortgage downpayments in a market pricing more young people out of home ownership.

Or so the stories go. But generations, of course, do not travel through life in uniform packs. The more realistic narrative about millennials tells the story of how they are splintered by circumstance and (mis)fortune along different paths that lead to a future of unequal economic and professional opportunities.

And that, experts say, has become a worrying trend in Canada. There's a widening gulf between millennials who, thanks in large part to family support, leap ahead in the job market and those who can't count on any assistance and lag behind. Economists say that those who stumble when they're young have a steep scramble to catch up, decreasing the social mobility that keeps economies and countries healthy. When class lines calcify, experts contend, society suffers.

The notion of a family-based safety net may be a reassuring storyline for a nation worried about how this generation will ever pay its own bills. And surveys show that parents have indeed been doling it out, potentially cutting into their retirement savings to do so: In a 2014 survey by Yconic, a Canadian company that conducts large-scale research panels with millennials, 43 per cent of respondents between the ages of 30 and 33 said they were still relying on financial help from family.

Poloz's advice was, to put it kindly, tone deaf to the reality of many millennials who are crunched by student debt and don't have the option of rent-free parental housing in cities where unpaid internships are available. (This week's federal budget did include some marginal relief for students seeking loans, by reducing the amount parents are expected to contribute and eliminating restrictions on what students can earn at jobs while studying.)

"Unless [you] get some stroke of luck, it doesn't matter how hard you work, how much you pound the pavement, how much you save, you are still stuck, and it's persistent," said Ria Rinne, 31, a board member for ACORN Canada, an organization that represents low-income families.

The generational income gap between millennials and boomers has been well documented in studies, including a February analysis by the Conference Board of Canada. Statistics looking within the Gen Y cohort are harder to come by, although there is evidence that young men have been falling behind young women as traditional manufacturing jobs dry up.

But data from Statistics Canada suggest that the gap between have and have-not millennials started getting worse a decade ago as salaries fell at a steeper rate for young people in the lowest income categories. Those jobs are more likely to be on contract and part-time, with fewer benefits. Costly though a degree may be, it still gives a huge advantage in a job market that has millennials with advanced degrees competing for lower-skilled jobs that once went to high-school graduates.

As a result, owning a home is increasingly a luxury: A recent Statistics Canada study found that the rate of home ownership among young adults in the top income group had doubled since 1971, while in the lower percentile the rate was halved. A home may be a less lucrative long-term investment than in the past, but it's still a forced savings plan: According to the Statistics Canada data, what really put wealthier thirtysomethings ahead in net worth was housing equity.

The "dynamics of home ownership will become a growing driver of inequality within generations," suggests Paul Kershaw, a UBC family policy researcher and the founder of Generation Squeeze, a group that highlights generational inequality. Kershaw points out it's not just about those who get help with a mortgage, but those who stand to inherit substantial wealth from their parents.

For millennials who won't benefit from such a windfall, watching their luckier peers pad résumés with unpaid internships and hop into the housing market early is frustrating. And they worry that they may never catch up.

"It's the luck of the draw," says Magida El Timani, 22, who will graduate this year with a degree in marketing and public relations. She lives at home with her mother and brother in Scarborough, Ont.; until recently she worked three part-time jobs to contribute to the rent and groceries. She sees the fortune among her friends, leaving school, unlike her, with no debt weighing them down.

Her circumstances also made a difference with the unpaid internships she could take as part of her course requirements – she turned down a full-time position with the Pan Am Games because she wouldn't have been able to work at a salaried job as well. "A lot of my generation, kids are just relying on their parents," she says. "They will have better connections and less debt to worry about, so they can do things they want to do. There are a million advantages."

Rinne's luck was turning a three-week temp job into a full-time position; she now works for an Ottawa technology firm. But even with her salary, she can't imagine buying a house. Her parents, she says, "couldn't help me out unless they were going to suffer through their retirement years" – and she isn't willing to ask that of them.

Despite debt, and even lingering in low-paying jobs, millennials, as a group, express optimism on surveys, sharing a belief that hard work and ability will eventually pay off. It may be that the inheritance that boomers leave behind will be far less than expected, drained by longer life and medical bills.

Canadians have long benefited from much higher social mobility than countries such as the United States. To keep that, however, we need to explore how to encourage employers to offer young people more secure positions, minimize the burden of student debt and reduce financial pressures on young families.

Generational divide

The average twentysomething in Canada would have to save for five years longer to manage a downpayment when compared with a counterpart in the 1970s, according to a new study comparing housing costs and current wages.

The saver would also have to work one extra month a year to cover the mortgage.

Based on the average housing prices, and assuming (generously) that young people could put 15 per cent of their income toward savings, the study found that a 25- to 34-year-old earning a median full-time salary today would need 10 years come, up with a 20-per-cent down payment. In the late 1970s, says Paul Kershaw, the University of British Columbia researcher who wrote the study, the equivalent goal would have taken half the time.

Even with more education and mortgage rates at historical lows, today's millennials are caught, Kershaw says, between a difficult job market and soaring housing costs. That sets many young adults on a much slower course to building wealth than their parents before them and leaving more of them unlikely to catch up.

"You can't get the time back," he said.

Here's how Kershaw's analysis sets millennials – particularly young men – at a financial disadvantage compared with those starting out in the late 1970s.

Salaries haven't kept pace

According to the study, the typical Canadian between the ages of 25 and 34 earns $4,200 less today at a full-time job than in the late 1970s (in equivalent dollars). This is mostly a male story. Women earn substantially more than their female predecessors (if still less overall than men); men under 35 earn 10 per cent less on average. Women between the ages of 25 and 34 increased their work force participation from 54 per cent in 1976 to 83 per cent in 2013. But according to Kershaw's work, that's only led to a nine-per-cent increase (or $5,900) in total income for a young household with two or more adults.

Student debt is higher

In constant dollars, the average four-year loan increased from $15,850 in 1976 to $22,616 in 2011.

Housing costs have made one generation wealthy and squeezed young people out

In 1976, the average cost of a house in Canada, adjusted to 2013 dollars, was $202,794. In 2013, it was $382,513 – and significantly more in cities such as Vancouver. For older generations, that's been a windfall – for Canadians between the ages of 55 and 64, the net wealth in housing is $165,000 more than their peers four decades earlier. Meanwhile, home ownership among Canadians under age 44 has fallen in the past four decades.

There are several ways to slice those numbers. Kershaw's data shows a growing divide between the wealth of older Canadians and the struggles of millennials to find equal footing – making the argument, he says, for more support in areas such as affordable child care and student-debt reduction.