Maybe Canada's millennial generation doesn't have it tougher than its parents did after all. But if that's the case, it may be more a fluke of generational timing than a broader economic trend. Many of their parents came of age in an unusually lousy time themselves.
A new study from Bank of Montreal senior economist Sal Guatieri, published Friday, compares the financial state of Canada's 25-to-34 age group today with the same age group a generation ago (specifically, 1984-88). He found that the current millennials group enjoys a lower unemployment rate, has a higher inflation-adjusted median income, and has almost double the net worth of the previous generation at the same age.
It flies in the face of the conventional post-recession narrative that young adults are faced with uniquely harsh economic obstacles that make it especially difficult for them to get their adult lives on track. But before you dismiss the current concerns as a bunch of social-media-juiced collective whining (full disclosure, I turned 25 in 1989), be aware that the period against which the study compares millennials just happens to have been one of the most brutal labour markets in history for young workers.
The average unemployment for those age 25 to 34 from 1984 through 1988 was 9.9 per cent. Even in the depths of the Great Recession, in 2009, unemployment in that age group only averaged 7.9 per cent. If you look at even younger adults (age 15-24), the unemployment rate in 1984 was 17.4 per cent, compared with 15.2 per cent in 2009.
The early 1980s were most definitely an unusual time – at least as unusual as today. Canada was emerging from an even deeper recession than it experienced in 2009, and central bankers were determined to break the back of runaway inflation with even higher interest rates. The rate on a five-year Government of Canada bond in the middle of 1984 was north of 13 per cent; today, it's 1.5 per cent. So while millennials (as Mr. Guatieri noted) do carry higher debt loads and face much higher home prices, that is to a considerable degree mitigated by the much lower interest rates on those debts.
Canada's economy gets a 'B' grade
The Conference Board of Canada has just issued economic report cards for Canada and its provinces, grading them on a range of performance indicators relative to a peer group of other developed countries. The economic and policy research group rates Canada a solid "B" – getting high marks for its employment and gross domestic product (GDP) growth, but scoring poorly on foreign direct investment (both attracting it to Canada and Canadian investing on foreign soil) and productivity growth.
The country's three most energy-rich provinces – Alberta, Saskatchewan and Newfoundland – rated "A-plus," largely driven by stellar GDP and employment growth. Nova Scotia and New Brunswick were both given "D" grades, with poor income, employment and outward investment performance. Over all, six of 10 provinces scored a "B" or better. (The United States, by the way, got an "A" grade.)
Problem: Too few new businesses
It wasn't that long ago that we heard Bank of Canada Governor Stephen Poloz lamenting the lack of creation of new businesses in Canada's economic recovery. Now we see that the United States may be suffering from the same disease – and it's looking chronic.
A new study from the Brookings Institution, a Washington, D.C., think tank, indicates that the rate of entry of new firms has been generally declining for three decades. Meanwhile, the exit rate for firms increased with the Great Recession. As a result, as of 2011 more firms were shutting down than were opening each year.
It's a problem because small business is generally seen as a vital source of entrepreneurship and risk-taking that is key to grassroots economic growth and job creation. "If [the downward trend] persists, it implies a continuation of slow growth for the indefinite future," the report said.
Problem: Too many small businesses
On the other hand, Mexico is discovering that small business is only an economic engine if those firms do, in fact, take risks and grow. If not, they can be an impediment.
The Economist magazine reports that Mexican business is suffering from a "Peter Pan syndrome" (never growing up) that is stifling the country's economic potential. It said 96 per cent of Mexican companies have 10 employees or fewer, considerably higher than other large Latin American economies. The problem is, small businesses have inherently lower productivity than larger ones, by simple economies of scale. As a result, Mexico's labour productivity rates are well below many of its peers.
To quote: Mexico's Slim on work ethic
"Work well done is not only a responsibility to yourselves and society; it is also an emotional need." – Carlos Slim, Mexican billionaire