Generation squeeze (Z) - Discussion


·         After devoting more years to school, the typical young person must work fi ve years more to save a down payment on an average home, because of the dramatic rise in housing prices across the country.

·         Even at historically low interest rates, they have to labour a month more each year to pay the annual mortgage than did the same age person in 1976-1980.

·         High home prices further weigh down today’s younger cohorts with particularly heavy debt loads that make them vulnerable to even modest increases in interest rates or modest decreases in housing prices.

·         The same housing prices that squeeze younger generations for time and money are powering wealth accumulation for those aged 55 and older.

·         The net wealth in owner-occupied housing for the typical household in this demographic is between $165,000 and $185,000 higher than it was for the same age group in 1977.

·         This additional wealth was accrued while taking on relatively little extra debt. Added wealth for the demographic age 55 and older comes on top of improvements to median total household income that are $14,000 to $17,000 higher than in 1976-1980, after adjusting for inflation.

·         These well out pace annual household income increases for the younger cohorts, even though the latter rely on larger increases in female labour force participation to generate household income.

·         Canadian governments have prioritized adapting to the health and retirement income needs of the aging population by adding $58 billion in annual spending compared to 1976 when measured as share of GDP.

·         There has been no corresponding increase in government revenue to pay for the additional spending outside of the Canada and Quebec Public Pension plans.

By contrast, governments have not shown a similar intent to adapt policy for younger generations. Combined spending on parental time, household income and community services like childcare and medical care has remained flat over the same period, while education spending has dropped.

What has increased markedly is the government debt/GDP level that young people inherit today compared to the same age group in 1976, along with risks associated with climate change.

The seeming imbalance in policy adaptation for older and younger Canadians is a signify cant issue for intergenerational fairness.

At the very least, age analyses of what is happening to the middle of the income and wealth distribution in Canada give serious reason to resist reallocating from young to old to pay for the aging population.

There is also reason to think twice about deficit financing to cover these expenses, because older cohorts already leave larger fiscal and environmental debts than they inherited.

These observations are particularly relevant to health care in Canada. While annual spending on medical care and the Canada/Quebec Pension plans have both increased by tens of billions of dollars, governments followed different strategies to finance these investments.

To the extent this is the case, younger generations may wonder whether their parents’ or grandparents’ generations are paying the full share of the medical care they will consume.

It is to suggest, however, that there is no obvious reason to believe that challenges facing older cohorts today are intrinsically more deserving of government attention than are the pressures facing younger generations who are squeezed by lower incomes, higher costs, less time and a deteriorating environment.

Generation squeeze (Z)

1.      Generation squeeze (Z)

2.      Generation squeeze (Z) - Individual income

3.      Generation squeeze (Z) – Age Analysis of household earnings

4.      Generation squeeze (Z) – Cost of living : Housing

5.      Generation squeeze (Z) - Revenue and Spending, by Age

6.      Generation squeeze (Z) - Discussion