VANCOUVER, BC, Mar 7, 2014/ Troy Media/ – The “middle-class squeeze.” Opposition political parties bandy about this phrase to score points against incumbent governments, while governing parties go out of their way to suggest their critics exaggerate.
The truth is, no political party is giving us the straight goods about what is happening to the middle-class. This fact was re-affirmed recently when Statistics Canada released new wealth data.
These data show the squeeze is primarily on younger generations, not all in the middle class. Consider, for example, the very middle class household age 65 and over. Its net worth is up $190,000 compared to 1999, carrying on a trend of impressive wealth accumulation for seniors that goes back to the mid-1970s. The typical retiree gained all these extra assets while taking on very little additional debt – just $9,500, or 5 per cent of their extra wealth.
Similarly, wealth for the typical 55 to 64 year-old household jumped by $179,000, eight times faster than their total debt grew.
The story for younger Canadians is strikingly different. Net worth rose $2,000 for the typical household under age 35 compared to the same age group in 1999. This minor increase leaves them well behind the wealth reported by the same aged household in 1977.
The news for the typical household aged 35 to 44 may sound better, because their net worth increased by $58,000 since 1999. But they gain this wealth only by taking on an extra $80,000 in debt.
Housing is a lynch pin in the generational divide. After adjusting for inflation, average housing values have nearly doubled. For those who bought homes decades ago, higher prices mean more wealth.
But what’s been good for a generations of seniors and those heading into retirement has been bad for their kids and grandchildren. Statistics Canada data show that the typical 25 to 34 year old working full-time must pay far higher housing prices with wages that are 11 per cent (or about $3 per hour) lower than the same aged person in 1976. This is pushing the dream of home ownership out of reach for many younger Canadians, or saddling them with very heavy debts compared to a generation ago, even though today’s down payment often purchases a smaller yard, a Condo, or requires a longer commute.
Young people’s wages are losing ground, despite the fact they are twice as likely to have post-secondary education compared to a generation ago. To cope, we have seen many young people adapt by devoting more time to the labour market, which is a major reason why there has been a dramatic shift toward dual earner households. But after adjusting for inflation, two young people still bring home little more than what one breadwinner often did in the mid-1970s. The result? Generations under age 45 are squeezed. Squeezed for time at home. Squeezed for money, because they pay higher tuition and housing prices with lower wages. And when they choose to have kids, they are squeezed for child care services, which remain in short supply, and often cost more than a post-secondary education.
Political parties are content to ignore Generation Squeeze in favour of misleading facts about the middle-class because the age analysis calls into question government budgets. Canadians are used to spending around $45,000 annually per retiree on things we care about for our older family members, like medical care and old age security. All the while, we show little interest in adapting the $12,000 we spend annually per person under age 45 to support young families, school, post-secondary, employment insurance, etc.
Alberta is the most recent government to showcase this pattern with its 2014 budget. Spending patterns determined by previous budgets show it intends to add more than $800 million in annual spending for the 11 per cent of the population aged 65-plus, compared to around $500 million for the 63 per cent of the population under age 45.
No doubt, there are many squeezed in Canada by the market and government budgets. But it’s not the middle-class in general. Political parties distract from the need to adapt for younger generations so long as they suggest otherwise.
Paul Kershaw is a University of BC Policy Professor in the School of Population Health, and Founder of the Generation Squeeze campaign (gensqueeze.ca).
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