Households with a major millennial wage earner are at greater risk of negative economic wellbeing. Meanwhile, child poverty is a growing concern
It would be hard to find anyone in Canada that has not seen at least some economic fallout of the pandemic. But for some, the past year has created ongoing challenges.
Two new reports this week highlight the outsized impact felt by younger generations.
Statistics Canada says that households with a major income earner from the millennial generation are at greater risk of negative economic wellbeing. This ties in with recent surveys showing the higher rate of concern among younger Canadians.
There are five main reasons for this:
- Greater reliance on wages and salaries as a source of income
- higher costs of entry to housing
- larger and increasing debt relative to income
- work in industries more impacted by the pandemic
- less equity in financial and real estate assets to draw on
In a new study called ‘Inter-generational comparisons of household economic well-being, the agency looked at historic trends of economic wellbeing from 1999 to 2019.
While millennials aged 31 at the end of last year had more disposable income than those from Gen-X at the same age ($80,200 vs. $68,700), this is mainly due to higher wages. This is risky because employment has suffered more overall in 2020 than financial markets and real estate.
Also, most of the increase in wages that millennials have seen relative to Gen-Xers (comparing both at age 31) is taken up by the cost of housing.
Debt-to-income ratio is higher for Gen-Xers (220% in 2019) but this has decreased as their disposable income growth outpaced mortgage debt. For millennials, the ratio has increased to 199% and although real estate values have compensated, disposable income growth has lagged debt increases (6% and 5% higher per year since 2010 respectively).
With many millennials working in the industries most impacted by the pandemic, the risk of reduced hours and unemployment is also greater for these younger workers.
Investing builds resilience
The Statistics Canada report highlights that, on average, younger Canadians will not have built up large investment portfolios.
With net worth around one third of that of Gen-X and boomers, millennials have fewer options to tap investments in equities, bonds, and real estate, to help them through these challenging times.
Additionally, tighter household budgets may mean longer delays in major financial life events such as homebuying or investing in their children’s education.
Child poverty risk
A separate report from UNICEF Canada warns that child poverty is expected to rise above pre-COVID levels for at least five years in high-income countries.
In Canada, many children and youth were struggling before the pandemic started with the country ranked 30th out of 38 EU and OECD countries in child and youth well-being pre-COVID. About one in five children in Canada were living in poverty.
"Children are not responsible for the pandemic or the economic downturn, and their childhoods should not pay for the recovery. We must ensure that child well-being and equality are built into the heart of Canada's COVID-19 recovery responses," said David Morley, president and CEO of UNICEF Canada.
The organization is calling on Ottawa to increase spending on programs to support children including a permanent rise in the Canada Child Benefit to ensure that no child is living in a household with below 50% of the median income.
“The amount of financial relief currently allocated to children and families does not match the severity of the risks children are facing; especially the most marginalized children and their families, where the worst off will be hardest hit,” added Morley.
