Tuesday 15 October 2013

Why Should YOU Care About Gen Y's Underemployment and (lack of) Income?

My last post was an Open Letter to George Stroumboulopoulos, which was re-blogged on Riotwire.com and I have to say, I was very surprised by the response. I've never had anything go viral(ish) before, and was absolutely thrilled that the issue resonated with so many readers!

...But, there were internet comments... and although everyone knows not to read comments on the internet, I couldn't help myself. Now, while the majority of the commenters were either in agreement, or were shocked at the statistics and were now in agreement...there is always the voice of non-reason echoing through the tubes of the internet.

There were a substantial number of readers who brought up the following concept:

"Why shouldn't young people work for free?" 

...And I thought those people deserved an answer. Our first step is to ignore the fact that unpaid labour is illegal, now, let's answer the question by looking at the larger picture... THE ECONOMY (dun dun dunnnnn!):
Make it rain, eh!

Generation Y, the Millennials, or dirty hipsters are basically me & my ilk...aka, those born between 1978 and 1995. We are the children of the Baby Boomers, and, compared to our parents at our age, we are not making money. Why is that? Well, according to (many) people on the internet, it's because we are lazy, or entitled, or narcissistic, or maybe all of those charming qualities together...

I would posit, that we aren't making money because we are entering the workforce during a recession, a time when Canada has the 8th lowest corporate tax rate (and they aren't giving anything back), when there is an unregulated market for unpaid labour, and more importantly, at a time where the money is being/has been shifted to a smaller section of the population (remember that whole 1% thing?)...

"So what?" - cry those born between 1946 and 1964

...But, the reality is, those who are dead set on deriding our generation don't care about the why... and they won't care until it affects them.

...and it definitely will.

Let's begin:

Generation Y is not buying cars. 
In 2011, boomers were 15 times more likely to purchase new vehicles than young millennials (ages 18 to 24), and even consumers ages 75 and up have been buying cars at higher rates than groups ages 18 to 24 and 25 to 34.
It's true, and it's bad news...I'll get back to it. In the meantime, let's do a little case study:

I was born in 1985, and am currently 28 years old. I am a Millennial. My father, a Baby Boomer, was born in 1954, and was 28 in 1982.

In 1982, Canada was in recession, in 2013, Canada is recovering from a recession. In 1982, youth unemployment was at 18.1%, in 2013 youth unemployment is 17.1%.

But this is pretty much where the similarities stop.

At 28, my dad was recently married, had been renting for four years, and was looking to buy his first house. I am 28, recently married, and entering my eighth year of renting in downtown Toronto with no chance of affording a house in the foreseeable future. In 2007, my final year of undergraduate university tuition $4700, compared to my dad's $400/yr in 1976.

"Aha! What about inflation!" You cry.

Well, let's look into that... Using this Bank of Canada calculator, we can compare 1976 dollars to 2013 dollars...

This means that my tuition should have been $1573.16...over $3000 less than what I paid...per year.


And it gets worse...In 1976, minimum wage was $2.76/hr, so my dad could earn a year of university tuition "flipping burgers" after only 144.9 hours, or a little under 4 weeks, full time; the classic "summer job". With today's tuition, I would have to work 458.5hrs (at Ontario's current $10.25/hr minimum wage)...working out to approximately 11 weeks, full time.

Well, maybe minimum wage hasn't kept up?

Actually, it's pretty comparable from 1976 to 2013, ($2.76/hr to $10.25/hr) ending up only $0.60/hr lower than what inflation would predict.

Now, all those lovely bits of data, what do they mean to YOU?

They mean that Gen Y is absolutely paying more for education today than the Boomers or Gen X did, and the opportunity to pay those faster-than-inflation-tuition-increases does not exist anymore...there is no "flipping burgers for the summer" anymore, and so, we take on debt.

Gen Y is carrying the highest student debt in Canadian history, averaged at $24,579 by Simon Fraser University.

That means Canada's youngest workers are starting out behind where their parents did, regardless of how many summer jobs they worked in university.

...But back to cars. Gen Y isn't buying cars, and that is bad. Cars mean manufacturing jobs in Canada, they mean independent businesses in the form of dealers, financing, auto repair, etc. Cars mean more money in our economy...So why isn't Gen Y buying them?
  • Maybe they are too expensive?
Well, in 1982, the suggested retail price for a Honda Civic was $4,799.00. So the current price should be around $10,625.12.

...But the price in 2013 is $15,440, over $4500 higher, even adjusted for inflation... and with the cost of gas rising from roughly $0.33/L in 1982 to $1.24 in 2012, not mention the average insurance cost in the GTA is $1500/yr, how can a population with high unemployment and low wages hope to invest in a vehicle?

Well, let's make a monthly budget for a young Toronto couple on minimum wage and see how likely it is they can put money into the economy (using Toronto's costs of living, the CAAStats Canada, and some previously mentioned sources):
  • Income A: $1624
  • Income B: $1624
    • Income = $3248.00 
  • Rent (outside city centre): $1000.00
  • Cell phone (x2 people): $100.00
  • Internet: $50.00
  • Car payment: $170
  • Car insurance: $125.00
  • Gas: $128
  • Groceries: $300
  • Debt repayment (based on 2 people with average student debt to OSAP): $548
    • Basic expenses = $2421.00

That leaves our hypothetical couple with only $827 per month for entertainment, savings, medical expenses & medication, clothing, emergency funds, and any other "non essential" expenses.

No wonder we aren't buying cars...

That budget leaves no room for things like dentistry, eye care, or even credit card debt... Which brings me to my next point, according to two TD surveys (1, 2), Millennials are:

  • Not paying their credit card balance in full at the end of the month (51%)
  • Making only the minimum monthly payment (40%)
  • Missing a monthly payment (23%)
  • Using their credit card to supplement their income (18%)
  • Routinely maxing out one credit card and needing another as backup (14%)
  • 34% admit they find it an almost impossible struggle to save
  • Finding their salaries too low to cover living expenses (39% of Gen Y versus 30% of Boomers)
  • Paying debts from credit cards, loans and lines of credit (38% of Gen Y versus 26% of Boomers)

What does this mean for the Baby Boomers? (and here's where you guys should really start to care about the underemployment of your children...) Let me ask you a question:

How much of your equity is tied into property you own? How many of you are planning on selling property to fund your retirements?

...we won't be buying your houses.

That isn't a threat, that's a reality. The average cost of a house in the GTA in 1982 was $95,496. As of 2012 that had risen to $497,301...but in accordance with inflation, that should be closer to $209,198... That's almost $300k of magical money. No bank is going to give someone earning $1624/month a mortgage on a house that costs nearly $500k.

"Maybe it's just because they have low-paying jobs?"

Even those of us with "grown up" jobs and not conned into unpaid internships are feeling the hit of corporate greed through the abuse of the "independent contractor" label. The CRA defines an independent contractor as someone who (among other qualifiers) sets their own hours, uses their own equipment, is able to accept or refuse work from their client, etc. Now, let me tell you about my last job, a "real" job in the television industry...
  • Worked 40 hrs/week
  • Worked 5 days a week for 4 years
  • At their office
  • On their hours
  • With their equipment
  • Was (definitely) not allowed to refuse tasks assigned to me
They labelled me, their only employee, as an independent contractor. This meant, despite working for 4 years, full time:
  • No holiday pay
  • No health benefits
  • Not eligible for EI
And most importantly:
  • Told by my bank that they would not give me a mortgage, despite my full-time/multi-year wage.
The worst part? They were right to do so. My employer decided to shut down and relocate the business, I was given 2 weeks notice I would be losing my job of four years, was not allowed to collect EI, and was not eligible for any kind of severance... If I had been paying a mortgage...well, you can guess the outcome.

Fig 1

Now, what does this mean for the Boomers? It means, that as they retire and look to downsize/relocate/cash-out on their home equity, Gen Y will not have the capital, nor the support of the banks to buy those houses at their current prices...

Effect? Market floods, prices drop. Generation X finds themselves with negative equity on their mortgages, good chance of foreclosure...

Basically, shitty all 'round. (see Fig 1)

One solution is for the government to begin a controlled rise in interest rates lowering housing prices, Generation X is still at risk for finding themselves over-extended, but with government involvement we potentially have the ability to create safety nets and tax incentives.

Another solution is the Boomers decide to will their properties to their children; Gen Y. We get a foothold in the world of home equity, and the prices don't plummet from a flooded marketplace... yeah right, try advocating for that solution when they already love the image of us as entitled and lazy...

Herp derp, entitlement!
Whatever the popular vision of Gen Y, the fact is, the Boomers are not going to get the money they want out of their properties. No one can afford them, and it has nothing to do with old ideas of lazy youth or "kids today".

“Our youth now love luxury. They have bad manners, contempt for authority; they show disrespect for their elders and love chatter in place of exercise; they no longer rise when elders enter the room; they contradict their parents, chatter before company; gobble up their food and tyrannize their teachers.”
― Socrates

The world of 2013 is massively different from the one my father grew up in, the old policies and ideas don't work anymore, and we need to find solutions. Economics are more complicated than "young people suck", and harder to solve than ranting "the Boomers stole my future"!

What we, as Canadians, and as human beings should care about, is 27% of our population is going to be, for the first time in our country's history, poorer than their parents...and to assume those economic realities won't resonate through both the older and younger generations is not only foolish, it's dangerous.


  1. There's a mistake with the car price - if it was $4800 in 1982, then at 1=3.93, that means the price today should be about $18800, much more than it costs today. But that's hardly surprising - it can't be that *everything* is more expensive than inflation would predict.. because... inflation... is... you know... how much more expensive things are (controlling for the fact that we buy different things). It's a bit naive to argue that things should not be more expensive than predicted by inflation. Some things rise more, some rise less, some even become cheaper (how much did you have to pay for a mobile phone in the 1980's?).

    This is not to contradict everything else you said, but the whole inflation vs actual prices of certain things is a bit problematic.

  2. Don't know where you got the 3.93 figure from... using the Bank of Canada inflation calculator (http://www.bankofcanada.ca/rates/related/inflation-calculator/) $1 in 1982 = $2.18 in 2013 dollars.

    Regardless, it's out-paced inflation significantly... :(

  3. I read another article about those "entitled generation" articles that pointed out two things: 1. These articles show up for every generation, and 2. These articles are based on the youth of that generation that the article-writers encounter, which is to say that they are based on... (wait for it) unpaid interns! IOW, they're generalizing from a small sample size of the very type of people who are likely to act entitled, rather than going out and meeting a wide sample size of that demographic. I don't think that Millenials are any more entitled than any other demographic generation; I do think there's more of a sense of betrayal. I'm the tail-end of Gen X and I know I was disheartened to graduate into a recession. It's worse now that the recessions are larger and deeper and the debt even crazier—the per-semester charge for my university is the same as a year when I attended, and that's less than twenty years ago!

    I have hope, though, because all bubbles pop in the end, and though deflationary events are awful, they do end.