The Conference Board of Canada has released a new study that, in the words of the Financial Post, “suggests that younger workers are making less money relative to their elders.” SUGGESTS? Let’s get serious. Of course they’re making less money than older workers. When has it ever been different?
“Age, not gender, is the new income divide in Canada,” the headline shouts. New? Like the Baby Boomers, when we were in our 20s and 30s, were making more money than the 50-somethings?
But wait – the gap is much worse today. According to the study, Canadians 50 and up have 64% more disposable income than 25-29 year olds, whereas it was 47% in the mid-1980s.
Why is that bad?
Because it is somehow unfair. The story quotes Andrew Langille, a Toronto-based labour lawyer and youth employment advocate: “Increasingly it’s clear that Canada doesn’t have a problem with a declining middle-class; rather, it’s a problem of income and wealth inequality for younger generations.” What’s more, he says, “unless politicians get serious about intergenerational equity, the issue has the potential to cause damaging social and economic consequences.”
What are those consequences? One was spelled out by David Stewart-Patterson, a vice-president of the Conference Board and one of the co-authors of the study: if the younger generations don’t start earning more, their inadequate wealth won’t throw off enough tax dollars to pay for health care for the retiring Boomers.
Okay, let’s stop and catch our breaths and try to make some sense out of this mish-mash.
In absolute dollar terms, there is no question we have a problem. I have chronicled it in Beyond Age Rage, and blogged it about frequently here: the Millennials are not getting untracked. They are struggling to find good jobs and earn good incomes. Everyone knows this; even the advertising industry is starting to realize that the much-touted “youth market” is no longer performing the way it did in previous generations.
And yes, if the younger generations don’t start earning more — and generating more tax revenues — many government programs, and not just health care for the Boomers, will be at risk. The Millennial malaise is real — and serious.
But it doesn’t that “intergenerational equity” is equally real, or serious, as an issue.
For openers, the concept is inherently silly: why should someone who has been working for five or ten years necessarily earn more than — or even close to — what someone can earn who’s been working for 20 or 30 years? It has nothing to do with equity, and everything to do with experience and level of responsibility. The Millennials of today may be delayed by several years, but they are on the same track as the much-hated Boomers were: they will gradually earn more and rise in the ranks, and it’s an absolute certainty that when they are the same age as today’s Boomers, they will be pulling in significantly more money than today’s newborns.
And besides, if you’re really worried about the under-earnings of the Millennials, what can the solution possibly have to do with the higher-earning Boomers? Do you decree that they must all take a pay cut and transfer the funds to the younger generations?
The Boomers are already paying up, after all. 6 out 10 provide financial assistance to adult children still living at home.
No, the answer lies elsewhere — and again, we have documented all of this consistently and faithfully on this blog. The education system drastically needs reform, so that it doesn’t churn out so many unqualified people. The good news is that this is already starting to happen, as Generation Z, coming in behind the Millennials and learning from the horror show of their immediate elders, shows more interest in job-related courses in the colleges and less interest in the humanities, which offer the double disadvantage of being (a) expensive and (b) disconnected from the job market.
In one sense, we can look at all of this as the inevitable result of the “revolution in aging.” If 70 is the new 50, why shouldn’t 30 be the new 20? What looks like “falling behind” will certainly level out. It will just take longer than we’re used to. But then again, the Millennials will have much longer at the other end, too. (Unless they take Ezekiel Rmanuel’s advice, outlined in my other post today).