Canada’s ‘new generation gap’ is not the terrible inequality it seems
NationalPost.com – Full Comment
September 24, 2014. Andrew Coyne
How fares the battle against inequality? What news from the front?
Let’s see. The percentage of Canadians below the Low Income Cut Off is at an all-time low. … Median incomes are at an all-time high, higher than in almost any other country on earth. … Even the share of income going to the top 1%, that old standby, has been falling for the better part of a decade.
Well this won’t do at all. Do you mean to tell me things are actually getting … better? That we’re making progress? I mean, who wants to read about that? I can see the research grants drying up already. What about the gender gap? Surely there’s some bad news to report there?
Sorry. Women’s wages have risen much faster than men’s over the past three decades — though both have been rising, especially of late. Where women earned 25% less than men in 1981, the gap is only half as wide today.
But this is a calamity! You’re talking about a threat to an entire industry! There must be some way in which things are getting worse — some new front to keep the battle going. Anything!
Well, there is this new report from the Conference Board of Canada. It finds that Canadians in their peak earning years have significantly higher incomes than those just starting out: average disposable incomes for those in their early 50s are fully 64% higher than for 25- to 29-year-olds.
Sensational! We can call it “the new generation gap” — er, hang on a minute. Isn’t that almost always the case? Don’t older people usually earn more than younger people? You acquire more experience as you go on, you pick up a promotion or two, and there you are. Isn’t that how the system is supposed to work?
Yes, but the gap has widened. A generation ago, it was only 47%. These mid-lifers are making out like bandits — did I mention median household net worth is at an all time high? — while Generation Z or whatever it is we’re up to now (when exactly does a generation start or end, anyway? who says?) struggles to get by. The Conference Board even wonders whether “today’s young Canadians [might] be the first generation in our country’s history to find themselves worse off than their parents.”
Yes, yes, that’s wonderful — I mean, terrible. But, erm, those 50-year-olds, the ones who are taking home those record wages and all, weren’t we saying back in the day that they’d be the first generation to be worse off than their parents? (“For the first time in many decades,” the Globe and Mail reported in 1991, “possibly since the birth of modern Canada, younger generations have lost the hope of doing better than their parents did.”) In fact, weren’t we claiming they were worse off until about five minutes ago?
But real wages for those in their 20s haven’t budged in 30 years!
I am right with you there. It’s deplorable. Only … it’s not the same people, is it? I mean, if my math is correct a 25-year-old back in 1981 is a 58-year-old today. People, you know, age. And as they do, their incomes rise. Indeed, it seems the earnings curve is steeper now than it was then: The relative returns to experience — the compensation for growing older, if you like — have increased. That’s a good thing, isn’t it?
But what about in the years ahead? Sure, yesterday’s poor young people turned out to be today’s rich old people, but maybe they just got lucky: maybe we’ll find today’s poor young people are still tomorrow’s poor old people. Maybe the trend that has always held in the past — people get richer as they get older — won’t hold in the future. Maybe we’re careening toward a dystopian future of permanent inter-generational inequity!
OK, except … who will be the rich older people of tomorrow, if not the poor young people of today? Somebody has to be, if there’s to be a generational divide to worry about. And it won’t be today’s rich old people. They won’t be around. Indeed, as more and more of them hit retirement age — by 2031, almost a quarter of the population will be over the age of 65, up from 8% in 1971— we’re going to find labour is increasingly in short supply, which, as the Conference Board remarks, “should put upward pressure on wages in the years ahead.”
But —
No, let me finish. The generation that entered the labour force in the early 1980s faced a youth unemployment rate of nearly 20%. Not only that, but they were forced to pick up the mess left by their parents: massive deficits and debt, high inflation and a wholly unfunded pension plan to boot. Yet they somehow managed to come out richer than any previous generation, even after taxes. You’re telling me the generation coming down the pike can’t do the same, when deficits, inflation and unemployment are all lower?
But you haven’t considered the cost side of the equation! All those future retirees are going to cost a fortune! It costs $3,000 a year to provide health care to your average 55-year-old. That rises to $5,000 at 65, $10,000 at 75, and more than $20,000 at 85. All told, the C.D. Howe Institute calculates Canada’s net unfunded liability — future spending obligations, mostly for health care, in excess of future revenues — in the order of $2.8-trillion. That works out to an increase in the annual tax burden in the order of 7% of GDP, or as much as we collect now through the federal personal income tax system. And who’s going to pay that? Today’s 25-year-olds! It’s a recipe for serious inter-generational conflict.
You’ve got me there. You’re right: Things really do look bleak. What a relief!
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Tags: economy, ideology, standard of living, youth
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