The fact that income inequality in Canada today is significantly greater than it was 30 years ago is not in serious dispute. But there is much less agreement on the underlying causes.
It is important to look at trends in the “pre-distribution” of income by the market in the form of wages and salaries, and changes in the impact of government taxes and income transfer programs that redistribute market income from the more affluent to the less affluent.
When I first conceived of my year-long project on the working world for the Calgary Herald’s Michelle Lang Fellowship, I have to admit, most of my proposal was based on a hunch. Through straw polls, coffee banter with friends and colleagues, discussions with my own parents and, of course, my own experience in the job market, I was fairly certain I wasn’t the only one gazing at an uncertain economic future with some apprehension.
To back up my pitch, I assembled a smattering of news stories pointing out the dismal projections for younger workers, growing income inequality, boomers delaying retirement and the like.
But when it came to my thesis – namely that the working world is changing and we’re not feeling all that great about it – there was very little evidence out there to prove that I wasn’t just butting up against the walls of my own little bubble.
Turns out the folks at the Broadbent Institute, an Ottawa-based think tank, felt the same. In response to the same dinnertime conversation I was picking up on, they decided to commission a poll to determine just how widespread concern over job prospects and economic futures for younger workers is.
The results, published today, show anxiety over the changing face of work, and all the social challenges it implies, runs deep across the generations.
The poll surveyed 1,064 boomers aged 50-65 and 983 millennials aged 20-30 about their experiences in the work force and sheds some much-needed light on how Canadians are feeling about the economy. The figures were weighted to reflect census data on population age, gender, education and region.
So, what do the numbers say? Many boomers and millennials are anxious about the younger generation’s job prospects, homeownership potential and ability to fund social programs through taxes.
Interestingly, boomer parents seem to be more pessimistic about their children’s future than millennials are about their own prospects. Nearly half of boomers, 49 per cent, feel their kids are facing a poorer future than they had, while 34 per cent of millennials feel they are worse off than their parents.
But at the same time, millennials know they are facing a working life with fewer guarantees. More than half anticipated a career where contract work played a role, compared to 14 per cent of boomers who said they faced the same instability in their own careers. Meanwhile, only a third of millennials were confident they’d own their homes at retirement, compared to more than half of boomers, and one in five millennials say they don’t know anyone with an employer-funded pension.
Rick Smith, executive director of the Broadbent Institute, said he wasn’t surprised to find a high level of angst across age cohorts, but he didn’t anticipate seeing so much agreement between the generations on possible causes of economic instability. A significant majority of both generations expressed a high level of distrust for corporations, he noted, with both blaming irresponsible corporate behaviour for bringing on the 2008 financial crisis.
“Our starting point was very similar to yours: is this our imagination or not?” Smith said in an interview Monday.
“If you were to rank likely topics of dinner-time conversation in Canada these days, youth unemployment is high on that list. These numbers bear out that anecdotal experience.”
Smith said the results of the poll will be used to inform policy recommendations coming out of a summit the institute is holding later this month in Ottawa.
Here are some other highlights from the survey (which you can read here). I’m interested to know if you agree, send me an email or leave a comment below and let me know how you’re feeling about your work prospects.
Just over half, 52 per cent, of millennials expect contract work to make up a significant part of their working lives, either alone or in conjunction with permanent jobs. In contrast, 14 per cent of boomers said their work lives relied on contract work;
39 per cent of millennials anticipate a career comprised of permanent jobs, compared to 66 per cent of boomers who experienced permanent employment;
Millennials with university degrees were more likely to anticipate a career encompassing contract work than those with high school or college education;
70 per cent of millennials and 78 per cent of boomers cite irresponsible business behaviour as the cause of the 2008 recession;
60 per cent of millennials anticipate the gap between rich and poor to grow during their lifetime;
55 per cent of millennials and 59 per cent of boomers say declining enrolment in unions has made good jobs harder to find;
48 per cent of millennials and 60 per cent of boomers say reduced corporate tax rates have not resulted in more investment in creating jobs in Canada.
The poll does not provide a margin of error because it is not a random, probability-based sample.
Canadians in the millennial and boomer generations disagree about much, but hold one thing in common: they’re deeply anxious about the economic future of young Canadians.
That was the key finding of a survey of Canadians between 20 and 30–the “millennial” generation–who are in the work force, and boomers, or those aged between 50 and 65, by the left-leaning Broadbent Institute.
“It puts [some numbers], for the first time, to the fact there’s deep angst, among both millennials and their parents, about the reduced economic opportunities available to young people, today,”Rick Smith, executive direction of the institute, told Canada Real Time.
“The scale of the angst certainly took us by surprise,” he said. “The strength of feeling here is really quite astonishing.”
The online survey, conducted last month, found that 41% of the millennials expect their working lives to comprise a mix of contract work and permanent jobs, with 39% anticipating a succession of permanent jobs.
That contrasts markedly with the experience of the boomers, 66% of whom reported working lives consisting of a string of permanent jobs and only 10% of whom experienced the combination of contracts and permanent positions expected by the millennials.
A near majority of 49% of the boomers said things are worse for their children today, while 40% believe their kids’ economic opportunities are better than theirs were when they were the same age. More millennials—56%–said they expected their opportunities to be the same as or worse than their parents’.
On the housing front, more than half of boomers are certain they’ll own their home at retirement, but only a third of millennials are as confident.
Mr. Smith said the relative pessimism about the prospects of working Canadians, both among millennials and boomers, reflects their “lived experiences” in the last few years.
The survey found that 92% of boomers know someone with a workplace pension, with 51% of them knowing some or many. That compares with only 30% of millennials who know at least some people who have a workplace pension, and 20% knowing no one with such a benefit.
A big majority of both millennials and boomers agreed free-trade agreements have made Canadian businesses more profitable by making it cheaper to make things in other countries. But a majority of these same respondents also said trade agreements have cost Canadians jobs and opportunities.
Overall, the survey pointed to concern about the prospects of younger Canadians now, but also into the future, Mr. Smith said.
“This concern is not only for economic prospects of youth currently, it’s also a realization of economic prospects for youth in the future are likely to be dimmed,” he said.
“People don’t view this as a blip. They’re not anticipating that things are going to bounce back, any time soon,” Mr. Smith said.
The perception of a growing generational divide seems to be taking hold among millennials and their baby boomer parents, as both groups now tend to believe that the economic future looks bleak for the younger generation, a new survey shows.
The survey, which was commissioned by the Broadbent Institute, found that millennials fear their working lives will be governed by precarious, short-term arrangements and that the gulf between rich and poor will grow. Their parents, meanwhile, worry that the younger generation will not produce enough income to support the social programs they’re counting on in old age.
“Parents across this country are fretting about the economic prospects of their kids. They’re worried their kids aren’t going to have the same economic opportunities as they did,” said Rick Smith, executive director of the Broadbent Institute, a left-wing think tank. “What really leaps out at me here is there’s a very high degree of angst.”
A feeling of anxiety about the economic prospects of a younger generation is not uncommon historically. What’s not clear is whether today’s fears are justified. Youth unemployment is at 13.6 per cent, unchanged over the last year and down from the peak of a recession that continues to send ripples through the global economy. This is also a period of significant technological change and it’s unclear what impact that will have over the long term. What’s clear is that a sense of pessimism, justified or not, is gaining momentum.
Baby boomers are more likely to say that their children face worse economic times than they did as young people. Just less than 50 per cent of the boomers surveyed said their children’s economic opportunities are worse than their own at that age, compared with 40 per cent that said they were better and 12 per cent that said they were the same, according to the online survey by Abacus. More than 55 per cent of boomers said they worried the younger generation won’t support social programs through taxes.
Millennials are expecting a different kind of working world from the one their parents entered. They expect to work a mixture of permanent and temporary jobs, compared with the more stable arrangements their parents had. They say lower rates of unionization will make good jobs harder to find and are more likely to say they don’t know anyone with an employer-provided pension, the survey said. Sixty per cent say the gap between rich and poor will increase over their lifetime, and only 16 per cent believe it will shrink.
Frances Woolley, an economist at Carleton University, said there’s no question today’s labour market is more unequal. This is a “winner take all” society, as some call it, where the greatest income gains go to those at the top of the spectrum and some, particularly those without a university education, will face a difficult job market. But one thing to consider is that the baby boomers had the good fortune to be born at the right time, an era of peace and prosperity, Prof. Woolley said.
“The older generation has had such a blessed life,” Prof. Woolley said. “Some generations are born in better times than others. That’s just the way it is.”
Matthew Cuthbert is a 27-year-old graduate of the University of Toronto. He has experienced the millennial’s anxiety. He has nearly $50,000 in student and credit-card debt and works at a community centre in customer service, earning $31,000 a year. He and many of his friends are the precariat, he said, a new class of precarious worker. It’s not what he was expecting, but after seven months unemployed, he’s grateful for the work.
“It’s frustrating to watch this break down. When I started school there was so much more optimism around the economy,” he said. “It’s far from the ideal situation that any of us anticipated.“
The Conservative Party’s 2011 election platform titled “Stephen Harper’s Low-Tax Plan” promised a bountiful menu of tax goodies. The government has delivered appetizers such as the Children’s Art Tax Credit and the Family Caregiver Tax Credit as well as an amuse-bouche in the form of a Search and Rescue Volunteers Tax Credit.
Posted by Rick Smith and Ken Neumann · March 04, 2014 7:00 PM
It’s no secret that Ontario needs to create jobs. Our unemployment rate is too high. But it’s very strange to suggest that job creation can be accomplished by killing jobs that people actually have today. And yet, that is exactly what Ontario PC leader Tim Hudak proposed in his jobs plan, which he tabled in the legislature last week.
In addition to some drastic cuts to public sector jobs, Hudak’s pledge to end subsidies to wind and solar power would have the effect of killing thousands of jobs in Ontario’s newest manufacturing sector — green energy.
Posted by NationBuilder Support · February 27, 2014 6:01 AM
Three economists on how the manufacturing sector can bounce back This article originally appeared in the Toronto Star.
Know your advantages
Manufacturing absolutely has a future in Canada, and in particular southwestern Ontario. The key to understanding the future of the industry is in knowing where our competitive advantages lie.
Low labour costs will never be a comparative advantage for Canadian manufacturing, but given those “costs” are largely wages, this should not be seen as a problem. Less obvious is how proximity to markets is no longer a comparative advantage for traditional manufacturing regions. The world’s economic centre of gravity is heading toward Asia, which places goods from southwestern Ontario at a geographic disadvantage compared to most other parts of North America. Even markets within North America are changing. In 1900, neighbouring cities such as Cleveland (7th), Buffalo (8th) and Detroit (13th) were among the biggest cities in the U.S. Now those cities are 48th, 73rd and 18th in population.
This disadvantage may pose less of a problem than it to appears at first glance. With supply chains becoming increasingly global, a smartphone assembled in China may have an operating system designed in Kitchener-Waterloo and Brantford, applications programmed in London and Windsor and use precision-crafted parts from St. Thomas and Sarnia.
The region maintains a number of advantages, including a financial sector that is familiar with the industry. We have one of the most well-educated workforces in the world, which gives us an advantage when it comes to precision manufacturing and products where high-quality control is important, such as food. Although our labour costs are high, there are significant cost advantages in other areas, such as access to land and clean water. Manufacturers that use these advantages are well-positioned for future growth.
— Mike Moffatt, assistant professor, Ivey Business School
Three ways to act now
Ontario manufacturing has had a rough ride over the last decade. A number of factors have been at play, including the rise of the dollar, the deep U.S. recession, and the growth of competition from emerging economies. However, we should not conclude that Ontario manufacturing is down for the count. Far from it.
In some research looking at leading Canadian firms done at Ivey’s Lawrence Centre, we find reasons for optimism. Firms such as Linamar, Magna and Shawcor are competing and winning at home and in global markets. Focusing on high value-added manufacturing, they are making the most of Canada’s skilled workforce and capacity for innovation to win new business around the globe.
Business and public-sector leaders convened with Ivey researchers in November to translate our research findings into action. They agreed on three recommendations for immediate action.
Leaders agreed that the primary responsibility for manufacturing success lies with the private sector. Therefore they aimed their first two recommendations at firms. Their first was to find a mentor: Firms seeking to expand into international markets need the counsel and advice of seasoned executives.
Their second recommendation was to form partnerships with local educational institutions. To attract the next generation of skilled workers and managers to manufacturing, firms need to connect directly with students by visiting classrooms and hosting plant tours. Linamar is a good example of a firm that is putting these ideas into practice.
Finally, leaders are looking for governments to raise their game, particularly in the area of attracting investment. Despite Canada’s many advantages, jurisdictions such as Mexico are winning the investment attraction game, even when wages are a small part of the total business proposition. Ottawa, provinces and municipalities need to work together to put our best case forward.
Ontario can compete and win at manufacturing. The leading firms we studied prove it. We need to stop focusing on our problems and start taking action on solutions.
— Paul Boothe, director of the Lawrence Centre at Ivey
How to work together
The recent depreciation of the Canadian dollar combined with recovery in the United States opens up a temporary window for recovery of Ontario’s hard-hit manufacturing sector. Those companies that have survived a brutal decade have the opportunity to grow. However, recovery will not happen automatically, and will require a major effort on the part of many players.
Support for new corporate investment is critical, but lowering the overall corporate tax rate has had little impact. Ontario’s corporate tax system should use enhanced tax credits to reward companies that invest heavily in new machinery and equipment, research and development, and worker skills.
Governments must also ensure access to the “patient” equity capital needed to finance investment that has a long-term payoff. Given the small scale of venture capital funds in Ontario and the focus of banks on short-term loans, we should establish an Ontario public investment bank focused exclusively on manufacturing. Such a body should operate at arms’ length from government, on the model of the federal Export Development Corporation.
Ontario has had a patchy record of fostering collaboration between the key players in a successful modern economy: government, companies, the post-secondary educational system; local governments; and unions. Drawing on past successes, Ontario should establish province-wide and local sector councils, bringing key players together to promote and deliver skills training and collaborative research programs. Community colleges can play a major role in rebuilding local manufacturing.
A revival of Ontario manufacturing will require active government leadership, and a spirit of partnership. It will certainly not come about if public institutions and unions are seen as the enemy.
— Andrew Jackson, Senior Policy Advisor, Broadbent Institute
Canadian families have become wealthier over the past several years, with net worth rising despite the well-documented growth in household debt and a setback from the recession, a new Statistics Canada study shows.
In a report that takes a long view on the state of Canadian finances, the agency finds that the 2012 median net worth among family units — of two or more persons and unattached individuals — has risen 44.5 per cent since 2005 to $243,800 and up almost 80 per cent since 1999.
Those family units have also accumulated more debt, a total of $1.34 trillion in 2012, up from $864.6 billion in 2005. Most of the debt — about $1 trillion — has been used to finance home purchases. All figures are in inflation-adjusted dollars.
The Conservative government said the report shows that Liberal criticism of their policies as not benefiting Canadians generally is wrong.
"That is a very significant increase ... after-tax disposable income has increased by 10 per cent across all income bracket," said Employment Minister Jason Kenney.
But while the overall picture of family finances was positive, the report also pointed to continuing disparities across regions, age groups and types of families.
The biggest single reason for the improvement in finances overall has been due to house prices reaching record levels, notes economist Andrew Jackson of the Broadbent Institute, and those prices are widely projected to moderate or even fall in the next few years.
"The big question is if and when we get a housing price correction, individuals will still be holding the debt and that is a cause for concern," he said.
Real estate prices have risen faster than mortgage debt and other assets, he notes, but if the trend reverses, some Canadian families may discover their wealth rests on "shifting sand."
For those who owned their homes, the median reported value of the residence was $300,000, up 46.6 per cent from 2005 and 83.2 per cent from 1999.
In terms of inequality, the report found that the wealthiest 20 per cent of family units accounted for 67.4 per cent of the total national net worth, although that was slightly lower than the 69.2 per cent the top quintile possessed in 2005.
Meanwhile, the top 40 per cent of families possessed 88.9 per cent of total net worth, leaving the bottom 60 per cent with a mere 11.1 per cent of the pie.
The lowest quintile — the poorest 20 per cent of families — had an overall negative net worth, meaning that as a group they had more debts than assets.
That segment of the population saw its family median net worth drop from about $1,300 in 1999 to $1,100 in 2012. By contrast, the top quintile saw its family median net worth rise from $981,400 in 2005 to $1.38 million in 2012.
Bank of Montreal chief economist Doug Porter said the data, while positive, still shows household debt remains a concern.
"The standout is the tremendous growth in net worth over the 13-year period. It works out to average annual increases of better than five per cent, which is quite impressive," he said.
But that doesn't mean household debt is a non-issue, he added, predicting that the biggest impact on the economy will be to act as a check on consumer spending going forward.
Overall, total family assets in Canada rose to $9.4 trillion in 2012, with the value of families' principle home representing one third of the total assets. Pension assets, including employer plans and private pension plans, made up 30 per cent of the total, while other real estate holdings — rental properties, cottages, timeshares and commercial properties — represent almost 10 per cent.
But the report confirms large disparities in net worth depending on age, the nature of the family unit and regions of the country.
For instance, median net worth was highest for families where the person with the highest income was 55 to 64 years old in 2012. For that group it came in at $533,600, more than double that of the overall population.
And lone parent families had the lowest median net worth — only $37,000.
Regionally, British Columbia reported the highest family median net worth at $344,000, followed by Saskatchewan ($271,400), Alberta ($267,500), and Ontario ($265,700). B.C. families had the biggest improvement since 1999, jumping from $150,700 when the province placed fourth.
At the bottom, family units in Newfoundland and Labrador and Prince Edward Island had a median net worth of $167,900 and $150,300 respectively.
If you divide Canadian families up into fifths in terms of net worth, the lowest quintile had net assets of about 1,300 Canadian dollars ($1,170) in 1999.
In 2012, it was actually below that; the overall worth of the lowest 20% of families declined 15.4% to C$1,100 by 2012, according to the “Survey of Financial Security” from Statistics Canada.
It’s a stark indication Canada is not immune the drift toward economic inequality in evidence in many other economies around the world.
“All in all, [the Statistics Canada report is] further disturbing evidence that economic inequality remains a serious concern,” said a blog posting from the left-leaning Broadbent Institute.
Income inequality is more frequently used as a metric when assessing economic inequality. But net worth, the wealth a family has when its debts are subtracted from its assets, also provides insight.
It’s important to note that, unlike the bottom 20%, Canadians in the four other quintiles did reasonably well in those 13 years.
The median net worth of Canadian families was C$243,800 in 2012, up 44.5% from 2005, and almost 80% more than the 1999 median of C$137,000, after adjusting for inflation.
Some analysts say the report undermines the idea Canada’s middle class is under siege, and that’s supported by the fact that the three middle quintiles all enjoyed gains of more than 75% since 1999.
But there is a catch. Much of the gain in wealth was driven by the increase in housing prices. If they drop, as many expect, that could erode much of the gains.
“Housing prices went up faster than any other form of wealth, including financial wealth, [and] housing wealth is more equally distributed,” said Andrew Jackson, senior policy adviser to the Broadbent Institute.
As in 1999 and 2005, the principal residence was the largest asset for Canadian households in 2012. Their median value was C$300,000, up 83.2% from 1999 and 46.6% more than in 2005.
Housing prices fluctuate, but debt is generally fixed. When the housing market collapsed in the U.S., many American households that had high net worth on paper watched it being eradicated as slumping housing prices left them with a sharply reduced asset position, or indebted overall.
“The experience of the U.S. tells us that housing values can fall, and housing debts will remain,” Mr. Jackson said.
If Canada’s housing market is subject to a sharp correction, as some analysts forecast, the value of Canadian families’ principal asset will decline without an offsetting decline in debt.
That fact points to the “fragility” of Canadians’ recent gains in wealth, Mr. Jackson said.
Geoff Meggs and Rod Mickleburgh. The Art of the Impossible: Dave Barrett and the NDP in Power, 1972-1975. Harbour Publishing. 2012.
This impressive and readable book by two well-known and respected British Columbia authors sheds light on a now largely forgotten episode in Canadian politics and is a welcome reminder of the very real gains that can be made by a determined and genuinely progressive government.
Geoff Meggs is a journalist and current Vancouver City Councillor, and Rod Mickleburgh writes from Vancouver for the Globe and Mail.