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House price overvaluation fading: TD (Moe Doiron/Moe Doiron/The Globe and Mail)
House price overvaluation fading: TD (Moe Doiron/Moe Doiron/The Globe and Mail)

Paul Kershaw

Forget Occupy, the real divide is generational Add to ...

Canada’s economy has more than doubled in size since 1976. Because many Canadians aren’t feeling better off, the Occupy movement’s slogan captured their attention a year ago. “We are the 99 per cent” reminds us that the richest 1 per cent of Canadians make 14 per cent of total income and absorbed more than a third of income growth in the past 15 years. It helps to explain where all the additional wealth went.

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But the slogan is incomplete. The change in prosperity is also generational.

On average, Canadians who got into the housing market by the mid-1970s (those who are newly retired or retiring soon) have been big winners. Compared with those 55 to 64 in the mid-’70s, their wealth has risen about 200 per cent, in large part because housing values have increased dramatically over their adult lives.

But what’s been good for a generation heading into retirement has been bad for their kids and grandkids. The typical full-time worker aged 25 to 34 must now save for 10 years to put away a 20-per-cent down payment for a home in an average school district. That’s twice as long as a generation ago, even though today’s first-time homebuyers often settle for a smaller yard, a condo or a longer commute.

Young people’s wages are losing ground, despite the fact they have more postsecondary education than previous generations. After adjusting for inflation, two young people still bring home little more than what one breadwinner did in the mid-’70s. The result? Those under 45 are squeezed – squeezed for time at home, and squeezed for money because they’re burdened with higher student debt and paying higher housing prices with lower wages. And when they choose to have kids, they are squeezed for child-care services, which often cost the equivalent of another mortgage.

The slogan “We are the 99 per cent” sheds no light on this generational squeeze – unless it’s accompanied by a commitment from boomers and seniors to help their kids and grandkids champion a better policy deal.

Championing social policy for generations facing tough times is a big part of Canada’s legacy. Remember that, in the mid-’70s, 30 per cent of Canadian seniors were poor – seniors like my grandmother, who’s now 96. Because this country has a proud history of building and adapting pension and health-care policy to changing socioeconomic circumstances, we have wrestled down the poverty rate among seniors to about 5 per cent – the lowest among any age group.

It’s in large part because of this policy legacy that my grandmother is not poor today. And it’s also why my parents, in-laws, aunts and uncles have a far lower risk of economic insecurity than did those approaching retirement a generation ago.

We need to sustain these achievements, but it’s also time to adapt policy again for a generation facing deep declines in their standard of living. The problem is that markets for wages and housing are difficult to influence. Policy can create a minimum wage and some social housing. Although important, they do little to help the typical 38-year-old whose debt is more than 100 per cent of his or her annual household income. A generation ago, the norm was about 40 per cent.

So we must look to other policy mechanisms to reduce time and income pressures for younger Canadians starting their careers and buying homes. There are solutions (see blogs.ubc.ca/newdealforfamilies). Better benefits for new moms and dads would ensure that it doesn’t cost them the equivalent of a second mortgage when they split their time at home before their children are 18 months old. Inexpensive child care would allow them to work enough to keep up with the rising cost of living. And since the 2012 federal budget asks younger Canadians to work longer before claiming Old Age Security, changes to employment practices would give workers an extra few hours a week at home each year before they retire.

These concrete solutions to the generational decline merit more attention as Canadians aspire for a fairer distribution of our national prosperity.

Paul Kershaw is a policy professor at the University of British Columbia.

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