The 29-year-old, who gave up his plans to become a professor while part way through his doctorate, has $30,000 in student debt. That means traditional rites of passage into adulthood – buying a house, having kids, building a nest egg – are all being delayed.
The different playing field for young people today can be measured in a number of ways. One is the decline of secure jobs: The proportion of 20- to 24-year-olds in temporary positions has climbed steadily, to about 29 per cent this year from 21 per cent in 1997, Statistics Canada data show.
Full-time work is harder to find as well. Last month, a broader measure of youth unemployment – which includes not only the jobless, but part-timers who would prefer full-time work and people who’ve given up looking for work – hit 19.6 per cent, the highest level for any September in 15 years.
Amelia Zheng has felt the sting of underemployment first hand. The 25-year-old has just what Canada needs: fluency in three languages and a masters degree in international business law from the Université de Montréal in 2010, a program she completed under a full scholarship after graduating near the top of her class in Shanghai.
She wants to help forge trade links between Canada and her home country, China. But since graduating, the only work she’s found is part-time or short-term contract: as a waitress, a tour guide, teaching Mandarin and in international purchasing.
The change in economic fortunes for the twentysomething generation is especially stark when rising house prices are considered, says University of British Columbia professor Paul Kershaw, who specializes in family policy. His research shows that the average household income of a young Canadian couple has climbed 5 per cent since 1976 when adjusted for inflation, while housing prices have climbed 76 per cent.
If high debt and underemployment persists, the spinoff impacts could stretch throughout the economy, and could particularly hit consumer spending, depressing demand for cars and other major consumer goods. One-sixth of Canadian spending on consumer goods is tied is to home ownership – purchases such as appliances and lawn mowers.
“We’re still a consumer society – we’re still driven in part by peoples’ capacity to consume,” Prof. Yates says. “And if we reduce peoples’ capacity, that will have long-term implications.”
Experts are quick to point out that the impact on today’s generation will be uneven; some people will always do well. But in the future, outcomes will be even more splintered between those with higher education and skills and those with lesser education and skills ill-suited for the labour market, says Craig Alexander, chief economist at Toronto-Dominion Bank.
He sketches out a future scenario where post-secondary education becomes even more more vital. More people go to school for longer, which means they carry more debt upon graduation. And as a result this generation will instead have less time to save for retirement. And what awaits them in retirement is far less appealing than it was for their parents.
“I doubt I will ever get a pension, ever,” says Edmonton resident Alix Kemp, 25. She graduated in 2010 with a history degree, and now works as an assistant editor at a magazine. She earns less than $40,000, and is still paying down $8,000 in student debt.
“When I look at the older generation who actually have pensions that I will never get, and who are horrified that they might actually have to wait an extra two years until they retire, I’m like, ‘Who’s entitled now?’ ”
Her hunch about ebbing access to pension plans is right. One of the biggest shifts over the past decade is in the proportion of companies that have closed their traditional defined benefit (DB) pension plans to new employees, who are shunted into group RRSPs or defined contribution (DC) plans. Unlike a traditional DB plans, the DC plans don’t pay a guaranteed level of income in retirement. The difference between the two is staggering.
A private sector employee who starts work today at age 25 with a salary of $40,000 will see her DC pension plan grow (assuming steady compound interest and investment returns) to about half a million dollars in value by age 65, an analysis by Mercer shows.