Young adults are not to blame for their financial frustrations.
Their problem is an economy that has put them on track to be worse off than their parents. So much for the theorizing about them being spoiled, coddled and otherwise not as good as the generations that came before them.
"Young adults may see their parents having college degrees, owning a single-family home and having a certain standard of living," said Markus Moos, a University of Waterloo assistant professor who wrote a study on 25-year income trends for people aged 25 to 34. "What they have to realize, given the findings in the study, is that they're actually going to have a slightly lower standard of living than their parents."
Prof. Moos looked at how earnings for young adults in Montreal and Vancouver changed from 1981 to 2006. His starting point was Statistics Canada data showing sharp declines in inflation-adjusted incomes in both cities. The next step was to see whether these declines could be explained away by socio-economic changes like today's higher levels of postsecondary education and more workplace participation by women and visible minorities.
The decline in earnings for the young adults of Gen Y, also known as millennials, is sometimes dismissed as being a result of the fact that more of them are going to college or university. That means they get a later start in the work force than their counterparts did a generation ago, and thus are behind in salary.
But even after Prof. Moos adjusted his data for this trend, he still found young adults were making less than they did 25 years ago. He describes his study as using "statistical tools to show that somebody with the same degree, the same job and the same demographic profile is earning less today than they were in the 1980s."
I reached much the same conclusion in my Young Adults Really Do Have It Tougher column of last year. Now, an academic has further trashed the view that Gen Y's problems are self-inflicted.
While based on the latest census numbers available, Prof. Moos's study does not reflect the impact on young adults of the economic troubles of the past five years. But it's a safe bet there has been even more Gen Y backsliding. Certainly, the economic factors cited in his study remain.
He says young adults have been affected by an increasing emphasis by employers on temporary or contract work instead of permanent full-time jobs. These changes affect even people working in low-paying service jobs like slinging burgers or coffee. "The study is actually able to show that somebody working in a job like that is earning less than someone who worked at the same kind of job 20 or 30 years ago."
Gen Y is falling behind its predecessors, and it's also getting poorer in comparison to other segments of the population, Prof. Moos said. From 1981 to 2006, a young adult's earnings in Vancouver fell to below 70 per cent of the level for workers in older age groups, from 85 to 90 per cent.
The personal finance implications of Gen Y's declining economic status are endless, but similar in theme: Those who have less money will bear more personal financial responsibility for their own well being.
Take retirement, for example. Temporary or contract workers likely won't be members of company pension plans, so they'll have to dig deeper into their paycheques to save for retirement. They may also lack health benefits, which means they'll have to pay out of pocket for things like dental care. Other cost-saving benefits you get from working in a permanent full-time job often include a term-life insurance policy, a prescription drug plan and extended health coverage that applies if, for example, you get injured and need physiotherapy. The old personal finance rule about having an emergency fund to cover surprise expenses is a must for Gen Y, and yet these are the people who are least able to afford one.
The good news in Prof. Moos's study, published in the International Journal of Urban and Regional Research, is that an education is a big help if you're young and you want the best possible advantage in the workplace. He found that someone with a degree earns more than someone without a degree, and this advantage has increased over time.
As covered in a column from earlier in 2013, your job and earnings prospects depend a lot on what you study in college or university. Smart educational choices may be your best defence against a job market where young adults are worse off now than they were 30 years ago.
Follow Rob Carrick on Twitter: @rcarrick