Meet Canada’s most expensive cities for young people: Halifax, Yellowknife, Moncton, Toronto and Winnipeg. A thinktank called Youthful Cities has teamed up with RBC Future Launch to create an affordability index that evaluates the cost of everyday life in 27 cities for youth aged 15 to 29. There wasn’t a city where a young person could cover a reasonable level of monthly expenses and have a surplus. To hear more about the affordability problems of young people today, I invited Youthful Cities communications specialist Claire Patterson to do an e-mail Q&A. Here’s an edited transcript of our exchange:
Q: I’ve been writing about the financial challenges faced by young adults for about 15 years and I still get pushback from older generations who deny anything is different today. How are things different for young people in terms of affordability?
A: I would ask older generations, which of the following did you have in your 20s?
- A student loan of approximately $20,000?
- A net loss of $9,000 per year after expenses?
- A rental cost that is 23.1 per cent of your monthly cost of living?
- Zero affordable cities to live in across Canada?
Many youth of this generation are answering yes to all of the above. The income earned by young people is not keeping pace with the price of essential living costs such as education, housing, and transport.
Q: Young adults were hard hit by job losses early in the pandemic, but the employment market has since opened up for them. Promotions, raises and better jobs are out there. How much is this helping young adults improve their financial position?
A: I think the key here is that the job market is helping some young adults improve their financial situation. Young people who already have social capital in the form of connections, education, and skills are able to use this basis to achieve upward mobility in the job market. But less privileged young people have been set back during the pandemic. Many delayed or took a pause on continuing education because of virtual learning and uncertainty about when it would be safe to return and make the most out of expensive post-secondary programs. Without opportunities to upskill during this time, many young people were left behind and are continuing to work minimum wage jobs. Youth unemployment was double the amount prior to the pandemic and triple the national average during the pandemic. It also took a year longer than the rest of the population to recover. Just over half of jobs now are part-time for young people versus 14 per cent for the rest of the population. Our index shows that the minimum wage isn’t a livable wage in any of the examined Canadian cities. The gaps between the minimum and livable wage range from $2 to $10.
Q: Your data shows that young adults have issues with the cost of living even in smaller cities away from the major centres? Why isn’t life there more affordable?
A: It was surprising to see that cities like Vancouver and Toronto weren’t the most unaffordable. Instead, we see a much smaller city like Moncton in the Top Three most unaffordable. This is because the same trends in the cost of living are trickling from big cities to smaller cities paired with a decreased amount of jobs that pay greater than minimum wage. We are also seeing older generations moving from larger cities to smaller ones, increasing the cost of housing. One thing we did to help young people find a more affordable city was creating an app to let them customize our data for their profile.
Q: It’s striking how much more affordable cities in Western Canada are – what’s the story there?
A: The East Coast of Canada has historically had lower paying salaries. This has been termed the East Coast discount. We also see a lower tax rate in cities in Alberta and a higher income in cities in British Columbia. Pair that with a similar cost of living seen in Western cities and you get a deficit that is greater on the East Coast, making the cities in Western Canada appear more affordable. It is also important to note some of the challenges in Western cities. I have seen that the cost of buying a home is out of reach for young people in Vancouver, as is renting in central areas.
Q: How big a factor are housing costs – for owners and renters – in the affordability problems faced by young people?
A: In calculating the cost of living for this index, housing was considered to be one of the major costs for young people. Rent alone made up 23.1 per cent of monthly costs for young people. We see that young people only start realizing a surplus in income between 25-29, making it difficult to save for a home until that age range. This is also due to skyrocketing rent prices in urban areas. It is a societal expectation that young people buy a home in their early thirties but the data in this index shows that many won’t be able to achieve this goal.
Q: I’m giving you a platform to explain to older generations why they should care about the affordability challenges faced by young adults – what do you want to tell them?
A: It’s no surprise that this generation of young adults has faced major hurdles. We watched our parents deal with the recession growing up, and now, at the start of our professional lives, we will deal with the financial fallout of the pandemic. Our future planning is foreshadowed by the climate crisis as well as the lack of affordability. I hear many young people talking about delaying any form of family planning because it sounds so out of reach financially. Young people are looking at the reality of having to leave urban centers where they have work opportunities, culture, and communities that they identify with, in order to afford to have a family and own a home. This will cause a major drain on talent in the job market and the vibrancy of cities and cultures all across Canada. These realities are increasing anxiety in young people and heightening the mental health crisis. This is a national problem.
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Rob’s personal finance reading list
Houses for $200,000?
A national look at the availability of homes priced at less than $200,000. For the biggest selection, look to the Prairie provinces and Atlantic Canada. And now for a view from the rental market, or should I say, hell.
A beginner’s guide to price-matching
How to get one retailer to match better prices at a competitor. I get price matching – a strong money-saving strategy in inflationary times. But it does gum up those grocery checkouts.
The 50/30/20 rule
A way to divide up your after-tax income to cover off needs, wants and savings. The savings allotment is aggressive.
Four top Canadian dividend ETFs
The My Own Advisor lists some exchange-traded funds holding Canadian dividend stocks that look good in areas like fees, diversification and tax-efficiency.
Today’s financial tool
The Globe and Mail’s registered education savings plan tool helps you maximize the benefits of RESPs.
The Money-Free Zone
A reader of this newsletter asks if I listen to any current music. I do like to share vintage songs people may not have heard before, but I also listen to a lot of current stuff. A few albums I’ve enjoyed lately:
- Skinty Fia, by Fontaines D.C. The best album yet from these gritty post-punkers. Here’s a song I like from their back catalogue, The Lotts.
- We’ve Been Going About This All Wrong, by Sharon Van Etten. My favourite song by this artist is one of her early works, Serpents. Seen her perform it live a couple times and it’s a highlight.
- Lifted, by Trombone Shorty. A mix of jazz, funk, soul and rock from an artist based in New Orleans, a city we have visited a bunch of times and will get back to for sure.
- Emotional Eternal, by Melody’s Echo Chamber. Dream pop for your working day. For a crunchier cut from singer Melody Prochet, try I Will Follow You.
Tweet of the week
A discussion of things you shouldn’t scrimp on, starting with a mattress.
In case you missed these Globe and Mail personal finance-related stories
- Gaslit: Breaking down the misconceptions around high gas prices
- Canada’s labour shortage is getting worse, so why are wages not increasing?
- Are young investors ready to face their possible first major downturn?
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Is the middle class dead for millennials and Gen Z? • Gas prices are soaring. Are electric vehicles an affordable solution? • Crypto is booming, but should you invest? • How are young Canadians dealing with soaring rents? • Inflation is squeezing our finances. What can we do about it? • Is a hot housing market squeezing Canadians out of their small towns?
- ✔️ The housing file: How bad is housing affordability? Even a crash won't help • Sell the family home to lock in profit and then rent? Better not • Why young adults can't afford houses: Hard work got you more in the past than it does now • Five reasons you should not buy a house till you're at least 30 • Now more than ever, owning a house is not a retirement plan
- 📈 Investing: The 2022 ETF buyer's guide: Best Canadian equity funds • The 2022 Globe and Mail digital broker ranking: Does the zero-commission revolution flip the script on who's best? • With bonds sinking, conservative investors are waking up to risks they never saw coming • A five-step plan for dealing with the sad fact that almost every investment is falling lately • The best financial advice in advance of retirement? Work on your marriage • One-year GICs are the best deal in town for safety seekers • What to do if the financial plan you paid thousands for disappoints
- 💰 Your money: Are you prepared for the pandemic wealth boom to blow up in our faces? • This hard-working 24-year-old is nailing it financially. But where's the happiness? • Who should and shouldn't worry about the wave of rate increases this year, and what every stressed-out borrower should do right now • Don't make this potentially costly assumption about the CPP Survivor's pension
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Rob Carrick