The financial help the federal government is offering to businesses hurt by the pandemic should come with a condition: When things get better, you need to hire some recent graduates.
The COVID-19 outbreak has hurt a lot of us financially in one way or another – mass layoffs and decimated retirement savings are just a couple of examples. But this year’s crop of university and college graduates are among the hardest hit. They’re graduating, many of them with considerable student debt, into an economy that will have almost no use for them.
Young adults are at the start of their working lives, unable to proceed. Seniors are looking at what they’ve saved over a lifetime and measuring how badly they’ve been affected by the pandemic’s financial disruptions.
Their registered retirement income funds have been thrice-hit by falling stocks, a growing trend of dividend cuts and falling interest rates. Those who live off their investment income may have less to live on this year, and those who dip into their savings are finding they must sell stocks or equity funds that are down in price.
Provinces and the federal government have increased payments to low-income seniors, while Ottawa has introduced what must be described as a minor measure at best to help lessen the damage to retirement savings. The mandatory minimum withdrawal from RRIFs this year has been cut by 25 per cent.
A year’s full relief from government-required RRIF withdrawals for 2020 would have been better. Going forward, seniors should try to keep two or three years worth of expenses in cash in their RRIFs so they can draw from that if stocks are way down.
Seniors feel extra pressure when investments fall because they’re no longer working and able to replenish what they’ve saved. But seniors will also be among the first to benefit from a pandemic recovery.
At midweek, stocks had regained some of their losses in February and March. As we reopen the economy when the virus is suppressed, dividends could be at least partly restored, and interest rates should edge at least a bit higher. This might be a bit of a lean year for some seniors, investing-wise. But from where we are now, it doesn’t look like permanent damage has been done yet to their investment wealth.
Lasting damage is what we risk if young people are sidelined after graduation without access to jobs. The evidence is right there in how millennials fared after the last recession – the one that produced what came to be known as the boomerang generation. Unemployed or underemployed, many millennials were living at home at an age when boomers and Generation Xers were self-sufficient and on their own.
Some of those millennials ended up finding work in the gig economy, a euphemism for temporary work without pensions or health benefits. This helps explain survey data from the credit-monitoring firm TransUnion, which show that 76 per cent of millennials and 73 per cent of Gen Z say their household income has been affected by the pandemic, compared with 67 per cent for Gen X and 50 per cent for boomers.
For graduates and students, jobs of any type will be scarce this summer and beyond. The idea of a quick return to normal economic conditions seems to be fading.
The federal government has offered help by suspending payments and interest on federal student loans until Sept. 30. Through wage subsidies to employers, the Canada Summer Jobs program has been upgraded in a way that will help create as many as 70,000 jobs for young people between the ages of 15 and 30 and extend job terms until Feb. 28, 2021.
And on Wednesday, the government announced a new Canada Emergency Student Benefit that will pay students and recent grads $1,250 a month from May to August.
Also needed: A strategy to make sure young people are not forgotten when we reboot the economy. Can employers be encouraged to add graduates as their businesses return to normal?
The government shouldn’t forget seniors – a full suspension of mandatory minimum RRIF withdrawals this year would be a big confidence booster (with a provision to put back RRIF money already withdrawn). But young people are the more pressing matter. Our economy badly needs them working productively and paying taxes.
The Globe and Mail is looking for millennials to speak with for Stress Test, a new Globe podcast that will look at how COVID-19 has hurt young people’s finances and what steps they can take to improve their situation. We are looking for someone who is struggling with student, credit card or other forms of debt. If you are open to sharing your story in a judgment-free space, please e-mail: email@example.com