Millennial workers have fared much better in Canada than in the United States since the global financial crisis, although their higher debt loads have left them more vulnerable to home price correction.
Forget the picture of jobless millennials living in their parents' basement, struggling under the weight of their student loans and unable to ever afford a home, says a new report from Toronto-Dominion Bank. That may be a fairly accurate picture in the U.S., where a housing crash and an extended recession have wreaked havoc with the finances of younger workers. But when it comes to Canada, it turns out the kids are all right.
Much of the difference can be chalked up to Canada's relatively quick recovery from the 2008 financial crisis, along with its strong housing market, which has helped boost the prospects of workers aged 25-34, say TD economists Beata Caranci and Diana Petramala.
Roughly half of Canadian millennials own real estate, a far higher homeownership rate compared to previous generations when they were the same age. By contrast, just 36 per cent of millennials in the U.S. were homeowners, a slightly lower rate than generations past.
Rising home values have meant that the net worth of Canadian millennials is now nearly double their American counterparts. Younger Canadian households are worth an average of $156,000 CDN compared to $76,000 U.S. for young workers south of the border.
Younger Canadians have also likely benefited from financial help from their parents for a down payment, something that is less likely south of the border where the housing crash erased a substantial amount of the net worth of many older American homeowners.
However, high home prices have also left Canadian Millennials deeper in debt. The average young Canadian owed $113,000 CDN compared to about $83,000 U.S. for young Americans.
Canadians are also graduating from school with less student debt than in the U.S. Stronger job prospects in recent years encouraged more Canadian millennials to opt for the workforce, while more young Americans waited out the U.S. recession by staying in school longer. That has helped them to earn postgraduate and professional degrees in higher numbers than their Canadian counterparts, but has also left U.S. students more in debt. Americans owed an average of $27,000 U.S. in student debt in 2013, compared to an average of $16,000 CDN owed by Canadians as of 2012.
Some of the differences are structural, such as the fact that the female employment rate has risen much faster in Canada since 2000 than in the U.S, something the economists chalk up to the expansion of parental leave benefits in Canada to 35 weeks in 2001. In contrast to Canada, American millennials were no more likely to be in the workforce than their parents were 30 years ago.
Still, TD predicts that the gap between young workers in the two countries will narrow in coming years, as the U.S. economy picks up steam, while Canada cools in the wake of falling oil prices.
Canada's high homeownership rate has likely peaked, TD says, while high mortgage debt loads have left Canadian millennials more vulnerable to a home price correction.
Meanwhile, in the U.S., expectations are that the housing market has bottomed out and is starting to recover, while higher levels of postgraduate education will allow American workers to capitalize on an improving U.S. economy.