Income Gap Between Generations Widening, Research Finds

Consequences could threaten social stability

A young woman takes an order at Starbucks. Canada’s young people are earning considerably less compared to their adult counterparts, according to a new report by the Conference Board of Canada. (AP Photo)

Canada’s young people are earning considerably less compared to their adult counterparts, according to a new report by the Conference Board of Canada. 

The report found that disposable income of Canadians between the ages of 50 and 54 is 64 percent higher than that among 25 to 29 year olds. 

Vijay Gill, the Conference Board’s director of policy research, says “there is always going to be a gap and we expect there to be a gap,” but that gap has grown over the past three decades.

“A 25-year-old in real terms is expecting to earn the same as a 25-year-old 30 years ago even though the economy has obviously grown. A 50-year-old is expected to earn 20 percent more than a 50-year-old 30 years ago.” 

The report noted that if the income gap continues to widen, it could threaten future economic growth and social stability.

“This has both economic and social consequences. If today’s younger workers continue to see their earnings lag as their experience grows, social stability as well as economic growth could be severely challenged,” the report warns.

There are some unknowns, however. 

“What we don’t know is if it will continue to grow, or we don’t know even if they are starting off at a lower base relative to older people,” said Gill. 

“We know from the mid-1980s to mid-1990s to early 2000s that gap grew and it seems that it has stabilized. It doesn’t mean it will continue like that.” 

Susan A. McDaniel, Director, Prentice Institute & Canada Research Chair in Global Population & Life Course at the University of Lethbridge, notes that the study only covered tax records and may not demonstrate the full picture. 

“There are limitations to this study, but it is important,” she said. “There is a lot we don’t know that is behind this report. We don’t know about informal transfers (living with parents), we don’t know about labour market, and we don’t know about the diversity.”

Recent research, including by the OECD earlier this year, found that Canada has one of the fastest growing income inequalities in the world. A 2013 OECD study ranked Canada 32 out of 34 countries for its lack of protections for temporary workers in contract work—a new reality among many new hires. 

Compared to past generations, today’s young people also need to contend with other new realities, McDaniel notes. 

“Today’s young people are disadvantaged. They have to pay a lot for tuition, jobs are harder to get, and houses cost a lot. All of those things disadvantage them regardless of their work ethic and whatever their individual circumstances are,” she said.

In the second quarter of 2014, youth unemployment was 13.4 percent compared to 5.9 percent among people aged 25 and over. Other countries have similarly high rates. A study by the UK House of Commons Library this summer found that between 2007 and 2011, the number of youth not in education, employment, or training increased in all OECD countries except Austria, the Czech Republic, Portugal, Sweden, and Turkey. 

“The economic global recession in 2008 is still going on for many people. Whether it is defined technically or not there are countries in Europe, specifically Spain, Italy, and Greece, that have huge unemployment among youth,” said McDaniel. 

“Unemployment is kind of a deceptive term because unemployment rates only capture those officially recorded looking for work. There could be people that gave up looking for work.” 

Kaven Baker-Voakes is a freelance reporter based in Ottawa.