In the mi-1970s, nearly one-third of seniors in Canada were considered low-income. Today, it’s closer to five percent. There are many factors accounting for this improvement in seniors’ lives, chief among them changes to public policy. Paul Kershaw believes government policy now needs to focus on another generation feeling the pinch: those in their mid-40s and younger. Dr. Kershaw, an associate professor in the School of Population and Public Health at the University of British Columbia, says this generation is being squeezed simultaneously by lower incomes, higher housing costs and less time compared to older generations. In an attempt to foster “inter-generational equality,” Dr. Kershaw has founded Generation Squeeze, an organization that he hopes will grow the clout of younger generations in politics and public policy. He recently spoke to University Affairs about this work.
University Affairs: I think it’s safe to say that in every era, the younger generation feels shortchanged by the older generation, or bemoans in some way their situation relative to that of their elders. How is today’s situation different?
Dr. Kershaw: The data show clearly that younger generations simply are facing a more challenging socioeconomic set of conditions than was the case for the same age group in the late 1970s and early 1980s. We can see this with a quick look at income data, especially income relative to costs. The typical 25- to 34-year-old today in Canada working full time makes about $4,500 less a year, after adjusting for inflation, than did the same-age person in 1976 and 1980 – even though they’re more than twice as likely today to have a postsecondary certificate of some kind. So people are going to school longer to take jobs that pay thousands of dollars less, and these positions often don’t offer generous benefits programs any longer. We are then asking young people to do the most amazing thing: pay hundreds of thousands of dollars more to try to live in an average home. This is leaving younger Canadians today squeezed between time and money pressures. They are working and studying more to have less.
University Affairs: So high housing prices are one of the key challenges?
Dr. Kershaw: Yes. The younger generations have to work five years longer now to save a 20-percent down payment on an average home. A generation ago it took only five years to save that down payment if you worked full time; now it takes 10 years and in my province of B.C., it’s 15. And, the same factors that are weighing down the younger generation are precisely what have driven up the wealth of the typical person aged 55 and older. So housing is at this very interesting moment in a generational relationship that is playing out in directly opposite ways along age lines.
University Affairs: But some observers claim the younger generation will eventually catch up as they grow older. What do you say to that?
Dr. Kershaw: I have two broad counters to that. First, look at the recent Conference Board of Canada study which shows the average disposable income of Canadians between the ages of 50 and 54 is now 64 percent higher than that of 25-to-29 year olds, up from 47 percent in the mid-1980s. There is also the study that came out the month before by BMO group saying that the typical senior now enjoys nearly nine times more wealth than the typical 25-to-34 year old. In the early 1980s, the wealth gap was only four times. These data suggest that our hope that it will just work out for people down the road is less likely given the trajectories.
University Affairs: You point out that today’s seniors are better off today than in the past. Doesn’t this put less burden on their children to support them in old age?
Dr. Kershaw: I have been looking at average trends in incomes for seniors between 1976 and today, and the data show the typical person aged 65 and older is now reporting about $10,000 in additional income per year, after adjusting for inflation. This is because of a combination of their jobs having paid more generous pensions, plus the Canada public pension plan and the old-age security system. It’s a wonderful public policy success story. We changed public policy, made major adaptations, and today we’ve wrestled down the low-income rate for seniors from about 30 percent to between five and seven percent today, lower than for any other age group in the country. Is that a bad thing? No! This is a fantastic thing. And, it helps us remember what we can achieve as a country by putting in place public policy that adapts to address big challenges.
University Affairs: So let’s talk about your campaign, Generation Squeeze. Tell me a bit about it.
Dr. Kershaw: We launched the language of Generation Squeeze in the fall of 2011 with a series of reports – one for each province – asking does Canada work for all generations? The theory of change driving us was that we needed to change the overall narrative in Canadian public discourse about who is deserving, who is vulnerable, where are the major societal risks. By the spring of 2013 we had the chance to test the degree to which we could shape public dialogue with the provincial election in British Columbia. What we showed is that we were good at earning media attention. On many respects you could say we had a great campaign! But, we really had no influence on the platforms whatsoever. In light of that finding, we decided it was insufficient to simply think that changing the public narrative would change the priorities in the world of politics. We would also have to build the clout of younger people. Only then would we likely see political parties transform their priorities to include room to invest in younger Canadians.
University Affairs: And how do you do that?
Dr. Kershaw: Well, this got us thinking: how come younger people don’t have as much clout as the aging population? And the answer is that younger Canadians are simply less organized. Take, for example, this great group called the Canadian Association of Retired Persons, or CARP, which has existed since the mid-1980s to advocate on behalf of Canadians 50 and older. They’re very clear about their mission: right there on their web page they say they want to build the clout of their constituency, and they know they have more clout the more people they bring together. They attract people in part by appealing to self-interest, saying we’ll keep more money in your pockets. We saw that and said that’s a brilliant strategy. As long as there’s an organization lobbying on behalf of Canadians 50 and older, younger generations need one too.
University Affairs: And Generation Squeeze is that vehicle?
Dr. Kershaw: Yes. We are now incorporating both as a not-for-profit and charity to function in those capacities and we are replicating and refining many of the clever organizing and funding strategies that drive the success of CARP.
University Affairs: What specific public policies changes would you like to see?
Dr. Kershaw: We are looking at changes that would save the typical young family around $50,000 before their kids reach age six. This would allow them to pay off their student debts, or reduce the number of years it takes for a down payment, or allow them set some money aside for retirement. The question then is: what are the right mechanisms, the right policy tools, to get us there? The first is parental leave. The typical couple, when sharing a year at home with a new baby, will lose about $15,000 from their after-tax income compared to the year before. Given that reality, there is something public policy can do directly: make the leave per household, not per person, and make it six months longer. And, reserve that extra time primarily for those who are far less likely to use it these days: dads. If you do that, you save the typical household $12,000. Then there’s childcare. Let’s bring the cost of that down to about $2,500 a year for a child, or about $10 a day. If you did that, you’d save the typical household with kids before age six about $6,000 or more a year when relying on childcare. Put it all together and by the time a typical family has their kids reaching age six, we will have saved them $50,000. That’s big dollars at a particularly expensive point in their lives. It would be the cornerstone of a better generational deal in this country.
University Affairs: Wouldn’t that cost a lot of money?
Dr. Kershaw: Right now we spend between $38,000 and $45,000 a year per person over 65 on important things like medical care and retirement income subsidies. By contrast, we spend around $12,000 a year in social spending per person under 45. To pay for the new deal for families as I’m describing, you’d need to raise that spending to $13,000 per person under 45. Pool that additional investment, cater to the moment when people start their families and save them big bucks at that expensive life-course moment.
This campaign sounds like it could really change things, but probably only for people younger than me – by the time policy change happens to address the issue, I’ll be well past 45. Regardless, here are my two cents:
As a person that has survived off of “prestigious” grants for the past ten years, I have no CPP, no EI, no permanent job prospects, very little savings, and some student loans form my undergraduate degree that remain unpaid. We also need to lobby for more jobs for highly educated people and student debt reduction; permanent job prospects and reduced student loan payments would go a long way!
I am about to have my second child, and I only get 4 months of paid leave. Squeeze is almost an understatement. It took my mom almost a decade to understand how much harder I’ve had it than she did – for the longest time she just thought I wasn’t trying hard enough. She earns about 2x more income as a retired individual than my husband and I do together, and she was a single mom in the 80’s – she thought that she struggled for money, but it’s become clearer to her that our situation is much more difficult.
So right. I am 63 and was lucky enough that during my working years, incomes were increasing sufficiently rapidly for me to accumulate a capital that is now sufficient to ensure a reasonable, if not comfortable retirement. Added to this, the cost of housing was such that it was possible to acquire a residence during these same working years.
Today, the national growth is reduced to 1 or 2 % and the incomes have not followed the high Growth seen at the end of last century. Our children, now in their 30’s are indeed squeezed: their incomes not only start lower than ours but also do not grow as fast as ours were. Consequently they can’t make it! As parents, we would love to help them but that would mean cutting our capital and reduce sharply our retirement income.
We absolutely need the young adults to be given the opportunities we were able to have. Not only for them to be capable to generate enough National revenue to pay for our retirements’ pensions…. but also for the survival of our economy and of the “middle class”. Either that or raise the upper 15 tax bracket sharply. Today the max income tax in Canada is asymptotic to 48%, while it should be asymptotic to a much higher level (in the 75 or 80% as it was in … the USA in the 60’s and 70’s).