While baby boomers prospered financially in the past 30 years, their kids are set to start their careers and family life on a firmer footing, according to a report from BMO Economics.
The report analyzed a number of economic factors to compare millennials—those born between 1981 and 2001—to the baby boomer generation.
Jobs
Labour markets are friendlier now for young people compared with three decades ago. Millennials looking for a job have a 93% chance of finding one, compared with 90% for those in the mid-1980s.
Unemployment soared in the early ’80s, especially for young people. Today, unemployed youth go without work almost a month less than in the mid-’80s. More young people today either have a job or are searching for one, though fewer work full time.
Incomes
Millennials’ higher education leads to slightly higher incomes than their parents. Adjusted for inflation, the median income of people age 25 to 34 rose from $33,900 in 1984–1988 to $34,700 in 2011; millennials can buy about 2% more goods and services than their parents could in 1984.
“Having 2% more buying power doesn’t sound like much, but the difference adds up over time,” notes Sal Guatieri, senior economist with BMO Capital Markets. “One caveat is that median income was higher in the 1970s, before the 1980s’ recession took a severe toll on workers, so the starting point for our comparison matters.”
Wealth
Young families are wealthier than their parents were three decades ago.
Median net worth of households headed by someone age 25 to 34 was $52,000 in 2012, almost double that in 1984 ($28,752 in 2012 constant dollars). For families headed by someone age 35 to 44, median net worth was $182,500 in 2012, again about twice as high as in 1984.
Debt
Though wealthier, debt levels are higher for young families.
In 2012, 84.4% of those age 25 to 34 had debts compared with 82% in 1984, and more young homeowners held a mortgage (85.6% versus 79.2%, respectively). Young people are likely saddled with more student debt, considering that tuition costs have risen three times faster than consumer prices since 1984.
Housing
Millennials need to pay more to get their foot in the door.
The average house price was 10.4 times the median income of young families in 2011, more than double the ratio of 30 years ago, relative to income. Despite double-digit mortgage rates in 1984, young homeowners today must pay more to service a mortgage. Many millennials are priced out of the Vancouver and Toronto detached housing markets or will need to take on large debts to get into them.
“There is a popular notion that millennials will become the first generation to do worse than their parents economically,” says Guatieri. “However, apart from taking on bigger loans to buy pricier homes, young Canadians today enjoy better job prospects, earn more and are wealthier than in the 1980s.”
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