Canadian millennials are more likely to face the brunt of a wavering labour market as most face mounting debt with an income that fails to keep up with inflation, according to a report from RBC Economics.
The report released on Wednesday said Canadian millennials are more vulnerable to serious financial burdens if job losses continue to rise in their age bracket. July marked the third consecutive month Canada’s overall unemployment rate has increased; the rate stood at 5.2 per cent in May before it rose to 5.5 per cent in July, according to Statistic Canada.
The data, based on changing average mortgage rates between January 2019 and January 2023, found older millennials between the ages of 35 and 44 had an average debt-to-income ratio of 250 per cent in 2019. Approximately half of what Canadians in the same age group reported having in 1999 reported, which was 150 per cent.
Younger millennials are also reporting above that nearly 25-year statistic, as their debt-to-income ratio is at 165 per cent.
Additionally, millennials who own a home are likely to see a 25 per cent increase in monthly mortgage payments by 2024 amid interest rate hikes, significantly affecting millennials who’s earnings haven’t kept up with the pace of their increasing debt. Since the start of the pandemic, hourly wages have grown by 12 per cent, the report says, which is less than half of the average five-year fixed mortgage payment.
In turn, boomers, who account for those aged 65 and older, are less vulnerable to interest rate hikes since the majority no longer have mortgage debt. As for the 14 per cent that still do, the average balance is half the size of a millennial mortgage.
As millennials continue to struggle post-pandemic with the rising cost of living and housing crisis, Prime Minister Justin Trudeau extended a message to younger Canadians during his cabinet retreat.
"To young Canadians, I want to say something: You’ve had two crucial years of adulthood dramatically interrupted by COVID, and then you were hit by global inflation and increased interest rates,” Trudeau said to reporters on Wednesday.
"We owe it to you to take action, so you can fully benefit from the promise of Canada,” he continued.
Housing affordability was among the core topics discussed during the three-day retreat in Charlottetown, P.E.I… However, the prime minister did not announce any new plans to tackle the housing crisis on Wednesday.
According to Statistics Canada, the average debt including mortgage debt, credit cards and student loans among other debts, for Canadians between the ages of 35 to 44 was $105,100 and $69,500 for those under 35.
With files from The Canadian Press.
Housing costs for anyone entering the market are basically out of reach. I don’t know how anyone without an incredible paycheque or generational wealth would do it.
Looking at the listings, there’s a three bedroom condo up for $200,000. Recent sales in the same building suggest that is in line with the market. Rough math says a mortgage will be around $1,100 per month.
The average paycheque can make it work. Better if you bring a friend. Seems like a lot of money to tie up in an unproductive asset, though.
Of course, nobody would dare tie up so much money in an unproductive asset if they knew of a good productive asset to buy instead; with its proceeds then able to pay the rent/mortgage. Trouble is that we’ve run out of ideas. Once upon a time we thought that if we pushed people into university research labs that research would lead to new ideas, thus higher incomes from the newfound productivity that came from those ideas. People heard the university part, and the higher income part, but forgot the critical middle.
Real estate is where money goes to die. The only way out is to see productive assets become the focus again, but it’s not clear is there is any ideas left, or if people are willing to get creative. An interesting conundrum.
You’re not entirely wrong on productive assets, but what are they? Stocks? Progress has basically all but stalled in most areas. The new trend is rent-seeking and the market is totally stuck sideways. There is nowhere for money to grow and nowhere to hedge it against inflation. Cryptocurrency is even performing poorly. At least property entitles you to a real thing - land. I’m way more keen on stocks but they’re performing like shit.
That’s the thing, if you already knew then it would be too late. One needs to be creative and inventive to find whatever that is.
As before, this is why we once tried pushing our youth into university research labs with a promise of higher incomes. It just might have worked too, but the typical Canadian got it in their head that they need to go to university to get a job doing things we already know how to do, which does nothing to increase productivity, and so we got left with stagnant incomes and money flowing to where it goes to die.
The question is: How do we get Canadians back on track? Canadians used to be known for being exceptionally inventive, changing the world in so many ways.
No. Stocks represent a used asset market that allows those who figured out the above to move on to new things. There is a place for diversification into used assets, but it’s not where you get set up or compel money away from housing.