A new UBC study says governments should do more to help cash-strapped and house-poor younger generations rather than plowing more resources into services for aging but wealthy baby boomers.
According to Prof. Paul Kershaw of the School of Population and Public Health, the current generation of baby boomers — whom he defines as those aged over 55 — heading into retirement is one of the wealthiest in the country's history.
Meanwhile their children and grandchildren, nicknamed Generation Squeezed — aged 25 to 45 — are finding themselves facing financial challenges that the boomers never had, at a time when government spending on the needs of younger people is reaching historic lows.
"After devoting more years to school, the typical young person must work five years more to save a down payment on an average home, because of the dramatic rise in housing prices across the country," writes Kershaw in the study entitled Population, Aging, Generational Equity and the Middle Class.
"Even at historically low interest rates, they have to labour a month more each year to pay the annual mortgage than did the same age person in 1976-1980," he concludes.
"The same housing prices that squeeze younger generations for time and money are powering wealth accumulation for those aged 55 and older. The net wealth in owner-occupied housing for the typical household in this demographic is between $165,000 and $185,000 higher than it was for the same age group in 1977."
"This additional wealth was accrued while taking on relatively little extra debt," he concludes.
Work ethic not to blame
Furthermore, baby boomers cannot claim they earned or deserve the extra wealth because they worked harder, made smarter decisions or better life choices, he said.
"There is no clear evidence that these generations purchased and consumed housing resources more cleverly and productively than did their parents' generations. The accumulation of housing wealth by today's aging population largely reflects good luck in the lottery of housing price trends."
And young peoples' work ethic or poor judgment is not to blame for their declining opportunities, he said.
"Canadians in their mid-40s and younger earn thousands less for full-time work compared to 1976-1980 even though they devote years more to post secondary," he concludes.
"Higher mortgages reflect the reality of getting into the housing market when the timing is not nearly as fortuitous as it was in 1977."
"While some may argue that the dramatic increase in housing costs should give young people pause before committing to home ownership, home ownership has been a strong Canadian norm for many decades now. It is understandable that many younger people believe this goal is worthy of pursuit – at least to the same degree it was prioritized by their parents' generation."
Baby boomer bonuses questioned
Kershaw concludes the federal and provincial government need to reevaluate how the shift in funding away from education and child care and other resources that primarily benefit younger people, and toward medical care and tax cuts that favour the elderly, may be creating intergenerational inequality.
"Canadian governments have prioritized adapting to the health and retirement income needs of the aging population by adding $58 billion in annual spending for those age 65+ compared to 1976. There has been no corresponding increase in government revenue to pay for even half of this additional spending on retirees," he writes.
"Younger generations may wonder whether their parents' or grandparents' generations are paying the full share of the medical care they will consume."
The study was based on Kershaw's analysis of Statistics Canada census data, CMHC studies and student loan surveys.