Millennial workers are losing out in a repeated rise of income inequality between generations and, according the recent Conference Board of Canada report, it’s threatening economic growth and social stability.
“Age rather than gender is becoming the new divide in our society,” said David Stewart-Patterson, Conference Board Vice President and a co-author of the report. “The Canadian generation at the top of the income heap today fought long and hard for principles like equal pay for work of equal value, but their children now face lower wages and reduced pension benefits even for the same work at the same employer.”
Two-tier companies offer new-hires less pay and poorer benefits for doing the same job as their older counterparts; a discrimination which, if applied to gender, would be considered entirely unacceptable. The report suggests that this growing imbalance could easily lead to inter-generational animosity between the ‘have-not’ twentysomethings and their ‘have’ elders.
According to the report, the average disposable income of Canadians aged between 50 and 54 is now 64 per cent higher than that of 25 to 29-year-olds, up from 47 per cent in the mid-1980s. This means generation Y is the first Canadian generation to be worse off than their parents and before long, the younger generation is going to get fed up, warns VP Stewart-Patterson.
But social strife isn’t the only worry for Stewart-Patterson and he pointed out that, as the baby-boom generation moves into retirement, Canadians will be relying on a smaller share of the population to drive economic growth and financially support the increasing health-care costs of the aging boomer generation.
"We are moving into an era where people of working age are going to be increasingly scarce; that should put upward pressure on wages going forward," he said. "And yet, if we look at the past 30 years ... the real incomes that are being earned in the workplace by younger workers have barely budged after inflation. That creates an issue in how much governments can raise in tax revenues, how much can our economy grow?"
With increasing concerns about millennial finances, financial advisors are left wondering where their place is in all of this. Even as generation Y’s wages rise over the years, it’s likely they will continue to be worse off than their parents and should expect to work longer and retire later. Advisors may have to rethink their current structures to provide suitable advice to the out-of-pocket up and comers.