Despite improved financial and economic backdrops, a study suggests Canadian employees still face risks
Canada’s recent economic strength has created improved conditions for working Canadians. But the positive developments have not translated fully as they remain vulnerable in some key financial areas, according to a new report.
“[W]hile 66% report being in a better financial position than a year ago, their debt levels remain high, they chronically undersave for retirement, and put themselves at severe risk in the event of economic changes,” said the Canadian Payroll Association, citing figures from its newly released 2018 survey of employees.
The association noted marginal improvements this year such as employees’ increased outlook of improvement for their local economy (from a three-year average of 36% to 39%), an uptick in the number of employees with total household incomes above $125,000, and full-time employment levels reaching 90%.
There was also a slight drop in the number of working Canadians, from a 48% three-year average to 44%, predicting that they’d have a hard time meeting their financial obligations with even a single week’s delay in pay. The number of working Canadians saying they couldn’t come up with just $2,000 in a month for an unexpected expense also dipped to one in 5, from almost one in 4. Those who reported spending all or more than their net pay went down from a three-year mean of 40% to 35%.
“However … it seems Canadians still need a huge reality check when it comes to realizing the risks they face, and acting on them,” the association said.
The survey found increased debt levels, with 40% of working Canadians saying the feel overwhelmed by their level of debt (up from 35% last year). Those reporting a year-on-year increase in debt load reached 34% from 31%; 43% expect to take more than 10 years to settle their debt, up from 42% in 2017 and 36% in 2016. Debt was a reality for 94% of respondents, with the most common obligations coming from mortgages (28%), credit cards (18%), and car loans (18%).
The most cited reasons behind increased spending were higher living expenses (27%) and unexpected expenses (20%). Ninety-six per cent of respondents expected to face increased costs of living over the next year.
For the first time, the survey found employees to be more concerned with work/life balance (33%) than earning higher wages (26%); among millennials in their 30s, 38% prioritized work/life balance. The number one to improve financial well-being identified by respondents was higher wages (25%) rather than dialing down spending (19%). Seventy-two per cent admitted that they had set aside only a quarter or less of what they feel they’ll need to retire, but respondents overall did not revise their target retirement age of 61, while half still felt they’d need at least $1 million to reitre.
“We would have hoped to see in the survey results that Canadians would do more to alleviate their debt and take control of their financial situation in strong economic times," said Canadian Payroll Association President Peter Tzanetakis. “Many Canadians seem to be complacent and are still not focused on the big picture."
Related stories:
Why retirement income is better than total savings
More than a quarter of Canadians face serious financial hardship
