Middle Class Squeeze is primarily a Squeeze on those Under 45

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1 Family Policy Adaptations to Reduce the Generational Squeeze in the Middle Class Queen s 2014 International Institute on Social Policy Dr. Paul Kershaw UBC School of Population and Public Health Founder, Generation Squeeze gensqueeze.ca August 19, 2014, Kingston ON Observation 1: Middle Class Squeeze is primarily a Squeeze on those Under 45 1

2 CANADA S ECONOMY HAS DOUBLED SINCE 1976 AN EXTRA $35,000 PER HOUSEHOLD SQUEEZE ON MEDIAN FULL-TIME EARNINGS BUT DESPITE THIS GROWTH THE DECK IS NOW PRIMARILY STACKED AGAINST AFFECTING YOUNG CANADIANS UNDER 45 Earnings $43,200 (2010) $48,700 (1976) Earnings For Age ARE HOLDING Total Income For Age 65+ ARE UP $44,600 (2010) $43,500 (1976) $49,500 (2010) $40,900 (1976) 2

3 RISE IN DUAL EARNERS: MAINTAIN TOTAL INCOME FOR UNDER 45; ADD >20% FOR 55+ Female LFP, % Age : 54% 2013: 83% Up $5,400 to $74,360 Female LFP, % Age : 29% 2013: 49% Up $14,420 to $82,140 THE PRIMARY DRIVER OF WEALTH FOR CANADIANS 50+ IS NOW THE PRIMARY SOURCE OF DEBT FOR YOUNGER CANADIANS $164,685 Age Change in home owner net wealth & debt, since $41,490 $382, $66,678 $90,308 Age under 35 Change in home owner net wealth & debt, since Market Value Increase in minus Mortgage Mortgage $202, Market Value minus Mortgage Increase in Mortgage 3

4 THE PRIMARY DRIVER OF WEALTH FOR CANADIANS 50+ IS NOW THE PRIMARY SOURCE OF DEBT FOR YOUNGER CANADIANS $185,202 Age 65+ Change in home owner net wealth & debt, since $382, $116,083 $98,483 Age Change in home owner net wealth & debt, since Market Value minus Mortgage $11, Increase in Mortgage $202, Market Value minus Mortgage Increase in Mortgage YOUNG CANADIANS HAVE TO SAVE UP TO 3 TIMES LONGER FOR A 20% DOWN PAYMENT 4

5 Average Monthly Mortgage Payments Interest Rates 10.32%-13.36% Paid on 80% of Average home value $1,479 $382, $202, $1, Interest Rates 4.80%-6.81% Paid on 80% of Average home value YOUNG CANADIANS ARE SQUEEZED FOR 5

6 CANADIANS BUT DESPITE UNDER THIS GROWTH 45 THE PAY DECK HIGHER IS NOW HOME STACKED AGAINST YOUNG CANADIANS PRICES WITH LOWER MEDIAN EARNINGS Earnings $43,200 (2010) $48,700 (1976) 67% 30% $23,000 $16,000 $382,513 (2013) $202,794 (1976) Observation 2: Younger Canada can t work our way out of the Squeeze without giving up something fundamental 6

7 YOUNG WOMEN (UNDER 45) ARE WORKING MORE, BUT HOUSEHOLDS TRADING TIME AT HOME FOR LITTLE MONEY Female LFP, % Age : 54% 2013: 83% Up $5,400 to $74,360 Postpone, Abandon Family Aspirations THE SQUEEZE TIGHTENS WHEN STARTING A FAMILY 7

8 GENERATIONS RAISING YOUNG KIDS ARE SQUEEZED FOR of kindergarten children are 25%-33% vulnerable 8

9 CANADA HAS PRIORITIZED POLICY IN PREPARATION FOR AGING POPULATION $141b $88b $53b $82b $21.1b $21.6b 1976: 29% of Seniors were poor. Today: around 6% 9

10 CANADA HAS PRIORITIZED POLICY IN PREPARATION FOR AGING POPULATION $141b $88b $53b $82b $21.1b $21.6b CANADIAN GOVERNMENTS NOW SPEND ~$45,000 ~$12,000 10

11 OVER AGE 65 Other Pension Income Credit $232 Pension Income Splitting $296 Recreation & Culture $487 Age Tax Credit $595 Tax Breaks Housing $613 RRSP Subsidies $3,181 RPP Subsidies $4,033 Old Age Security $7,694 CPP/QPP $8,942 Medical Care $12,758 $38,000 $12,000 UNDER AGE 45 Other $141 UCCB $160 Parental Leave $215 Workers Comp $234 Other Childrens Tax Credits $303 Child Care, Kids Under 6 $354 Tax Breaks Housing $472 Employment Insurance $487 Recreation & Culture $535 CCTB/NCBS $2,241 Post-secondary $2,337 Medical Care $2,635 Grade 1-12 OVER AGE 65 Other Pension Income Credit $232 Pension Income Splitting $296 Recreation & Culture $487 Age Tax Credit $595 Tax Breaks Housing $613 RRSP Subsidies $3,181 RPP Subsidies $4,033 Old Age Security $7,694 CPP/QPP $8,942 Medical Care $12,758 $38,000 $12,000 UNDER AGE 45 Other $141 UCCB $160 Parental Leave $215 Workers Comp $234 Other Childrens Tax Credits $303 Child Care, Kids Under 6 $354 Tax Breaks Housing $472 Employment Insurance $487 Recreation & Culture $535 CCTB/NCBS $2,241 Post-secondary $2,337 Medical Care $2,635 Grade

12 Observation 3: Housing and Wages Squeeze Younger Canada. Housing and Wage Policies are Not Primary Solutions. MARKETS BUT DESPITE THIS LARGELY GROWTH THE DETERMINE DECK IS NOW STACKED AGAINST YOUNG CANADIANS HOME PRICES AND WAGES Earnings $43,200 (2010) $48,700 (1976) POLICY INFLUENCES MINIMUMS MAJORITY NOT RELYING ON MINIMUM WAGES OR RENTAL ASSISTANCE $382,513 (2013) $202,794 (1976) 12

13 Observation 4: Family Policy can be a Primary Solution. NEW DEAL for FAMILIES 13

14 $50,000 CAN Income Splitting doesn t accomplish the same. $0 for dual earners with similar incomes $0 for lone parents $1,088 for couple where one earner makes median earnings 14

15 NEW DEAL for FAMILIES Majority gain substantially while Eliminating Poverty for Families with Young Children 3 4 Triple the National Child Benefit Supplement Raise Shelter Allowance on Social Assistance by 50% 15

16 NEW DEAL REQUIRES NARROWING THE GENERATIONAL SPENDING GAP ONLY SLIGHTLY ~$45,000 ~$12,000 NEW DEAL REQUIRES NARROWING THE GENERATIONAL SPENDING GAP ONLY SLIGHTLY ~$45,000 +~$1,000 ~$12,000 16

17 Observation 4: WE COULD ADAPT POLICY FOR GEN SQUEEZE AS WE DO FOR RETIREES BUT WE AREN T FEDERAL BUDGET $11.5 billion/year for 5.9 million age 65+ ~$45,000 +$1.7 billion/year for 20.2 million under age 45 ~$12,000 17

18 BC BUDGET $1 billion/year for.83 million age 65+ ~$45,000 No change/year for 2.6 million under age 45 ~$12,000 ONTARIO BUDGET $1.5 billion/year for 2.3 million age 65+ ~$45,000 No change/year for 7.8 million under age 45 ~$12,000 18

19 NOVA SCOTIA BUDGET $147 million/year for.172 million age 65+ ~$45,000 -$31 million/year for.482 million under age 45 ~$12,000 Why? 19

20 PEOPLE POWER EXERCISED EFFECTIVELY SHAPES THE GENERATIONAL SPENDING GAP ~$45,000 ~$12,000 PEOPLE POWER EXERCISED DIFFERENTLY SHAPES THE GENERATIONAL SPENDING GAP CARP has 300k+ members on march to a million ~$45,000 Under 45 have??? ~$12,000 20

21 Observation 5: Adapting Family Policy for Gen Squeeze doesn t require more policy research. Requires a novel Population Health Intervention A CARP for Younger Canada 21

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