Growing income gap between the old and the young
The income gap between the old and the young is increasing in Canada, according to the Conference Board of Canada.
The study revealed that older Canadians earn around 64 percent more than younger people after accounting for tax. This is 17 percent more than the difference in income between the old and the rich three decades ago.
The study, titled “The Bucks Stop Here: Trends in Income Inequality between Generations”, by David Stewart-Patterson, said:
“My gut feel was that young people were falling behind,” he said, referring to frequent stories about young adults still living in their parents’ basement, saddled with student debt and stuck in low-paying jobs. I think what the report does is confirm the plight of younger adults today is not just anecdotal. There really is a significant pattern here.”
The report compared the pre- and post-tax incomes of Canadians 25 to 29 years of age between people aged 50 to 54 years of age, using tax records from 1984-2010.
It doesn’t come as a surprise that older workers are earning more than younger workers as they usually have more experience and subsequently are better suited for higher, better paying, job positions.
However, the gap between the young and the old has been increasing over the past 27 years, according to the report. Stewart-Patterson noted that it’s also the case when taking into accounting tax policy, longer lifespans and the increasing rate of female participation in the workplace.
David said that the gap could possibly go down as the baby boom generation enters retirement, which would leave more jobs positions for younger workers – subsequently increasing wages among the young.
However, David warned that thirty years of better labor conditions have caused lower wages and a widened income gap. If this trend continues it could result in less economic growth and a lack of support for social programs, including health care.
“We’re clearly entering an era where we’ll have fewer people of working age available to work. As an economy, we’re going to be relying on fewer people to earn all the money that will create demand and provide tax revenue. We need workers to be earning more in the years ahead. And yet young people are starting behind.
“If you look back at the last 30 years, we’ve already seen significant decreases in typical unemployment rates. We used to think double- digit unemployment was normal in the 1980s.
“It’s easier to find a job (now) than it used to be. Yet wages at the bottom of the age scale have barely budged,” he said. Will these younger workers ever catch up? “That’s the big unknown.”
“The old economic policy mantra of jobs, jobs, jobs is out of date. What we really need to focus on is how to ensure every person in the labour force is able to earn to their potential. t’s not about creating more jobs but about creating better jobs.”