Do youth really have it harder? - MoneySense

Do youth really have it harder?

Sure, young people have higher expenses, but they also have advantages that previous generations didn’t have.


When the Quebec student strike began in February, no one in the province, nor the country, was prepared for the strength and dogged determination of the movement. It quickly became apparent that the protests were not just about tuition hikes: they were fuelled by a sense that young people today face a barrage of economic ills that their parents and grandparents didn’t, such as huge debt loads, limited career options and soaring home prices. But is it really true that young people today are getting a raw deal compared with previous generations?

According to Mercer actuary Malcolm Hamilton, the current crop of young adults is likely to accumulate more student debt, but their education will pay off in the long run. A greater percentage of young people are going to college and university than ever before, and they will find it easier to land good jobs—albeit in a larger, more competitive workplace.

Hamilton admits that the job market is tough, but that’s nothing new. “Weak job markets for young people have been a regular occurrence for some time,” he says. “If you go back to the early ’90s, youth unemployment rates were much higher.”

But what about housing prices? In recent years, the cost of a typical house has soared to five times the average income. Hamilton points out that this phenomenon has been largely fed by astoundingly low interest rates—and low rates actually make homes more affordable: in 1981, 42% of pre-tax household income went toward mortgage payments, and this dropped to 30% in 1991, and 20% in 2001. Now it’s sitting pretty at 24%. “To complain about house prices being high is like complaining about mortgage rates being low,” says Hamilton.

And while recent investment returns have not come close to those of the 1980s and 1990s, today’s twentysomethings have access to far better investing tools than their parents, who grew up in the golden age of high-cost mutual funds and $200 stock trades. Low-cost exchange-traded funds (ETFs) and online brokerages offer tremendous opportunities for young people looking to build wealth over a lifetime.