Younger workers lose out in three-decade rise of inequality between generations
Ottawa, September 23, 2014—Three decades of progress in reducing income inequality between men and women has been accompanied by a growing earnings gap between younger and older workers that could threaten future economic growth and social stability, according to new research from The Conference Board of Canada.
The report, The Bucks Stop Here: Trends in Income Inequality between Generations, finds that younger workers are making less money relative to their elders: as men and women, as individuals and couples, and both before and after tax.
- The income gap between older and younger workers has jumped over the past three decades: for women and men, for individuals and couples, and before and after tax.
- The average disposable income of Canadians between the ages of 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 trend in inequality, if it continues, could both limit future economic growth and trigger growing conflict between older haves and younger have-nots.
“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.”
It’s normal for older workers to make more money than those with less experience. But in the mid-1980s, the average after-tax income of Canadians between the ages of 50 and 54 was 47 per cent higher than that of 25-to-29 year olds. In recent years, that gap has jumped to 64 per cent.
The report notes 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 sustain the tax base that supports public services.
“We need average employment incomes in the years ahead to go up, and yet younger Canadians are falling behind,” said Stewart-Patterson. “This is a trend that could have serious consequences for employers, for labour unions, for governments and for communities. If the earnings of younger workers continue to lag, we also could see growing conflict within our society between older haves and younger have-nots.”
The report, based on 27 years of income tax data, finds that the size of the income gap between generations is bigger for men, but has been growing faster among women. Between 1984 and 2010, the gap in employment income for men grew from 53 per cent to 71 per cent, while for women it leaped from just 9 per cent to 43 per cent.
The report was funded by the Conference Board’s Research Reserve Fund and can be downloaded free of charge at http://www.conferenceboard.ca/e-library/default.aspx.