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Young, underpaid and angry: The coming clash over the income gap

David Stewart-Patterson



Vice-President, Corporate and Public Affairs

Originally published in iPolitics.ca September 23, 2014

The growing income divide between younger and older workers adds a new dimension to policy debates on key issues like pensions, health care and deficits — and to the campaign calculus for political parties.

A just-published report from the Conference Board of Canada shows that younger workers have been the losers in a three-decade rise in income inequality between generations. No matter how we sliced the data — men and women, individuals and couples, before and after tax — the trend has been consistent.

Experience matters, and older workers usually make more money than younger ones, but the gap has grown significantly. We compared the average income of Canadians between the ages of 50 and 54 with that of 25-to-29 year olds. In the mid-1980s, the after-tax income gap was 47 per cent. By the second half of the last decade, the gap had risen to 64 per cent.

At the very least, this creates an economic problem. 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.

The economic problem may eventually solve itself. A growing scarcity of labour as baby boomers retire should push incomes up for today’s younger workers. On the other hand, the real incomes of younger workers have stagnated for three decades — even as unemployment rates have dropped.

In the meantime, the increasing generational divide on income is also challenging our social values. The generation at the top of the income heap today fought long and hard for principles like equal pay for work of equal value — and yet their children face two-tier workplaces where they get paid less for the same work for the same employer.

How long will it be before younger Canadians start to push back? How long will they continue to support spending more public money on health care — money that primarily benefits the elderly but comes out of working-age pockets? How long will they accept getting lower pay and leaner pension plans while being told to work longer, save more and maybe pay higher taxes for that health care?

Most importantly from the political perspective, what happens if and when the younger generations dig in their heels?

On one side of the inter-generational income divide, political parties count on younger Canadians for the energy, enthusiasm and fresh ideas they bring to the table. They represent voters and potential partisans who will be around for a long time.

On the other side, older Canadians have a growing edge in numbers — and are much more likely to vote. Elections Canada says only 45 per cent of those between the ages of 25 and 34 voted in the last federal election, compared with 75 per cent of those aged 65-74.

The combined weight of numbers and degree of engagement suggests that seniors will continue to hold sway in the short term. However, if the trend in income inequality persists and drives younger adults from angst to anger, each party will have to assess when and how to shift policy gears.

Those decisions will be driven in part by where each party gets its existing support. According to Nanos Research, the Conservative Party garnered only 35 per cent support from those under 30 in the 2011 election, less than its 39.6 per cent share of the total vote. Under-30 support for the New Democrats was right in line with its national total, while both the Liberals and Greens attracted significantly higher support from younger voters.

Interestingly, though, the Conservatives have been the most visible proponents of policies friendly to the next generation. They have been adamant about the need to eliminate deficit financing (which transfers the cost of current public services to future taxpayers) and about limiting the growth of federal transfers for health care.

Since the late 1990s, meanwhile, income tax cuts launched under the Liberals have disproportionately benefited older and higher-income workers and account for much of the increase in inequality between generations in the most recent decade.

Our report suggests the potential for a growing clash of economic interests between younger and older Canadians — one that sooner or later may force each party to choose sides. At the very least, the growing generational income divide suggests all parties will need to think carefully about how they position their platforms and communicate their intent to younger voters.

 


For more information contact

Corporate Communications
613-526-3280
corpcomm@conferenceboard.ca


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