*Some* of the kids are all right
February 26, 2016 7:35 AM   Subscribe

The current crop of 28-34 year old Canadians is the wealthiest ever, according to an internal Finance Canada study obtained by the CBC. This group averaged a net worth of $93k, compared to previous 28-34 year olds' more typical $60K. Most of this wealth is concentrated in the top 10%, whose net worth doubled to $500k, while most others saw a gain of only $1500 (CBC video). But efforts to narrow the gap are underway, in some corners: Ontario announced that students with family incomes under $50K will be getting free tuition for college or university.
posted by cotton dress sock (39 comments total) 5 users marked this as a favorite
Free grants that cover that average tuition (currently estimated at about $6000/year), not the full ride for any program they choose. More expensive programs can come in at about $12,000/year, so other grants/loans/their own money would be used to cover the difference. But this is still a pretty nice change, at little or no additional cost to government, apparently, than current setup.
posted by maudlin at 7:42 AM on February 26, 2016 [3 favorites]

1.00 CAD = 0.73 USD, in case you're wondering.
posted by djb at 7:45 AM on February 26, 2016

Or, if you look closely: wealthy 28-34 year olds are wealthier now than that age group has been in the past, just like wealthy people of any other age group. The bottom 90% are not doing that well.
posted by jeather at 7:46 AM on February 26, 2016 [29 favorites]

djb, it's also worth noting that international students get charged substantially more tuition. At my alma mater, international student tuition plus fees were about $35k for those entering in 2014 (and $40k for those entering in 2015), compared to $6000 for those entering as domestic students in 2014.
posted by maudlin at 7:51 AM on February 26, 2016

Yeah, the skew is ridiculous, and in keeping with sharpening inequality across the board. I'm happy there's some kind of effort to remedy it. (Not sure Wynne's government necessarily used that study in their planning, though.)

I like that a bunch of researchers took it upon themselves to work this out: "Finance Canada researchers say they carried out the work last summer on their own initiative, rather than responding to a request from then-finance minister Joe Oliver, because of a gap in existing research. The report was delivered to the deputy minister in the middle of the election campaign, they say, only because it was ready."
posted by cotton dress sock at 7:51 AM on February 26, 2016

"Of all the wealth held by those in their 20s, 70 per cent is held by the top 10 per cent and the bottom 70 per cent hold one per cent of that wealth."

The headline is outrageously misleading. It may as well be "Rich kids richer as housing goes apeshit"
posted by Damienmce at 7:57 AM on February 26, 2016 [35 favorites]

I was lucky enough to not have to pay tuition for my undergraduate degree – it was covered by a purely luck-based scholarship that I got when I was born and definitely influenced/determined where I went to school. I still paid fees (approx. $1500 at my school each year) but other than that I was free. I worked three years in high school (15 – 25 hours a week at a grocery store) and paid for my residence fees in first year myself. I was lucky enough to work good summer jobs each year and pay my rent/living each year, and my parents gave me about $100 per month during school months. I graduated with no debt, went to a fully-funded MA program and graduated from that debt-free as well. I would not have felt comfortable going to grad school with undergraduate debt. I cannot imagine how differently my life would have played out if I had had undergraduate debt the way many of my classmates did. The opportunity for other students to have my experience, and have it not be based on pure luck but because the government has made this a priority, is wonderful in my eyes.

My parents, who were admittedly rather young when they had me, are still paying off student debt for two degrees each and they’re in their mid-40s. My father would definitely have been eligible for this type of scholarship for the two undergraduate degrees he got. I am currently in my last semester of law school and am sitting under more debt than either of them ever had. I would not be in law school if I had been saddled with undergraduate debt; I would not have felt safe enough to make that leap. I’m very happy with this decision by the government.
posted by hepta at 7:59 AM on February 26, 2016 [2 favorites]

The wealth of Canada's middle class as a whole is doing really well on paper right now because we are coming off a decade of high resource prices that eased the Canadian economy through the recession, and we are still on the perplexing upswing of a housing bubble that has seen basically every middle class property owner in Vancouver or Toronto suddenly become a paper millionaire.

I grew up in North Vancouver, and my father is born in the mid-50s, so he's a pretty average boomer. Even after he divorced my mother and had to pay child support, he was able to raise two more kids with his second wife and buy three houses, one to live in and two to rent out, in the depressed real estate market of the early 1990s. This was on income from being a commercial salmon fisherman operating his own gillnetter/troller, occasionally hiring a deckhand. Many people who operate boats like his today are so poor they live on them year round, and almost certainly priced out of the Vancouver rental market, let alone buying.

Those properties he bought are worth well north of a million dollars each now, and will hit two million a piece soon if the market doesn't crash.

Lots of people his age have used this wealth they found to give their kids a boost onto the property ladder, which while risky has certainly paid off. I know a few people my age (early 30s) whose parents gave them a down-payment on houses once they were out of school, then helped them with the mortgage while they started their careers. Those kids have had houses for 10 years now, some of them, and have over a million in accumulated equity. We'll see if that wealth is real if the market ever truly crashes, but for now the ones lucky enough to own property are swimming in it, and the rest are left out in the cold.
posted by [expletive deleted] at 8:23 AM on February 26, 2016 [7 favorites]

*opens wallet*
*moth flies out*

posted by Fizz at 8:27 AM on February 26, 2016 [9 favorites]

My student loans will finally be paid off in 4 months. 8 months short of turning 50.

I've constantly fallen just through the cracks of OSAP timing-wise. Non-contributing parents income and assets too high. Grants ended just as I was eligible for them. Tuition started rocketing up just as I was committing to long term education. Loan forgiveness programs were constantly just out of my reach for one reason or another.

I hear this announcement and I just think how painful it will be for the kids whose parents make $50,001.
posted by srboisvert at 8:33 AM on February 26, 2016 [4 favorites]

I'm sure some people have that kind of wealth but I also know a lot of people in that age range who are struggling. I'd really like to see the median number reported as the mean in this type of situation is completely misleading.

As [expletive deleted] notes, the housing situation in most Canadian cities is a huge factor. Those who bought in the 80s and 90s are getting a major windfall. I know people on my street in Ottawa who paid $30,000 for their house less than 20 years ago- nothing in my neighborhood sells for less than $500,000 now.

This report must be counting the possible sale price of housing against mortgages- on paper my family probably has "assets" of $200k+ but that is certainly not cash and I'd have to sell my house to access it.

And yeah, raising tuition overall and then offering a "grant" for some groups is not a huge help for everyone.

I haven't dug through the budget but I saw someone mention that there is going to be a basic income pilot project in one city in Ontario. That I definitely support.

Oh, and for those who aren't familiar with the previous government- Harper basically stopped doing studies or collecting data as much as possible. I'm not surprised that government workers carried out the project themselves without being directed to.
posted by betsybetsy at 8:36 AM on February 26, 2016 [1 favorite]

I hear this announcement and I just think how painful it will be for the kids whose parents make $50,001.

Actually there is a different award just announced for households earning $80K, so for once middle-income households (that in Canada) are going to get some help.

In British Columbia we have to pay a healthcare "premium" called Medical Services Plan (MSP). This is on top of the taxes we pay for universal healthcare. At the moment our family of four is paying around $150 a month for MSP. I'm self-employed so some years that can add up to 5+% of my annual income.

The BC government recently announced "changes" to MSP, but it's a shell game. I now longer have to pay for my kids (yay!) but now my wife and I have to pay more individually. So our total household MSP bill will go up. The big news was that single-parent (but not single income households) will pay less.

So the Ontario announcement, where middle income families also get some help, makes me happy.
posted by My Dad at 8:40 AM on February 26, 2016 [1 favorite]

I am probably in this "wealthy" demographic and I can chalk it up entirely to having cheap tuition. I was able to save enough each summer to pay my tuition and residence fees (graduated university in 2005). Not having $50,000 in student debt allowed me to save enough in the 10 years after university to buy some property.

Many, if not most of the baby boom generation, were able to afford a home and a car after getting a high school diploma. Today, you need a university degree to get a decent paying job. We need to at least bring tuition in line with the salary of a summer student. It should preferably be free, if we want each successive generation to keep succeeding.

Also - I've had to move to a major Canadian city to continue my career, and property ownership is now off the table. I'm OK with that.
posted by Brodiggitty at 8:40 AM on February 26, 2016

The other thing worth considering is what happens to the middle class in Canada once the effects of the resource crash become more strongly reflected in the statistics. The Canadian economy is basically a three-legged stool of the public sector, resource extraction, and FIRE (which can be basically reduced to resource extraction financialization, public sector institutional investors plus real estate and consumer debt, so basically only real estate is not dependent on the other legs). Manufacturing in Canada is dead for the foreseeable future.

So out of those three legs, the resource one (the only one that actually contributed positively to Canada's current account balance) is basically on life support, and is shedding what is left of the middle class jobs that aren't tied to real estate or the public sector. Real estate likely has a little life left because the cratering Loonie has made our overheated markets more attractive to foreign buyers.

To someone not from Vancouver, it's hard to explain how bizarre it has become there. There are basically no good jobs, but housing is San Francisco/New York/London expensive, and the people who bought when it was a depressed overgrown logging town in the 80s and 90s are fantastically wealthy now. They are now handing that wealth to their kids, and that is where these numbers are coming from.

The street I grew up on was a bunch of post-war bungalows full of 2-income, 2.5 kid middle class families. Schoolteachers and carpenters some of whom paid for their houses in cash. As those people sell their homes, it is rapidly turning into a street full of $5,000,000 empty mcmansions used as investment vehicles. The schoolteachers retire to condos in Cabo San Lucas where they can live comfortably on their pension and they can give $250,000 to each of their 2 kids for a down payment, while keeping another million in the bank for a rainy day.
posted by [expletive deleted] at 8:47 AM on February 26, 2016 [7 favorites]

Trying not to have GRRRR! feelings towards my father-in-law, who sold a giant house on Grand Boulevard in North Vancouver in the mid-eighties. God only knows what it's worth now. DAMMIT!!
posted by crazylegs at 8:52 AM on February 26, 2016

My guess is that this bump in net worth is entirely a result of the very rapidly growing values in the Canadian real estate market (recall that we've yet to see a crash similar to what the US experienced). I'm guessing 30-40% of this age group own a home*. They may still have massive debts and mediocre incomes, but as long as they have a mortgaged property in of the hot markets (Vancouver, Toronto, etc) they will have seen rapidly growing net worths.

For example, I'm just a few years older than this group, and on paper, me and my wife's net worth would probably be about $200K each. But it's all from increased real estate value – take away our house and sadly we'd be close to $0 (if not negative – I'm scared to do the actual math).

*Ownership rate by age in 2011
posted by Kabanos at 9:08 AM on February 26, 2016

In other news, income trusts and other means to avoid inheritance tax aren't doing much. Rich stay richer.
posted by anthill at 9:21 AM on February 26, 2016

There is no inheritance tax as such in Canada.
posted by jeather at 9:25 AM on February 26, 2016

Where we live, Kingston, is one of those weird cities in that the rents are at Toronto prices but buying a house is still pretty affordable. The trade-off though is that if you're not fortunate enough to have a well-paying white collar job with three biggest employers (Queen's, RMC, KGH), you really have to hustle to find good employment. (I really don't like my job but it took me a year to find it.) So if you want to really excel in your chosen field, you head to Toronto, Ottawa, Montreal, or Vancouver and watch as you get the bigger paycheque, but the higher cost of living as well as very little chance to get on the property ladder.
posted by Kitteh at 9:30 AM on February 26, 2016 [1 favorite]

Being a 40 year old Canadian in Victoria BC, I can back up the assertions above about Vancouver. The article is bullshit - youth are saving more? No. This worth is coming from real estate, stocks and pensions. Saving is not going to get you anywhere.

I'm one of the more fortunate people whose parents have a house on a big property in Victoria, and I have a house here myself that I bought in 2011 that I now have about $300k in paper gain on due to this ridiculous market that is spilling over from Vancouver to the island. I also have a pension, and I will be inheriting the half of $2M or so from my parents' house (who were both teachers, by the way). This is if the market doesn't crash. I don't count on this money, don't count on it at all. I just know I can afford my mortgage.

You can't get here from saving. If you don't have property in BC as a young person, you're not seeing these huge paper gains that are making up the wealth figures seen here. I have friends who both bought condos in Vancouver 10-15 years ago and then married each other. They have $1.5m in equity with very little mortgage left. Do they see the benefit of this? No, not unless they're moving to Pemberton.

Then there's pensions, and stocks. Public sector pensioned jobs are vanishing, most kids don't have stock portfolios (where there have been massive gains the last few years) unless they're already rich.

There are two things to take away:

1. You can't benefit from the paper gain, unless you downsize, and even then the cash gain is marginal.
2. It's bad for the economy. Less jobs will be created if everyone is scrabbling and all this wealth is accumulated in housing. Young families are hooped.

I'd rather be on the paper gain side, for sure, but if you don't have genuine generational wealth beyond what you live in, young people are markedly worse off now, and the gap is growing. The low interest rate is crazy if you have the ability to leverage it, which again only richer/better educated people have any hope of doing.
posted by jimmythefish at 9:43 AM on February 26, 2016 [1 favorite]

Public sector pensioned jobs are vanishing,

More to the point, defined benefit pension plans are going the way of the dodo and are mainly available only in public-sector jobs. Few private sector employers offer them any more, opting instead for cheaper defined contribution plans (at least in cases where the work is permanent, not precarious, and the overall benefits package halfway decent).
posted by mandolin conspiracy at 10:10 AM on February 26, 2016

They have $1.5m in equity with very little mortgage left. Do they see the benefit of this? No, not unless they're moving to Pemberton.

So pretty much my dream life? I'd work some shmoe job a few months out of the year, spend the rest of it skiing and biking all day. Maybe finally knock the Pencil Chute off my bucket list. This looks like my kind of place. Centrally located, semi-detached, built in 1974, vinyl siding, 1100sqft, and less than $300k.
posted by [expletive deleted] at 10:33 AM on February 26, 2016 [1 favorite]

So pretty much my dream life? I'd work some shmoe job a few months out of the year, spend the rest of it skiing and biking all day.

Sure...the bum pension pays out based on your 5 best skiing years. Biking, not so much. The retirement plan is collecting cans.
posted by jimmythefish at 11:00 AM on February 26, 2016 [1 favorite]

If I had a million in the bank, my "retirement plan" would be spending then next 50 years at my current income level.
posted by Zalzidrax at 11:15 AM on February 26, 2016

It really would be nice to take housing out of the calculations as I can see appreciation in housing values being a big chunk of this increase in net worth.

That being said, I think younger people who have well-paying jobs are much more focussed on saving than in previous generations because A) they need to have more money in order to get a down payment on these expensive houses, B) they know they aren't going to be getting any large pension and have to save for retirement, and C) as per Piketty we live in a world where capital grows much faster than income so it makes sense to convert as much of your income into capital as possible.
posted by any portmanteau in a storm at 11:24 AM on February 26, 2016

To someone not from Vancouver, it's hard to explain how bizarre it has become there.

Anyone interested in Vancouver might do well to check this blog post out. It was an eye opener for me.
posted by Ashwagandha at 11:45 AM on February 26, 2016 [1 favorite]

such as African indigenous populations who have no trust for the government, or recent immigrants

Are there indigenous populations of Africans in Canada who aren't immigrants?
posted by LizBoBiz at 12:07 PM on February 26, 2016

Thanks for the info. I had no idea.
posted by LizBoBiz at 12:43 PM on February 26, 2016

The survey response rate was 68.6%. A significant factor in any census response rate are marginalized populations who virtually never respond, such as African indigenous populations who have no trust for the government, or recent immigrants who may not speak a great deal of English or French. Or a single mom who does not have time to fill out a 45 minute survey.

It should also be noted this implies you have a household - i.e., we do not count homeless people.

All this is to say - it would be really, really nice if we had more journalists in Canada who understood statistical surveys and could perhaps point out that virtually all of the people missed by a survey are those at the bottom of the net worth scale, and large-scale problems like people living in basements or needing roommates to have apartments are thoroughly masked by the design of this thing.

In terms of the response rate and bias in non-response, remember that this is StatsCan, not Joe's Survey Shack. You're not saying anything they don't know and haven't thought about. I promise if you download the data you'll find a survey weight variable that corrects for over- and under-representation of different demographic groups (like single mothers, immigrants etc.). It's not perfect, of course, but it's disingenuous to assume and imply that StatsCan is conducting research in complete ignorance of the first thing every undergrad research methods student says when you put a paper in front of them.
posted by If only I had a penguin... at 1:02 PM on February 26, 2016 [3 favorites]

Here's the info on the weighting of the data to correct for many of the sources of measurement error that scrittore mentions.
posted by If only I had a penguin... at 1:29 PM on February 26, 2016 [2 favorites]

First, I just realized that it doesn't make any sense to be talking about households here. The report (which apparently is not available online) is measuring individual net worth, not household net worth. The link you provided gives household net worth and thus the statscan definition of a household, but that's not what's being used in the report. So the guy in his parents basement with nothing to his name is being counted as a guy with nothing to his name, not excluded from the findings, nor having a third of his parents' net worth assigned to him. Note that the survey asks if R specifically owns the home and what proportion of the home they own, as well as all the asset questions being about personal assets.

So - for example - household size in this sample is corrected against the Census. If a large number of adults are living at home with their parents (a key assertion made by both generations recently), this is true both in the population and the corrected sample, but the conclusion that the person in the basement's net worth is well explained by their household net worth is incorrect.

I'm not sure I understand what you're saying here about the person's net worth being explained by their household net worth. There doesn't seem to be anything about household net worth in the report, at least as mentioned in the article. On sampling there are at least two distinct issues: Who is in the population (so it doesn't include people living on reserves, communes, prisons or military housing). Weighting can't correct for that. Then there's "there are too many married couples and not enough singles" where weighting means you count each married couple a little less, each single a little more, so that your parameters simulate what you would have had if you had matched the married:single ratio in the population. This doesn't use the household net worth to account for anything.

and yes "The lower the response rate the greater the potential for non-response bias." that's why they do the weighting. That's their point: Systematic errors are a problem so we address that by weighting.
posted by If only I had a penguin... at 2:25 PM on February 26, 2016 [1 favorite]

I think something we can agree on is that reporters should just let us read the report ourselves.
posted by If only I had a penguin... at 2:32 PM on February 26, 2016

It's looking like the biggest financial mistake I'll ever make in my life was not taking every penny I owned at the time (which wasn't much) and buying a house in Leslieville when my wife and I moved there in 2001, when you could still get a place for $200-$300 G.

Toronto and Vancouver remind me of that joke about how nobody drives in New York City; "No-one lives there. It's too expensive."
posted by The Card Cheat at 2:50 PM on February 26, 2016 [2 favorites]

On the other hand, I was at a party last weekend and met a guy who was some sort of Bay St. finance dude. After a few drinks he couldn't stop going on about how the whole city was over-leveraged in housing, one interest rate hike away from bankruptcy, etc.
posted by The Card Cheat at 2:57 PM on February 26, 2016

Toronto and Vancouver remind me of that joke about how nobody drives in New York City; "No-one lives there. It's too expensive."

Except instead of a joke, you have rich "taxpayers" who don't even live here, yet still entitled to vote here telling me "if you can't afford to live here, just leave", despite Toronto, Vancouver and Whistler being literally the only places on earth where I have friends or family and am also legally entitled to work.
posted by [expletive deleted] at 2:59 PM on February 26, 2016

The funny thing is I'm so incensed about this, but I'm not exactly hard done by. I make enough to live, just not enough to own property. I can only imagine how brutal it must be for the tons of people here trying to raise a family on minimum wage. The only thing that really upsets me personally is when I get lectured at about my lack of financial acumen by people who essentially won the lottery.
posted by [expletive deleted] at 3:03 PM on February 26, 2016 [1 favorite]

The only thing that really upsets me personally is when I get lectured at about my lack of financial acumen by people who essentially won the lottery.

Maybe it is a personal failing, but this is the thing that gets me riled up like nothing else. Being told by people who were just plain lucky what I am supposedly doing right or wrong angers me out of proportion to the actual situation. By no means to I think badly of someone who is doing good because their parents had money or they bought a house at the right moment, but I also don't really want their life advice.
posted by Dip Flash at 7:37 PM on February 26, 2016

There is no inheritance tax as such in Canada.

It is not called such, but in effect, the tax on estates in Canada is much higher than in the U.S. All property of the estate, with the exception of personal residence, is taxed for capital gains as if it were sold on the date of death. Any RRSPs are taxed as if the entire account were withdrawn on the date of death. This RRSP income and capital gains on assets are included on a final year income tax return for the deceased, which can amount to a whopping big tax bill.

In contrast, in the U.S. there is no estate tax at all for the first $5.5 million ($11 million for a married couple). Zip, nada, nothing. Any assets pass to heirs with stepped up cost basis so that heirs assume them tax free. Further, IRAs can be passed to heirs and the estate tax on the IRA can be used as a tax deduction by the heirs so they can spend from the IRA tax-free.

So, for example, Mitt Romney can pass his $100 million IRA to his heirs and it will be taxed approximately $40 million, leaving $60 million for his kids. They can use the $40 million of taxes paid by Mitt as a tax deduction meaning they can spend up to $40 million from the IRA without paying a dime of taxes. Or alternatively, they can leave the $60 million in the IRA earning compounded income tax-deferred, removing only a few percent each year for their entire lives.
posted by JackFlash at 4:15 PM on February 27, 2016

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