|By Marketwired .||
|May 15, 2014 06:00 AM EDT||
TORONTO, ONTARIO -- (Marketwired) -- 05/15/14 -- While baby boomers prospered financially in the past 30 years, their kids - despite being saddled with more debt and costlier homes - are set to start their careers and family life on firmer footing, according to a new report from BMO Economics released today.
"There is a popular notion that Millennials will become the first generation to do worse than their parents economically," said Sal Guatieri, Senior Economist, BMO Capital Markets. "However, apart from taking on bigger loans to buy pricier homes, young Canadians today enjoy better job prospects, earn more and are wealthier than in the 1980s."
The report analyzed a number of economic factors to compare Millennials -- those born between 1981 and 2001 -- to the baby boomer generation.
Jobs: Labour markets are friendlier now for young people compared with three decades ago.
-- Millennials looking for a job have a 93 per cent chance of finding one, compared with 90 per cent for those in the mid-1980s. -- Unemployment soared in the early 80s, especially for young people. Today, unemployed youth go without work almost a month less than in the mid-80s. -- More young people today either have a job or are searching for one, though fewer work full-time.
Incomes: Millennials' higher education leads to slightly higher incomes than their parents.
-- Adjusted for inflation, the median income of people aged 25 to 34 years rose from $33,900 in 1984-88 to $34,700 in 2011; Millennials can buy about 2 per cent more goods and services than their parents could in 1984.
"Having 2 per cent more buying power doesn't sound like much, but the difference adds up over time," noted Mr. Guatieri. "One caveat is that median income was higher in the 1970s, before the 1980s' recession took a severe toll on workers, so the starting point for our comparison matters."
Wealth: Young families are wealthier than their parents were three decades ago.
-- Median net worth of households headed by someone aged 25 to 34 years was $52,000 in 2012, almost double that in 1984 ($28,752 in 2012 constant dollars). -- For families headed by someone aged 35 to 44 years, median net worth was $182,500 in 2012, again about twice as high as in 1984.
Debt: Though wealthier, debt levels are higher for young families.
-- In 2012, 84.4 per cent of those aged 25 to 34 years had debts compared with 82 per cent in 1984, and more young homeowners held a mortgage (85.6 per cent versus 79.2 per cent respectively) -- Young people are likely saddled with more student debt, considering that tuition costs have risen three times faster than consumer prices since 1984.
"While young families today have an opportunity to capitalize on favourable financial and economic circumstances, the way in which they manage their higher debt loads will be essential to securing long term financial stability," said Martin Nel, Vice President of Personal Banking Products, BMO Bank of Montreal. "And with interest rates set to rise in the near future, a comprehensive financial plan designed to reduce debt as quickly as possible can help them achieve this."
Housing: Millennials need to pay more to get their foot in the door
-- The average house price was 10.4 times the median income of young families in 2011, more than double the ratio of thirty years ago, relative to income. Despite double-digit mortgage rates in 1984, young homeowners today must pay more to service a mortgage. -- Many Millennials are priced out of the Vancouver and Toronto detached housing markets, or will need to take on large debts to get into them.
The full report is available upon request.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified financial services organization based in North America. The bank offers a broad range of retail banking, wealth management and investment banking products and services to more than 12 million customers. BMO Financial Group had total assets of $593 billion and more than 45,500 employees at January 31, 2014.