Young Canadians’ incomes still outpaced by inflation: report

Young Canadian households are seeing their incomes increase faster than any other age group since 2020, but the gains are meaningless as runaway inflation continues to erase their earnings.

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Young Canadian households are seeing their incomes increase faster than any other age group since 2020, but the gains are meaningless as runaway inflation continues to erase their earnings.

Young Canadians’ wealth gains have been primarily driven by “an increase in financial assets, including cash deposits, and sizable growth in the value of their properties,” according to a new Royal Bank of Canada report.

However, despite many Canadians under 35 doubling their income over the last five years, their disposable income has shrunk due to inflation and increased labour market volatility.

Young Canadians are disproportionately employed by “industries that are vulnerable to economic shocks like retail, accommodation and food services.”

This cohort has also taken longer to find work, which contributes to “labour market weakness for this age group,” said RBC economist and report author Rachel Battaglia.

“These headwinds have steepened the drop in the employment rate for young Canadians. The employment rate for those under-35 is set to drop 3 percentage points this year relative to 2020, indicating a falling share of young people earning employment income in Canada,” Battaglia said Wednesday.

Young workers account for nearly 40 per cent of the rise in Canada’s unemployment rate, despite a large number of them being recent graduates unable to find work.

Additionally, much of the wealth younger Canadians built during the pandemic era was thanks to government aid, such as the Canada Emergency Response Benefit (CERB).

While some bought a house during the COVID-19 pandemic, benefiting from rock-bottom interest rates, others chose to avoid mortgage debt altogether.

“By postponing or forgoing homebuying due to affordability constraints, some young households avoid new mortgage debt, while those that own real estate retain pandemic-era price gains,” reads the report.

“The disconnect between income and wealth for young Canadians raises important questions about their financial security as housing and equity markets normalize and the boost from earlier government support continues to dissipate.”

Growth in disposable income for young Canadians has been the lowest of any age group since 2020, increasing only 18 per cent. This keeps it 16 percentage points below those aged 45 to 55 and eight points below the national average.

“This makes under-35s the only group where income growth has failed to keep pace with inflation,” she said.