Graduating from university, landing a well-paying job, owning a home, getting married and starting a family – these once attainable goals are quickly becoming out of reach for Millennials. If you think the Sandwich Generation has it tough, it fails in comparison to the challenges faced by today’s young workers.
The facts don’t lie – students are graduating with record-level debt and as a result delaying marriage and starting a family. What’s the culprit behind these drastic lifestyle changes? A weak labour market and eroding home affordability are the main factors, as today’s youth struggle just to scrap together the minimum five per cent down payment. Often referred to as the entitled generation, young workers today need a serious reality check if they expect the same lifestyle as their parents. Let’s take a look at the challenges faced and Gen Y and see if they’re up to the task.
Post-Secondary Education and Student Debt
The decision to attend university used to be simple – if you wanted to land a decent job, post secondary school was a must. Today it’s a different story, as entry-level jobs are no longer plentiful. A lot of university graduates are either finding themselves unemployed or struggling with underemployment (working a job with training and education requirements far below your qualifications).
Your success in the labour market greatly depends on your field of study – your chances of landing a job are bleak in careers where there are worker surpluses – elementary school teachers are a good example. With 60 per cent of post-secondary students graduating with an average debt of $27,000, it’s important to ask yourself whether they’ll be a job waiting. If you end up underemployed, not only do you still have to pay back your student debt, you’ll most likely have to push back important lifelong goals like owning a home by several years.
Landing a Job Out Of Reach For Many
Landing your first job out of university should be your first step towards the rest of your life, so why are the facts so frightening? Forty two per cent of young adults aged 20 to 29 are still living with their parents – one third more than a generation ago. Worse yet, the unemployment rate for youth aged 15 to 24 reached 14.1 per cent at the end of 2012, up from 11 per cent in the summer of 2008.
A weak labour market is to blame. Gen Y has more training, education and skills than any other generation, yet they’re being asked to work harder for less pay – something doesn’t add up. Contract work and job outsourcing has become the the norm – and it’s hard to plan a future when you don’t know if you’ll have a pay cheque next week. With baby boomers choosing to stay in the job market longer, the jobs Gen Y was promised are just not there.
Home Ownership – A Distant Goal
Despite historically low mortgage rates, homeownership is a pipe dream for a lot of Gen Yers. I know firsthand – a year and a half ago I purchased my first house, but with today’s stricter mortgage rules and skyrocketing home prices I wouldn’t even afford my own home. With double-digit price appreciation in Canada’s economic hubs like Toronto and Calgary, first-time homebuyers are finding themselves priced out of the market.
While my parents were married, had their mortgage paid off, and owned their first rental property in their late 20’s, most youth today will be lucky to own a home in their 30’s. Today the average age of first-time homebuyers is 29, but that will continue to climb if something isn’t done about housing affordability. Whether it’s giving first-time homebuyers a break on CMHC insurance or baby boomers assisting their children with their down payment, Gen Yers need a helping hand to get their foot in the door of the real estate market.
Retirement: Going Extinct?
If Generation Y expects the same benefits in retirement as past generations, think again. Canada is facing a serious demographic challenge – with fewer women having children, and with an overall longer life expectancy, the retirement crisis faced by baby boomers could be nothing compared the bleak retirement reality we face (if we can ever afford to leave the workforce). Generation Y is thinking twice about contributing to RRSPs – as tax revenues fall and government spending climbs, who knows what the tax rate will be when we retire.
Health care costs are a;so predicted to rise to a whopping 80 per cent of government spending in Ontario as baby boomer retire en mass – it may be a case of robbing the future to pay for the present. The age to start Old Age Security has already been upped to 67 from 65; I’m sure this is only the tip of the iceberg when it comes to reform in government benefits for retirees.
By starting a family later in life – or not starting one at all – who will pay for our benefits in our golden years? With only 40 per cent of Canadian workers with pension plans, it’s up to us to save for our retirement. Despite the warnings, consumer debt continues to climb and savings fall, as Generation Y doesn’t seem to be getting the message.
Is Generation Y Screwed?
Colourfully nicknamed “Generation Screwed,” the facts don’t paint a pretty picture for 20-somethings – but there’s still hope. Gen Y needs to learn the lost art of savings and face the reality that you can’t always have everything in life right now. Just because you graduated from university, it doesn’t mean you have a buy a house and a car right away.
By continuing to live frugally like a student after graduating, you can set yourself up for a brighter future. It all comes down to the basics like budgeting and living within your means – if you’re willing to work hard and make sacrifices, your chances of success will be that much better.