Born into greater income inequality than previous generations, millennial home buyers continue to struggle against enormous fiscal pressures, Statistics Canada suggested in a recent study which found that the top 1% of income earners’ share of national income swelled from 8.9% in 1980 to 13.6% in 2010.
The earning differences between millennials and other buyer cohorts are especially stark when taking into account just how much income mobility has been enjoyed by different generations, Better Dwelling said in its analysis of the StatsCan report.
“Canada used to be a place with a low level of inequality, where kids moved up classes. By the time millennials were born, that was no longer the case. Their parents faced more inequality, and a child’s economic outcome was more closely tied to their parent’s wealth,” Better Dwelling said.
To compare across generations with vastly different economic conditions, the StatsCan study utilized the Gini coefficient, which measures the general gap between the richest and poorest members of each demographic. The higher the reading, the more pronounced the inequality.
Assuming before-tax incomes and an average first-time home purchase age of 25-29 years old, the generation born in 1963 had a Gini coefficient of 33.77. To compare, the 1972 cohort’s reading was 35.64, and the millennial generation posted a 38.13 coefficient.
“A clear pattern toward decreasing intergenerational mobility can be observed from the earliest to the latest birth cohorts,” StatsCan said in its report. Similar trends have been uncovered in other highly developed economies.
The findings also underscored the importance of the famed “bank of mom and dad”, at least for the other 99% of the population.
“More inequality has gone hand in hand with lower mobility,” StatsCan noted, adding that while the association is “purely correlational” at this point, the fact that such a pattern plays out across entire countries and time periods “points to something more than simply a spurious correlation.”