Millennials earn more than their parents did — but owe a lot more

Millennials make more money than previous generations in that demographic cohort, but are also saddled with much more debt, even adjusted for inflation, according to new Statistics Canada data that confirms what has been long suspected.

The data agency analyzed income, wealth and debt levels for different Canadian generations over various timeframes to see how they are doing, compared to each other.

Among the main takeaways are young people are wealthier than previous generations were at the same point in their lives.

For the purposes of this study, Statistics Canada considered millennials to be between 25 and 34 years old in 2016. The agency then compared them with the same age group in 1999 (generation X) and young people in 1984 who are today's baby boomers.

The millennial cohort had a median after-tax household income of $44,093 in 2016, by Statistics Canada's calculations. That compares with $33,276 for gen-Xers and $33,350 for boomers at the same age. Those figures are inflation adjusted, meaning an apples-to-apples comparison.

But while millennials incomes were higher on the whole, their overall debt loads were much higher, too.

Education costs are one reason. Almost three-quarters of millennials pursue some sort of higher education after high school, higher than the just over half of gen-Xers who did. And almost a quarter of them carried student debt in 2016 with a median value of $12,000.

"This compares to 14.8 per cent and $9,675 for generation-X families at the same age in 1999," Statistics Canada said.

Financial counsellor Jessica Moorhouse says education has become a double-edged sword: it's seen as key to ensuring wealth, but also costs more to obtain — and comes with no guarantees of a high-paying job as a result.

"When we grew up, we were given a blueprint for how to be a successful adult based on what our parents did," she says, rattling off the typical path of working hard in school so you can get into college, because that sets you up to get a good job for life with a pension.

"But we did all those things and none of it worked," she said. "The whole game changed."

Home ownership is also seen as key to wealth generation for millennials, and there, too, it's playing out in the current generation being more indebted than the previous one.

The median mortgage level for a homeowning millennial was $218,000 in 2016, Statistics Canada said — more than 2.5 times the average annual income for a young family who owned a home that year.

For the previous generation, the typical mortgage at that age was $117,481. For boomers, it was $67,802 — barely more than the typical after-tax income of $64,800 for a young family owning a home.

"Higher values for principal residences mainly explain the increases in net worth from one generation to the next, yet these were also coupled with more mortgage debt," Statistics Canada said.

Income inequality getting worse too

The impact of house prices on millennial wealth levels is so large that it's causing a wider than usual gulf within the same generation — between those who own their homes, and those who don't.

Millennials aged 30 to 34 who owned a home in 2016 were worth $261,900 on average. Those who didn't, however, had a net worth of just $18,400. Only eight per cent of millennial renters had net worth greater than the median net worth of homeowners in the same age group, Statistics Canada said.

Not surprisingly, millennials in Toronto and Vancouver are, on the whole, much richer than their peers in other parts of Canada, largely because of higher house prices among the lucky few who've managed to buy in.

That's why millennials are often told it makes financial sense to move to smaller cities with cheaper real estate, but Moorhouse notes those cities also generally come with much lower salaries and worse job markets, which negates some of those theoretical benefits.

House prices are a big factor in widening the income gap within the current generation, too. The poorest 25 per cent of Canadian millennials were worth $9,500 each in 2016, while the richest quarter of them were worth $253,900.

A generation ago, that gap was much smaller, from $6,220 for the poorest slice of gen-Xers to a net worth of $126,900 for the richest.

To Moorhouse, the widening gap between rich and poor is one of the most interesting parts of the data.

"There's less of a middle class in this millennial world. That's where we're going, because even though we're making more money, there's a lot more things we have to pay for."