If you want to see proof of the erosion of the middle class, look no further than those born between 1982 and 1991.
Millennials are generally seen as a generation that’s worse off than their parents, but that isn’t entirely true. When trying to measure the wealth of my generation, the mistake is treating millennials as a single cohort.
In reality, there are two distinct classes: the millennials who are thriving and everybody else. A 2019 Statistics Canada study, which explored whether millennials are better or worse off than previous generations, revealed that rich millennials are doing better than any generation before them. The top 10 per cent of millennials have a shockingly high median net worth of $588,600, double that of the top 10 per cent of the Gen X-ers.
But the surprise isn’t that rich millennials are absurdly wealthy – it’s that they are so much better off than the rest of their cohort.
High-net-worth and low-net-worth millennials are experiencing parallel but completely different financial lives because of postsecondary education, housing and income. For the richest 10 per cent of millennials, these three things magnified and multiplied their wealth beyond that of any previous generation. For the remaining 90 per cent, the same three factors sabotaged their lifetime wealth accumulation in a way most of them may never recover from.
The top 10 per cent of millennials hold 55 per cent of the total wealth of their generation. They are high income earners and homeowners, with low debts and ample financial assets. They are thriving, while the bottom 90 per cent of millennials struggle with high student debt loads, unaffordable housing and stagnant wages.
This divide is so severe it has eroded anything in between. In fact, our worst socioeconomic fears have come true for this generation: There is no such thing as a millennial middle class.
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Millennials are the most educated generation in history, with 70 per cent holding a postsecondary diploma or degree. This educational attainment has delivered the higher incomes it promised, with millennials earning one-third more than Gen X-ers did at age 30.
Those whose tuition was paid for by the Bank of Mom and Dad are exceptionally blessed, getting to move into those high-earning careers unencumbered by hefty student loan debt. Those who had to pay for their own postsecondary educations find their student loan payments large enough to affect their qualification for a mortgage and leave little left over to build tax-free savings accounts and registered retirement savings plans.
Some of these largest income gains over the past two decades have been in technology. Millennials came of age with the internet, and they make up the majority of founders and early employees of many tech startups. Those who joined early internet companies were rewarded with high salaries and stock options.
Canada’s own tech darling, Ottawa-based Shopify Inc., was founded in 2006 and boasts more than 7,000 employees and a market capitalization of around $105-billion. It can be credited with making a number of millennials into millionaires, including employees, stockholders and even its users, young entrepreneurs who capitalized on e-commerce.
High-earning millennials had the income to secure themselves a foothold in Canada’s overheated housing market, and have watched that multiply their net worth in only a handful of years. If they received down-payment gifts from parents, they’re even further ahead.
Expensive housing has been one of the most powerful wealth divides of the millennial generation. It amplified the wealth of those already in it, and slammed the door shut on those hoping to get in – pun intended.
We are already in the middle of a $1-trillion generational wealth transfer, as boomer parents hand over financial assets to their millennial children. However, it’s unlikely this will be enough to lift the average millennial into some semblance of financial security.
Much of the wealth transfer has already happened, with boomer parents gifting millennial children cash for down payments, weddings and more. These cash gifts accrued for those who already had other advantages, such as paid-for postsecondary education.
The only solution to closing the gap in millennial wealth is cracking down on the tenets that created the divide. It’s not enough to tell millennials to give up their lattes and avocado toast, to work harder or to save more.
We need student loan forgiveness, affordable housing, and wages that keep pace with inflation. Without that, we are risking more than having an entire generation disgruntled by the wealth divide.
We are losing the last attainable rungs on the socioeconomic ladder and will be left with a two-tier Canada where everyone remains in the class in which they were born, without hope of ever changing their circumstances.
This is not the generational legacy millennials want to leave for Gen Z, who are likely to find themselves even worse off.
Bridget Casey, MBA (Finance), is founder of Money After Graduation, a financial eLearning company. You can follow her on Instagram & Twitter at @BridgieCasey
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Bridget Casey