More spending power for Canada’s youth: BMO

Continued income growth should result in Canada’s youth achieving more spending power than their parents over their lifetimes, according to a report by BMO Economics.

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The report shows that an upturn in compensation growth, driven in part by the resource and housing booms, have generated decent gains in spending power since the mid-1990s, averaging just over 1% per annum.

“Since 1996, real median income has turned higher for all age groups, rising 18% to 2010,” said Sal Guatieri, vice president, BMO Capital Markets. “Furthermore, the annual gain of 1.2% was more than twice that in the United States during this period.”

The report says the upturn in median income that began in the mid-1990s corresponds to a similar upward shift in labour compensation, as total real labour compensation increased 24% since 1996 — about seven times faster than in the previous 15-year period.

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“This upward trend in income should continue, albeit at a slower pace in the near term, as the economy returns to full employment next year,” added Mr. Guatieri.

Guatieri noted that even modest further growth in real income would allow young people, who have lost considerable spending power relative to their peers of the 1970s due to severe recessions and growing post-secondary school enrolment, to achieve a greater increase in spending power as they advance into higher-paying jobs during their careers.

Overall, the report credits improved labour market conditions since the mid-90s for the upturn in compensation, with higher rates of employment and labour force participation combined with lower unemployment being the main drivers.

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Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.