So, before I was rudely interrupted last week by Ontario’s government with its tuition/OSAP announcement, I was talking about whether the belief of Millennials that they are a uniquely put-upon generation was justified or not.  My view was they certainly are not if your basis of comparison was income or wealth of Millennials in Canada versus its predecessors (i.e. the so-called “Generation X. But other measures tell a different story.

In Canada, the balance on income and wealth tilts in favour of millennials; that’s not the case in the United States.  US Census Data shows that for 25-34 year-olds, inflation-adjusted income levels fell precipitously in the wake of the 2000 recession and did not recover until 2016; in other words, Gen X by and large was better off than millennials.  But if you look at disposable income, it’s a different story; student debt levels have nearly doubled in the US from the late 1990s, when Gen X was graduating.  In Canada, it was Gen X that bore the run-up in debt levels and debt has remained more or less constant ever since (see here and here).  Moreover, Canadian millennials are the beneficiaries of quite significantly reduced tax rates on middle income-earners compared to graduates in the early 2000s, plus *significantly* reduced interest rates – all of which means student debt burdens – what students actually have to repay each month – have fallen quite a bit, whereas in the US they have increased.            

But of course, in Canada, we tend to assume that any trends occurring in the US are also happening here.  So when we see a deluge of articles (like this one from Huffpost) or books (for instance, Kids These Days)talking about how millennials are screwed and worse off than their predecessors, which are perfectly sensible from an American point of view, many Canadians assume they apply to us too.  Sometimes that’s true but not in this case.

Another way you can make a case for Millennials in Canada being historically disadvantaged is that even though they make more money, their money “doesn’t go as far”.  That’s what several people said to me after I posted those statistics last week, that demonstrated Millennials had median incomes over 20% higher than their GenX equivalents.  I pointed out that the figures were in real dollars, that is, adjusted for inflation.  They responded by saying, “sure, inflation-adjusted, but what about the cost-of-living”?

Part of the confusion, evidently, is that not everyone understands what the term “inflation” means or how rates are calculated.  But the subtler – and perhaps more justified – point is that not everyone faces the same inflation rate because everyone’s consumption basket differs, and of course price changes are not the same across the country.  One thing that has changed significantly over the past 20 years or so is the cost of housing, and this cost is at the crux of “cost of living” complaints.

Now, it is certainly true that housing prices have increased substantially over the past two decades.  It’s not always easy to tell by how much: Statscan’s says the cost of “owned accommodations” is up by over 50% in nominal terms since 1999, but Statscan’s definition specifically excludes capital gains (CPI is not really designed to capture changes in asset prices), so their figures is clearly an understatement.  The Teranet-National Bank Housing Index suggests house prices have more than tripled, but their “national” index only captures data from Halifax, Montreal, Ottawa, Toronto, Calgary and Vancouver, which miss most suburban and rural prices.  Plus, interest rates have fallen, meaning the cost of maintaining a mortgage is a lot cheaper than it used to be, if it’s getting hard to save for down payments. 

Rentals are similarly mixed.  Statscan shows rental rates increasing at below-overall CPI rates for the past 20 years, even in Toronto and Vancouver.  But many of the 9000 renters in the Labour Force Survey sample that generates the CPI data on rent will be older people who have inhabited their rent-controlled dwellings for a long period of time. Thus, Millennials typically face higher rent payments than Statscan indicates.

All of which is to say, comparing housing costs over time is tricky.  I think it’s fair to say that housing is putting a squeeze on millennials, which does curtail their purchasing power, and may offset – partially if not entirely – their higher wages and lower student loan payments.  This offers some support to the idea that Millennials are unduly put-upon (or at least, have more reason to be pessimistic about achieving a middle-class lifestyle which includes home ownership).

Or at least that’s the case if they are in Toronto and Vancouver.  It’s not at all clear that housing prices in, say, Moncton, London, or Regina are pricing out millennials in the same way.  So, a subset of millennials – big city millennials, let’s call them – are perhaps at a larger disadvantage than others.  It just so happens, of course, that the country’s English-language media is overwhelmingly concentrated in those two cities (Toronto especially), and so the issue gets a lot of attention.

This big-city bias is, I think, a way in which American and Canadian millennials are similar.  If you read the various millennial complaints in American books like Alisa Quart’s Squeezed, they basically come down to the fact that housing prices in New York and Northern California are nutty koo-koo.  But this is part of a larger problem pointed out by economist Paul Collier in his intriguing recent book The Future of Capitalism.  Around the world, good jobs have become more geographically concentrated over the past thirty years, mainly because of clustering in knowledge-intensive industries.  In theory, that means people living in those cities should be better off.  But in fact, rising prices for land, housing and shelter mean that it is landowners in those cities (either those renting or selling their properties) who have appropriated a major share of the gains from these knowledge-intensive agglomerations.   

In other words, to the extent that millennials have a significant complaint to make (and again, this is truer in the US than Canada, and truer in big cities than elsewhere), there is a silver-bullet solution: build more housing.