The squeeze

Paul Kershaw is no slouch. A professor at UBC. Media hound. Lobbyist. Founder of Generation Squeeze. His side hustle consists of whipping up Millennial hate for Boomers, arguing that younger people have never been this financially ravaged and battling the housing market.

The result? Bingo.

You can probably thank PK for the FHSA. In a few months Canada will have a new age-restricted and surprising tax shelter only for people under forty. They can plunk in $40,000 each, write that off taxable income, grow the money without being taxed then withdraw it (no tax) to buy a house that will make untaxed capital gains. Never has Canada seen anything this forgiving. So narrowly targeted. So generous. It’s fair to say Paul did that, bending pliant politicians around his persuasive digit. He’s also the dude most credited with BC’s creation of a new tax on real estate the government deems is not occupied enough.

Lost on him, perhaps, is the fact giving people a powerful new tool to afford houses will increase demand, rendering them less affordable, or that taxing properties more doesn’t make them cheaper. But he’s only a professor. And he’s young. He’ll learn.

Here is the Gen Squeeze argument: the young are being screwed over as government spends more on the old than them. Also Boomers own houses which have inflated like crazy, and the kids can’t buy now without swallowing massive debt. Wages have not advanced enough over time and, heaping more unfairness on it all, the Mills are way more educated (= smarter) than their parents and therefore should have better lives. This is why they’re struggling, angry, squeezed and militant.

Is this true? Did we greedy wrinklies suck off the entire future? Or are the kids just whiny, entitled crybabies who want instantly what their parents took decades to get?

Interestingly, a recent US central bank study found Boomers have 51% of all net worth but make up only 21% of the population. GenX (both 1965-80) owns 28%. Millennials (1981-96) now comprise 21% of the pop but possess only 6% of total assets.

Ah-ha!, cries the professor. Screwed! Get Socks on the line!

Not so fast.

First the argument that spending on 65+ people – like with universal OAS payments – is unfair to the young, won’t hunt. We all get old. The same payments will be there for the Millennials when they need thirsty underwear. If there’s no outcry over a tax shelter just for the under-40s, then shut up about payments to the Boomers. Sheesh.

Second, parsing up national assets by age cohort is just dumb. It’s unfair, statistically corrupt and completely divorced from the way lives develop. First Trust in the States dove into this myth and also concluded this Gen Squeeze way of thinking is totally misleading. Also manipulative. And, for a smart professor, embarrassingly facile. Instead of measuring the share of net worth held by each generation, it’s better to measure the average level of wealth for generations at similar points in their adulthood. In other words, how do 30-year-olds today compare with Boomers thirty years ago, when they were the same age?

The math is tricky, since inflation needs to be stripped out, but the conclusion is stark. First Trust also included every single member of a generation in its calcs, from Warren Buffet and Jeff Bezos for the Boomers to Elon Musk for GenXers to those ridiculous TikTok millionaires for Millennials.

The average GenX is 48 years old and has net worth of $1.108 million. It turns out Boomer households, on average, owned $730,000 in assets at the same age (adjusted for inflation). Meanwhile the average Millennial is 32 and Mill households typically hold $196,000 in net worth. At the same age, GenX households owned and inflation-adjusted $158,000 in stuff.

The bottom line is that, at the same point in their lives, the average Gen Xer is better off than the average Boomer and the average Millennial is beating the average Gen Xer. If policymakers obsess about shares of net worth rather than growing the whole pie, they may adopt more policies that slow economic growth and wealth creation and then Millennials could end up being thrown off track. For now, however, it’s important to recognize that Millennials don’t have it as bad as many think.

Maybe the squeeze isn’t between generations, but betwixt those who are carving out careers, investing, and building, and those who moan. Just a theory.

About the picture: “Long time reader but never ventured to post in the comments swamp,” writes Drew. “No exaggeration, you’ve changed our financial future for the better. Really appreciate what you do.  Here is a pic of Levi, our German Short-haired Pointer. Our previous $200 ‘Concession Special’ had to be put down at age 13 at the end of April 2020, the beginning of Covid. Despite swearing we’d never get another dog, a house just isn’t a home without a dog. So two weeks later we picked out Levi from a litter…$1250. The next litter the pups were $2500. Covid inflation.  Sure hope this can make your blog. Levi’s been the best thing about Covid. He’s such a good boy.”