Today's discussion:

As rates rise, old people are doing better and young people are doing worse

When interest rates rise, those with interest-earning investments tend to benefit while those with debts, of course, do not. This is obvious. It might also be obvious that the young have more debt than the old. What is not widely understood, however, is the sheer magnitude of the gains and losses resulting from recent rate changes and the ongoing redistribution from young to old that they have caused.

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Stuart Thomson, editor-in-chief

If you were looking for an explanation of recent polling trends showing young Canadians losing faith in the Liberals and moving in droves to the Conservatives, you couldn’t do better than Trevor’s piece today. Young people are being squeezed and, especially in the wake of the pandemic, they’re not happy about it.

This is from a Nanos poll in August and represents a precipitous drop: “The data shows the Liberals in a distant third place for 18-29 year olds with 15.97 per cent, compared to the Conservatives and the NDP with 39.21 per cent and 30.92 per cent respectively.”

19th October 2023 at 6:14 am
Michael F

One poll is concrete evidence of a sesmic shift? Poilievre has been out there telling bald faced lies and offering populist slogans as a solution to very complex problems. Perhaps the naive and gullible are buying his snake oil. His recent speech in Kelowna contained outright fabrications about bail policies that local legal experts and lawyers called: “Completely false.” “Laughably wrong.” “Irresponsible and misleading.”

When are you going to publish something on his blatant fabrications? Or is it only the Liberals in your crosshairs?

19th October 2023 at 1:42 pm
Rob Tyrrell

One would need to know/show the delta in party support for that age group to conclude “moving in droves to the Conservatives” only, and not the NDP as well, no? I don’t doubt the assertion but “moving in droves” should be explicitly substantiated.

Young people are being unfairly squeezed, are justifiably unhappy about it, and this feeling is dangerous if permitted to fester, especially if nothing happens to address the situation after a likely federal government change.

19th October 2023 at 9:33 am
Luke Smith – deputy editor, The Hub

“It is roughly comparable to a four percent tax on the disposable incomes of those under 35 and a nearly seven percent subsidy to those over 65.“

This is a truly wild stat in a piece full of them. And should be pretty eye opening to anyone, regardless of age. Any solutions though would require frank acknowledgement of this inequality and a willingness from those benefiting to actually change the status quo (or for the younger generation to actually vote). Needless to say I’m not optimistic.

19th October 2023 at 8:55 am

I think you’ve overlooked the reality that many of the older generation bought our first homes in the early 1980s when interest rates were around 17% – many were paying rates like that on mortgages for homes that had dropped so much in value they were worth less than the mortgage principle. You have also failed to remember how high unemployment rates were in some of those years. Most in the older generation have worked insanely hard to even have any savings today. Then when we finally accumulated some equity and savings we had a decade of almost nil returns on those savings but were paying large amounts of tax while being in a middle demographic group that was bypassed for child and senior-related benefits. Now we are supporting our adult kids who are taking longer to launch and at the same time supporting our ageing parents whose needs for care go beyond what the system can provide. The analysis is crude and lacks nuance.

19th October 2023 at 7:23 pm
Paul B

Conceptually, this article presents the results of the author aggregating and summarizing the current economic circumstances that individual Canadians are facing by age group. That summary apparently shows that older Canadians are, as a group, faring better than younger Canadians as a group in this environment of inflation and relatively high interest rates. As a result of his analysis, the author suggests we should, in effect, “penalize” the elderly by reducing OAS or postponing eligibility and re-think increases to various income support programs that benefit seniors.

The problem with this analysis, of course, is that the basis for aggregation does not yield “clean” results – there are many seniors who are not benefitting and many who live in poverty. I’m sure there are even some younger Canadians who are doing relatively well in these times.

In similar fashion, the author could have aggregated and summarized peoples’ circumstances by ethnicity instead of age group or by religious affiliation or by urban vs rural citizens or by level of education attained or by many other potential differentiators. Of course none of these aggregations would produce “clean” results either but I doubt the author would suggest penalizing the category that is doing best when using any of these filters – and rightly so.

Is it just me or is it blatantly obvious that the “cleanest” results with the fewest exceptions would be obtained by aggregating and summarizing peoples’ circumstances based on wealth. Is there any doubt that, regardless of age, ethnicity, religious affiliation, or any other demographic characteristic, the group that is benefitting most from high interest rates and being least impacted by inflation are the wealthiest Canadians? In keeping with the author’s line of thinking wouldn’t it be much more appropriate to consider penalizing Canadians based on their wealth and not their age?

19th October 2023 at 5:02 pm

Thanks for this Paul, and especially your last question.

I used to be a huge fan of Trevor Toombe. But his more recent articles do feel like he is cherry picking and manipulating numbers to fit a narrative that is divisive.

(The Hub, in spite of its claim of impartiality, is a conservative paper. I think it makes an honest, if uneven attempt at presenting divergent points of view, but its consistent and predictable bashing of liberal policies gets tiring. More importantly, its inclusion of a quote by Peter Thiel, a self declared anti-democracy thinker, in its mission statement, reveals much about the editors’ ideological stance. The quote is innocent enough, but its author sure isn’t!)

I think the same data sets Toombe is playing with could be used to show that the disappearing middle class is a much greater problem for the young AND the old generations, than (some) older folks making money on their retirement savings.

This has been the cycle for decades.
My parents were making a killing on their savings when I got my first mortgage at 14%, back in 1990. Admittedly the picture is far more complex today, but pitting boomers against their descendants is disingenuous. The more damaging reality is without a doubt the growing gap between rich and poor. Not a message the Hub, or Peter Thiel, would endorse.

20th October 2023 at 3:40 am
Rob Tyrrell

“This also isn’t a criticism of older Canadians, who worked hard to accumulate savings that they are now benefiting from. That’s fair enough.”

Can we just assume that the level of “hard working” is consistent across the generations? Older Canadians were saving in a time when you did not start out of school in a debt hole, one income households were broadly achievable, down payments on housing were lower, and monthly residential rental rates were lower (proportionally to income and accounting for time-value-of-money).

To the main point of the article, we need to a fair distribution of resources, certainly to be fair in principle, but also ensure that the faith of young people in our liberal democratic prosperity is not dangerously dashed.

19th October 2023 at 9:18 am

When pointing to the old days costs, use hours worked as a measurement, dollars mean nothing. When did anyone exist on a single income??? Eligibility for loans was not as easy as now…. I worked my way through university and college, not borrowed my way. The media has to stop caressing the whiners and deal in reality.

19th October 2023 at 12:36 pm
Rob Tyrrell

//use hours worked as a measurement, dollars mean nothing. //
Why? Are you suggesting that people worked more hours back in the “old days”? What are the “old days” for you? Surely the relative earning power is a relevant question?

//When did anyone exist on a single income??? //
It was common when I was growing up in the 1980s. I am not sure what the crossover point was (when two income families with children was greater than one income families).

// I worked my way through university and college, not borrowed my way.//
Congratulations. If this was in the early 1990s or earlier, this was more likely. However, tuition and associated post secondary university costs have risen much faster than wages and inflation since then.

//The media has to stop caressing the whiners and deal in reality.//
I don’t know how this strong but vague feeling is relevant in a comparison of the conditions for young people starting out today versus various points in the past 70 years (boomers onward)?

It *seems* that many people can’t help but feel that broad comparisons across millions of citizens of each generation’s challenges are somehow an insult to their personal story and agency in their own success, or lack of it.

19th October 2023 at 2:41 pm
A van Gool

Seniors are not a monolithic group. Some have investment portfolios, some have pension plans that adjust yearly. Others have only CPP and OAS. But anyone receiving GIS is low income. Adjustments to OAS seems reasonable since everyone over 65 gets it unless they are high income, but GIS is a needs based and legitimate benefit.

19th October 2023 at 8:59 am

Seniors are doing better? No one is doing better. Corporations are controlling the economy and govts either won’t or can’t do anything about that. A very few cable tv/internet/cellphone companies, a few mega grocery stores, billionaire housing developers, $90,000 pick-up trucks, energy costs FOR ALL AGES higher for vehicles or heating homes, cheap appliances that last
1/5th as long as years ago, unions greatly reduced, corporate nursing homes charging ridiculous monthly rates for seniors, even veterinarians are charging “killer prices” to treat pets because corporations like Mars are buying/owning vet hospitals all over and something that used to cost $400 is now $2,000 if you’re lucky. Politicians can try to have some sway in controlling this, but don’t kid yourself…the wealth is growing for the corporate elite and their control is unimpeded and this snowball rolling down the mountain is getting bigger and bigger.

19th October 2023 at 8:24 am
Cyril Gibb

Good grief. What a silly, divisive, and cherry-picked article. Ceteris paribus, the more years you’ve worked, the more wealth you accumulate. Always has been and always will be. Despite that, there’s no shortage of poor old people and no shortage of wealthy young people.
Aggregating data based on a single factor (such as age) without considering the other confounding factors is meaningless.
I sincerely hope the intent of the author is to deliberately create discord. If, on the other hand the article was to enlighten, it’s yet another example of the deterioration in our educational institutions.

Perhaps a more accurate title rewording:
As rates rise, wealthier people are doing better and poorer people are doing worse.

20th October 2023 at 11:18 am
Alisha Rao – content coordinator (The Hub)

“The young are saving $200 per month less than they did a year ago while those age 45 to 54 are saving $327 per month less. Those age 65 and over, meanwhile, savings are up over $500 per month compared to last year. For them, rising prices increase monthly expenses, sure, but by less (on average) than their incomes are rising.”

The statistics of this article are revealing in how strong the impact of rising rates are felt between the different demographics, and it illustrates well that the economic realities of a younger Canadian versus an older Canadian cannot be discussed as though the experiences are equivalent. It is important for young individuals to have positive affirmations about housing in Canada both in the short and long term.

19th October 2023 at 10:15 am
Amal Attar-Guzman – Content Editor (The Hub)

“In total, the youngest households paid nearly $1 billion more per month in interest. And net of higher interest earnings, those under 45 collectively paid over $1.6 billion more. Those over 65, meanwhile, received $1.6 billion per month more.”

This perfectly encapsulates the way of interest rates tend to younger demographics vs. how older demographics are not feeling the pinch as much, if at all. It also further encapsulates the divide between demographics, especially when older demographics just blatantly claim that younger demographics are “just lazy and want everything handed to them” or “eating too much avocado toast,” not fully realizing that the current economic conditions we’re in are so drastically different when they were our age or younger.

19th October 2023 at 9:36 am

yes Amal they are different, the elderly actually matured during their critical years.

19th October 2023 at 12:41 pm
Nancy Pea

None of these demonstrations were pro-Hammas and you conflating opposition to genocide and/or ethnic cleansing with support for terrorists is exactly what is wrong with media today. Hopefully you have other readers with some critial thinking skills. Your initial assertion is false and therefore the whole article crumbles.

19th October 2023 at 2:31 pm
J Jewell

Many of today’s borrowers are not the brightest bulbs in the box.
As a banker in the 70’s and 80’s I remember that first mortgage rates ranged from 9% to 19.5%%. Wages were much less than today as were home prices. Most folks had far fewer toy’s (boats, ski doo’s, lake cottages, warm area winter trips, 2nd vehicles, etc.). Deposit rates went up to 21% (lucky mature folks).
I have categorized those that are whining and crying about rising interest rates in the first line above. The third and fourth lines explain why all the whining.
I am pleased to be earning deposit rates that are not subsidizing the borrowers.

19th October 2023 at 1:47 pm

during the free money years… the young used their homes as atms and gobbled the consume everything since they were entitled.The elderly, had no way of making an extra dollar without interest and continued to go backward. now that they can, the clawback for their 1$ interest is painful. The only place for the elderly to accumulate any wealth is through their homes.

19th October 2023 at 12:31 pm
Rob Tyrrell

Perhaps it is only public investors that are still waiting? Private investment is getting more and more of the “returns pie”. Scott Galloway recently had an interesting episode on the recent dismal performance of IPOs as evidence of this.

19th October 2023 at 9:23 am
Rob Tyrrell

Sorry all, this was intended to be a reply to a previous comment. 😐

19th October 2023 at 9:24 am
Bruce Westmoreland

Thinking that one can live on a senior government benefit alone is ludicrous. I don’t know where he gets his numbers from, but they aren’t realistic. A senior couple receives just under $ 3,000. a month max from government entitlements as they love to call them. Add that up. for a year, and ya, pretty well off I’d say. Not!

19th October 2023 at 8:17 am

And when one dies 40 – 50% of that income disappears. So saying the elderly have increased savings, is by and large an illusion. Elderly who can have been selling their assets in order to manage the costs of property taxes, insurance and utilities.

19th October 2023 at 12:44 pm
Steven Rivette

I have difficulties seeing a way back from so much damage done. Great incentives will be needed to get Canadian Investment into Canadian projects that are actually meant for completion. Cause do WE not have a production per dollar problem. A Work to Rule problem A red tape problem that is now extraordinary and is intent on stagnation. The gross mismanagement of funds during the Pandemic and the intentional redirection of funds in wrong directions when no one was looking.

There is much happened the Canadian tax payer would not even believe if truth were told.

19th October 2023 at 8:15 am
Alex Reizinger

Except investments are stagnant and have been for 3 years now. The big corporations are making a killing but investors are still waiting for their share.
Somebody’s making money but it’s not us and I get the feeling we’re getting the Royal runaround

19th October 2023 at 7:48 am
Rob Tyrrell

Perhaps it is only public investors that are still waiting? Private investment is getting more and more of the “returns pie”. Scott Galloway recently had an interesting episode on the recent dismal performance of IPOs as evidence of this.

19th October 2023 at 9:23 am