Title: Feeling squeezed?
Sub-title: Real estate prices are up, mortgage borrowing is increasing and salaries are stagnating. No wonder families feel under pressure.
With Christmas shopping season getting underway, Canadians are getting a renewed look at the vast array of products and serves available to typical western consumers. While many feel pinched by the recession that Canada is clawing itself out of, those celebrating the holiday season with their boomer parents, will find that offerings available to them, are vastly better than what was available 30 years ago.
Prices on a range of goods, from clothes, to music and electronic devices have all fallen drastically during the last generation, brought down by everything from better technology to freer trade with China. In fact many products available for sale today, from laptop computers more powerful than those that powered NASA not too long ago, mobile devices straight out of James Bond movies, and entertainment options that boggle the mind, did not even exist.
Even Canada’s housing sector, which many experts say is overvalued, does not look so bad when compared with what existed 30 years ago. While today’s $330,000 average house price looks high compared with the $75,000, boomers paid back in 1981, today’s cheaper mortgage rates (a five-year closed mortgage rate is posted as 3.79 percent, compared to 21.8 percent back then) just about makes up the difference.
Monthly payments on a 30-year amortization at a five year closed rate are $1,535.98 today, compared with $1,394.59 in 1981. That means on the surface monthly payments are about 10 percent higher. However today’s houses are far bigger and more luxuriously designed than those built during the 1970s and 1980s, which more than accounts compensates for the differential.
Life seems better. But is it?
In fact, life seems much better now than it was a generation ago in almost every respect. Kids today are vastly smarter than their parents were at a similar age. The work world has changed from having a large physical component to being more intellectually based, entertainment options are far broader than they ever were and air travel is cheaper. However looked at more closely, things aren’t so clear. In fact, in many respects, life is a lot tougher today than it was a generation ago.
That because many of those consumer comforts that Canadians now enjoy come at a big price. Although product offerings have expanded dramatically during the past few decades, Canadians have nevertheless still have trouble coming up with the cash to pay for them. A study by the Center for the Study of Living Standards published last year noted that median wage for Canadians rose by only $53 (in 2005 dollars) between 1980 and 2005.
To make up for the stagnant wages, Canadians have been borrowing more. Credit card and personal loan debts have skyrocketed during the past three decades, as has government borrowing. Mortgage debt too is on the rise. According to the Canadian Mortgage Brokers Association, the country as a whole now holds more than $1 trillion dollars of mortgage debt, up 7.6 percent from last year.
Another way that households have been funding their consumption growth is by pushing more women into the workforce. According to data compiled by the Canadian Labour Congress, the labour force participation rate of women between the ages of 15 and 64, which was just over one half in the mid-1970s, had risen to 73.5 percent by 2006. True, most of those women want to work. However those new salaries have come at a high cost in terms of family life. The average number of kids born per couple has fallen, and many are pushed to do without.
Two-income couples that do opt to have kids have been subject to a significant rise in stress levels, as they struggle to find the time to manage daily activities. The result, as pollster Mark Leger points out, is that Canadians are now sleeping an average of an hour a day less than they once did, which in turn boosts stress levels even more.
How these trends will work themselves out in the end is open to question. Man is an adaptable animal. There is thus evidence that Canadians will be able to manage the increasingly time charged and stressed lives that they are creating for themselves.
In the meantime, we can try to relax ourselves by going out and doing some Christmas shopping.
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