Young Canadian employees are facing a series of headwinds stemming from rising housing costs and decades of inaction by the federal government to support retirement savings, said Paul Kershaw, founder of not-for-profit organization Generation Squeeze and a policy professor at the University of British Columbia, during the keynote session at Benefits Canada’s 2024 Defined Contribution Investment Forum.

The government’s current approach to pension policy is taking place in a context where class dynamics have been transformed by how a person’s age is affecting their status in the housing system, he said, noting young workers often have very little to contribute to retirement savings due to the current cost of housing.

Read: Gen Z workers want to retire at 61, but 99% facing obstacles to saving for retirement: survey

“Often we have focused on affluence in terms of income, but income matters so much less now than it did decades ago. . . . For people who bought homes in the 1970s and 1980s as a nurse or a bus driver, their asset has increased so much in value that they’re no longer that blue collar worker, they’re part of the global one per cent.

“By contrast, a younger person with a good education making good earnings by today’s standards may very well struggle to find a two-bedroom apartment they can afford to rent.”

While young Canadians are more likely to have post-secondary education than previous generations, the higher cost of tuition and subsequent student debt means more of these employees are delaying home ownership and renting longer, in turn driving up the cost of rent and eating into retirement savings, said Kershaw.

In addition to the impact of the housing system on retirement savings, an historic lack of government policy to support healthy retirements is impacting today’s younger employees as a large cohort of baby boomers exit the workforce. When baby boomers were young adults, he said, there were seven workers for every retiree; however, this ratio has since decreased to three working Canadians for every retiree.

Read: Survey finds 59% of gen Z workers have yet to start saving for retirement

“Back then, the taxes, costs and pension contributions could be shared among many hands and made for lighter work. But now that the boomers are retiring and have every reason to expect the same, if not, better services and benefits, there’s so much more work that we’re expecting from a younger demographic to contribute, at least on the public side, to the cost of retirement for an ageing population.”

While the federal government substantially increased Canada Pension Plan premiums in 1996, it didn’t take measures to account for increases in medical costs and old-age security amid the looming wave of retiring baby boomers, noted Kershaw.

“If you flash forward to the best part of three decades later, the very things that were described in the 1996 budget have come to pass. So much of the tax dollars we create from either changing tax policy or from economic growth are being used to cover the increasing costs of old-age security and medical care for the baby boomers.”

Read: Survey finds 29% of Canadians are concerned about inflation’s impact on retirement savings

In order to support young Canadians’ retirements, he suggested a multi-pronged approach that includes legislation to protect the financial well-being of present and future generations of workers, as well as a cultural and legislative reimagining of housing for homes as opposed to investments.

“That means we don’t just need a clear goal for how many units we’re going to build, we need a clear goal in what we want from home prices and we need our politicians to effectively restore housing affordability for all.”

Read more coverage of the 2024 DC Investment Forum.