Generation Y’s Playbook to Succeed in a Messy Economy

Bill Morneau, a newbie politician, probably didn’t quite bank on being handed the country’s most senior cabinet post, and then only months later in a new government mandate find deficit projections and economic forecasts going out the window. Age 54, the handsome Bay Street millionaire was the executive chair of Morneau Shepell, Canada’s largest HR company specializing in pension and employee assistant programs. Plucked out of relative obscurity by Prime Minister Justin Trudeau in November 2015, himself fairly new as a member of parliament, Morneau was handed the job of finance minister, the most senior federal cabinet position.

To your faithful correspondent, and to many others, it was a surprising appointment, considering some of the very experienced heavy weights in Trudeau’s new cabinet, such as former Liberal finance minister Ralph Goodale. But Trudeau wanted to test out new blood in his cabinet, and along the way received accolades for creating a gender balanced cabinet, a first in Canadian political history.

The point of boring readers with these little factoids is to set the stage for this post. Indeed, it was Bill Morneau who raised eyebrows when he publicly stated on October 23 that young Canadians will need to get used to job churn. In other words, workers will have numerous job changes and short stints of unemployment during their working lives. A year previous, the respected Toronto-based Globe & Mail newspaper criticized Morneau on his apparent naiveté on labor market issues.

Your correspondent worked as a labor market economist and manager for many, many years in the federal government. Subsequent to that, it was in innovation, industrial competitiveness and management development. This is an old story of the many job changes that workers will need to make and the need to keep learning and re-skilling during their working careers. There’s nothing new here, except that it seems new to Bill Morneau, which is odd given his background in human resource management.

While there’s a saying never to question a person’s motives—perhaps question their judgement—Morneau’s comments since becoming Canada’s finance minister are certainly a little offtrack.

There seems to be a link to the Trudeau government’s weakening fiscal situation. The most recent GDP forecasts show 2017 as another lacklustre year, with GDP growth under two percent. The following year looks, again, weak. This will certainly create a certain tension within the Trudeau cabinet, with an election expected in November 2019. Voters tend to re-elect governments when the economy is doing well and unemployment relatively low.

So let’s get out of the political clouds and figure out what this means for Canada’s young folks. And yes, my neighbours to the south are in a similar boat when it comes to labor market changes caused by technology, globalization (read that as work being done anyway on the planet), an ageing population and the upheaval it is starting to create, climate change (and its geo-political implications), and a likely highly tense political environment for several years following the U.S. election on November 8th.

We’re all in this together, whether we’re 25, 45, 65 or 85 years of age.

As a 61 year-old Baby Boomer with four adult kids and a sixth grand kid on the way, and who’s worked with a ton of young people (and loved it), it’s easy to understand why Generation Y (Millennials, if you wish) is pissed off. They’re not dumb. My kids (27 to 37) see what’s ahead when it comes to pensions, job security, healthcare, supporting old farts like their parents, and so forth. They talk about RRSPs (401 Ks if you’re American). Two of them own houses while the other two would like to become home owners. All four are either married or have partners.

It’s freaking brutal for Gen Y.

How are you supposed to invest in a house, with steadily rising prices, while Canada’s finance minister clamps down the lid on younger buyers and with what Morneau referred to as short-term contract work? You don’t. Layer on growing student loan debts from college and you have a big problem. Financial analysts and economists have noted that student loan debt and motor vehicle debt are two ticking time bombs in North America, akin to the mortgage crisis that imploded the financial system in 2008.

In Canada, household debt exceeds the country’s gross domestic product (GDP) for the first time. Canadians have an insatiable appetite for credit cards and consumer loans. Statistics Canada, a federal agency, stated that the ratio of credit market debt to disposable household income rose from 165% to 167% in the spring of 2016. In a country of 36 million people, it’s frightening that total credit market debt hit $1.97 trillion mid 2016, with consumer credit reaching $586 billion and mortgage debt of $1.3 trillion.

A reality check is desperately needed by Canadians.

Older Boomers and the Silent Generation (age 70-85) don’t seem to really give a crap for young people. What’s important for these cohorts is ensuring that they maintain their lifestyles, tending occasionally to their kids and grandkids. They want and demand independence, and politicians know not to mess with their entitlements. Former Conservative Prime Minister Brian Mulroney and his finance minister Micheal Wilson got that message loud and clear in the eighties when they tried to means test the Old Age Supplement (funded by general revenues). Old people, including my parents, went nuts.

Here’s a tip to Gen Y: politicians pay attention to people who vote. You guys don’t, so you don’t count that much. Old folks do vote; they count a lot. Your correspondent has been voting regularly at all levels of government for 40 years. It means something.

Okay. So what do young folks do to cope with the fucked up mess that older generations have created?

Here are eight lessons for Gen Y’s playbook for success in a messy economy:

Playbook Lesson #1: Screw Home Ownership

Give up the idea of owning a home, especially in the suburbs. Prices will eventually collapse as the massive building spree of the past many years produces a huge glut of overpriced, poorly built homes. Rent. Invest what you save. You’ll be better off in the end.

Playbook Lesson #2: Reduce Your Carbon Footprint

Young people tend to be getting it faster than Boomers and the Silent generation. They want to see governments effectively addressing climate change and environmental pollution. They’re exploring other ways for personal transport. And it’s not just buying more fuel-efficient cars, using public transit, riding bicycles to work and walking, but taking advantage of what technology offers. Sure, there’s Uber and Lyft. However, car sharing, such as Zip Car, is making its emergence. Whether car sharing has a long-term future is uncertain. But it’s a very clever business concept for its practicality and contribution to reducing carbon emissions.

And that leads to lesson #3.

Playbook Lesson #3: Go Urban

Living urban is where it’s at in the 21st Century. And by that we’re not talking way out in the far reaches of the suburbs but in more densely populated areas in cities. Studies have shown that urban dwellers aren’t just more healthy but also have a lower carbon footprint. As downtowns across North America become gentrified (in turn jacking up housing costs but increasing safety), as public transit continues to improve, as cycling grows in popularity, and as new forms of entrepreneurship appear in the ways of consumer services, they’re becoming the cool place to live.

Lessons #1 and #2 feed into this Go Urban lifestyle. However, to make it work well consider the next two lessons as ways to refocus your priorities and lifestyle.

Playbook Lesson #4: Pay as You Go

The explosion in consumer debt, from credit cards to loans to mortgages, certainly acted as a huge catalyst to increasing the material well-being of people. Along the way, employment in building trades and associated services took off as home and commercial building rose. Consumer spending, which drives over 60% of Canada’s and America’s economies, has been a hugely important driver of economic growth. However, it has imposed a high degree of vulnerability on the economy and job market. This has been accentuated by the unwillingness of the business sector to invest adequately in the U.S. and especially in Canada.

The point here is that just as a business that takes on too much debt puts it future at risk, the same applies to individuals. Instead of having an immediate gratification approach to life, shift to pay as you go, where you’re not accumulating any debt and feel more gratification when you know you’re free and clear of financial obligations afterwards.

The big bonus is that you’ll be in a better position to explore new opportunities, take some calculated risks and embark on new adventures, whether its travel, starting a new business or going back to school to study a new field.

Playbook Lesson #5: Adios Starbucks

This is not to pick on Starbucks, but they are huge and growing internationally. Estimates vary, but regular customers of Starbucks and other coffee houses pay $700 to $1,400 a year just for a morning coffee. Some individuals may blow a few grand a year, depending on how often they visit and what type of drinks they order.

Buy your own whole bean coffee and grind it at home. You’ll save not just a ton of money over a year but you’ll have fresher, better quality coffee. Seek out local roasters and support small business.

Playbook Lesson #6: Small is Beautiful

This lesson is more philosophical, embracing the playbook lessons listed here. It acknowledges and draws from a highly respected thinker of the 20th Century. The late E.F. Schumacher, a British economist and statistician who died in 1977, wrote a compact book under this lesson’s title. He believed in the appropriate use of technology that was user-friendly and environmentally responsible. His work and writing coincided with the rise of the environmental movement, and Schumacher became a leader to those wishing to make the world a better place.

Integrate Small is Beautiful in your approach to life and daily routines. And check out Small is Beautiful: A Study of Economics as if People Matter. It’s excellent reading.

Playbook Lesson #7: Use Plastic Credit Responsibly

It creeps up on you insidiously. You suddenly realize that you owe a whack of money. The allure of accumulating points from various credit cards, for whatever purpose, can become an addictive routine. However, it demands self-discipline to regularly pay off accumulating card balances. Remember the above comment about Canadians’ huge debt problem?

Don’t engage in this when you’re young while trying to get an education and a foothold in the job market. In fact, don’t get into the points game when you’re older unless you have strong self-discipline.

Use plastic responsibly and with a clear purpose in mind. Yes, society’s going cashless slowly (Sweden’s way ahead of us) and plastic is essential for everything from ordering online to Uber to Airbnb. Don’t blow it by having the collections department give you a call. Nurture your credit rating. (Note: when just out of university, your correspondent worked in consumer leading, which included collecting delinquent debts face-to-face. You don’t want to be on the other side of the conversation with the loan collector.)

Playbook Lesson #8: Keep Learning

As mentioned earlier, young people are taking on huge student debts. It’s bad in Canada, worse in the United States when one looks at the size of loans. At the end of 2015, the Globe & Mail reported that the average student loan in Canada was $29,000 CAD (with a 13% default rate); in the U.S. it was $29,000 USD (with a default rate of 11.8 %).

Competition for acceptance at universities in North America has escalated, compounded by grade inflation and the out-dated belief that a university education is the ticket to success. Community colleges, with their diversified programs of various lengths, are aimed more towards employment success and more in touch with labor market realities. Yet, community colleges, whose tuitions have also risen a lot but less than universities, are still in the back seat of public perception.

But in addition to young people (notably the upcoming Generation Z) needing to give much more thought to colleges, there are emerging forms of post-secondary education that make use of technology. MOOCs have a lot to offer, as well as the newest form of a university without teachers. This isn’t for everyone, and self-motivation is key to its effectiveness.

Young people need to take the necessary time to make decisions on where they want to pursue education after high school and what they wish to specialize in. Parents, too often, get in the way by pushing their kids towards fields that may not mesh with particular talents, interests and passions. Guidance counsellors have their personal biases, and contribute to steering students to certain programs.

Self-empower yourself to chart your learning and career development. This way you own your career future, and will be motivated to make the best of it.

The point is to embrace learning for life. Work for a while after high school if necessary, both to save money and to observe the real world. Perhaps travel internationally and do community work. My two middle kids worked as servers in their late teens. The people skills and work ethic they acquired have benefitted them hugely. One is a nurse and the other works as a senior manager with a large bank.

Learning and re-skilling is something you’ll do not only until you eventually retire but until you die. My late dad was a sponge for learning, something passed on to his son.

And finally on learning, keep the preceding playbook lessons in mind during this time of personal reflection and observation.

Live simpler, build collaborative relationships and enjoy life.

Any intelligent fool can make things bigger and more complex… It takes a touch of genius – and a lot of courage to move in the opposite direction.
– E.F. Schumacher