The young adults of Gen Z think they need an annual income of just more than $100,000 to live a comfortable life.

Average income for this demographic is about $45,000, a gap that demands a reality check. Not for Gen Z, though. If anything, these young people sadly underestimate the income needed to buy a home in many cities, start a family, save for the future and have some money left over for fun stuff.

The reality check is for anyone who dismisses Gen Z’s idea of financial comfort as a sign of entitlement or naiveté. Young people know what they’re up against trying to afford adulthood. Do the rest of us?

A recent poll by Abacus Data asked adults of all ages how much they think they need to earn per year before taxes to live comfortably. The overall average was $79,270, with many interesting variations based on city, family situation and, most notably, age.

Boomers said they needed to earn an average of just $63,753, compared to $84,700 for Gen X, $87,386 for millennials and $100,953 for Gen Z. A generational scorecard from Statistics Canada: Boomers were born from 1946 to 1965, Gen Xers from 1966 to 1980, millennials from 1981 to 1996 and Gen Z from 1997 to 2012.

It seems clear in these numbers that the older and more established you are, the less you figure you need to live a comfortable life. But the size of Gen Z’s six-figure number still seems way out there – at least until you look at what these young adults face in today’s economy. Housing costs are down from peak levels, but there are signs the real estate market is heating up again. Previous generations have seen expensive housing as well, but there’s a complication for Gen Zs. They will come into their home-buying prime with both expensive prices and comparatively high mortgage rates.

Renting has in the past been an affordable alternative for people who couldn’t afford to own a house, but monthly rental costs have changed that. Average rents across the country are up 20 per cent from their pandemic lows, or $340 per month on average. How are you supposed to absorb that increase while also saving a home down payment?

A tight job market has been a huge plus for young job-seekers and others, but we’re starting to see signs employers will be hiring less and be more restrained with pay increases. The economic surge that followed pandemic lockdowns has given way to concerns about recession.

It’s normal for a generation to face adversity in its young adult years. Boomers had the inflation and high interest rates of the 1980s, Gen Xers had the early 1990s recession and millennials had the 2008-09 financial crisis. Younger millennials face similar issues to Gen Z, but we can say in a general sense that every generation has followed a similar track of school, career building, home ownership and starting a family.

Gen Z will almost certainly do likewise, but on what timetable? You can buy a house in your late 30s or even at 40 and be just fine, but delayed gratification isn’t seen as the virtue it once was. Today, it means explaining to everyone why you don’t have a house yet.

Other tactics for addressing affordability include living in a less expensive city or town. The Abacus survey found that people in Toronto of all generations figured they needed $96,125 to live comfortably, compared to $63,128 in Quebec City.

Delaying or not having children makes a difference. People with kids thought they needed $30,000 more on average than those who did not.

Migration out of expensive cities such as Toronto is happening, and we’re hearing more about young couples deciding not to have kids. But these are micro-solutions that won’t satisfy a generation of young people hungry to get their lives in gear. What would really help is a massive Second World War-esque industrial push to build affordable houses and rental units.

Abacus’s own analysis offers some ideas about what could happen if Gen Z feels shut out of a normal, prosperous adulthood. Everything from consumer behaviour to election votes could be affected. Anyone think that will be good for the country?

The Globe and Mail, May 31, 2023