REPEAT-The Kids (Should Be) All Right: BMO Economics Report Shows Increased
Spending Power, Even Among Canada's Youth
- Report suggests that a continuation of the improved income growth
of the past two decades should result in Canada's youth achieving
more spending power than their parents in their lifetime
- Improved labour market conditions since the mid-90's - driven by
the resource and housing industry - credited for compensation growth
- BMO Business Confidence Report finds one quarter of business owners
in Canada expect the size of their workforce to increase in 2013
TORONTO, ONTARIO -- (Marketwired) -- 05/14/13 -- Continued income
growth should result in Canada's youth achieving more spending power
than their parents over their lifetimes, according to a report
released by BMO Economics.
The report shows that an upturn in compensation growth, driven in
part by the resource and housing booms, have generated decent gains
in spending power since the mid-1990s, averaging just over 1 per cent
"Since 1996, real median income has turned higher for all age groups,
rising 18 per cent to 2010," said Sal Guatieri, Vice President, BMO
Capital Markets. "Furthermore, the annual gain of 1.2 per cent was
more than twice that in the United States during this period."
The report states that the upturn in median income that began in the
mid-1990s corresponds with a similar upward shift in labour
compensation, as total real labour compensation increased 24 per cent
since 1996 - about seven-times faster than in the previous 15-year
"This upward trend in income should continue, albeit at a slower pace
in the near term, as the economy returns to full employment next
year," added Mr. Guatieri.
Mr. Guatieri noted that even modest further growth in real income
would allow young people, who have lost considerable spending power
relative to their peers of the 1970s due to severe recessions and
growing post-secondary school enrolment, to achieve a greater
increase in spending power as they advance into higher-paying jobs
during their careers.
Improved Labour Market Conditions Key Driver
Overall, the report credits improved labour market conditions since
the mid-90s for the upturn in compensation, with higher rates of
employment and labour force participation combined with lower
unemployment being the main drivers.
The BMO Business Confidence Report shows that labour market
conditions may continue to support income in the near future, with
one-in-four (24 per cent) of business owners expecting the size of
their workforce to increase in 2013, with large businesses more
likely than small businesses to be planning to hire new employees (38
per cent vs. 24 per cent).
Businesses in the services sector are the most likely to be planning
to hire new employees (28 per cent increase), with those in
construction (13% increase) and agriculture (8% increase) expecting
to hold steady.
"Increased spending power means higher demand for a lot of small
businesses, particularly in the retail and service sectors," added
Mr. Murphy. "To take advantage, Canadian companies should consider
making strategic investments to upgrade technology and processes,
open up new markets, and invest in people."
The full report is available here:
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a
highly diversified North American financial services organization.
With total assets of $542 billion as at January 31, 2013, and more
than 46,000 employees, BMO Financial Group provides a broad range of
personal and commercial banking, wealth management and investment
banking products and solutions.
Peter Scott, Toronto
Matt Duffin, Toronto
Ronald Monet, Montreal
Laurie Grant, Vancouver
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