“Gotta Spend Money to Make Money”… or is it “Make Money to Save Money?”

2 Aug

 “Young people want to retire early and spend, too”.

That’s the main finding of a survey commissioned by the Bank of Montreal, released today in newspapers across the country.

The coverage of the survey report is problematic on its own. For instance, although 1000 Canadians aged 18 and over were surveyed, the focus in media reports has been on the 40% of the youngest respondents, who said they intend to retire by age 60. Moreover, although 73% of those young people said they’ve “tucked some money away” for retirement, the headlines point to the 27% who haven’t.

But let’s ignore, like everyone else has, the relative weight of those numbers. Let’s shove aside the majority who are planning financially for retirement and the 60% who think they’ll retire after age 60, and let’s focus on why young people are irresponsible with their money, naïve, materialistic and lazy, shall we?

Let’s ask why there is this apparent delusion on the part of SO MANY young people who, at the beginning of their working lives, are already dreaming of Freedom 59. I propose we seriously consider the findings of another survey, released last month by the Pew Centre.

That study found that in most countries, a minority or only slight majority of people believe that “hard work leads to material success.” Those who do have faith in the rewards of work effort are more likely to support capitalism, while those whose faith is wavering are more likely to believe that people would be better off under some alternative form of political economic organization. Subsequent commenters have interpreted these findings as signs of “declining” faith, despite having no historical or longitudinal data to back up that claim, and in the spirit of totally ignoring data in order to proceed with argument, I’m going to accept the “decline” narrative and add it to the “irresponsible youth” narrative.

But I also want to add one more study, which does seem to have a bit more reverence for its empirical findings. Specifically, NPR released data on “how America spends its money,” and it showed how people in the bottom, middle and upper income brackets divide their money to cover standard expenses. Perhaps surprisingly to people who want to think that poor people are idiots with no self-control, the figures show that compared to wealthier folks, people in the lowest income brackets spend a greater proportion of their income on housing, food (at home, not at restaurants – not even the fast food restaurants you might assume all poor people go to; don’t get your Stephen Harper Brand knickers in a knot), transportation, health care and utilities. They spend virtually nothing on education, and very little on retirement. In fact, among the poorest families, only 2.6% of income gets put toward retirement savings. Among the richest, it’s 15.9%.

Taking all of these surveys together, I want to make two more tenuous arguments.

First, if young people aren’t saving money, maybe it’s because they don’t have it. If our data look anything like the US data in the NPR report, young people’s money is going toward housing, transportation (and to tuition, which is rising yearly in most provinces) and ramen noodles for home consumption.

I can support this argument with an anecdote for now. Last year, as a highly educated 28-year-old research fellow in Toronto, I spent 45% of my income on rent. I spent another 12% on food at home, and 8% on tuition. I spent about 10% on flights to and from Nova Scotia to visit family. I spent 3% on a monthly cell phone bill and about 1.5% on internet. I spent about 3% on clothing and shoes, and about 8% on medical and dental, because I had no coverage. I blew the rest on moving everything we owned to Nova Scotia to start a new job.

I spent virtually nothing on daily transportation because I couldn’t. I didn’t put away anything for retirement because there was nothing left. And I don’t even have any debt – so I can only imagine what it’s like for the many people who paid for their education on credit, on the hope that it would pay off in the end.

Second, if young people want to retire early, it’s because the rewards of hard work are increasingly difficult to see. We’re told we’re not owed a pension, benefits, bonuses, vacation, or even raises at the level of inflation. When we ask why, when we cry foul, we’re called entitled, spoiled, or just idealistic.

But we’ve seen what the protestant work ethic – the belief in hard work as a reward in itself – does to the body, the mind, families and communities. At least, we’ve seen what it does in an economic system where most people are required to sell their labour for pay, and relinquish any of the profits or surplus value their work makes possible. I’ve seen pelvises crushed by coal cars in the mines of Spring Hill, heard of fathers and grandfathers swept from their fishing boats and washed away in the Atlantic Ocean. I’ve witnessed ageing workers, with 20 years at a company, watch their yearly raises shrink to below inflation in the name of ‘tough economic times,’ while their employers continue to increase their share of company revenues. Why on earth would I have any sense of obligation to a system like that? Why would anyone?

The real shame of the retirement savings data is that it’s pitched as a warning to young people to be more sensible, to come to terms with the realities of the day, to look out for themselves because no one else will. What we should be doing is getting angry, coming together, and fighting for a social, economic and political system that helps (nay, forces) us to take care of one another.

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One Response to ““Gotta Spend Money to Make Money”… or is it “Make Money to Save Money?””

  1. jillofalltradesmistressofnone August 2, 2012 at 2:50 pm #

    “Retiring early” is a Boomer construct because they benefited from the post-war growth economy that enabled them to get well paying jobs in their late teens, early twenties with little to no debt. Few people in the previous generation had the luxury of retiring early and no one in Gen X or beyond will be able to because even if we do achieve well-paying jobs, we needed a minimum of four extra years of education to do so. This means that we started off in the red, began our careers late and had our kids late. What really scares me is the concern that these early retirees didn’t save quite enough and are going to live FOREVER, thereby making it impossible to retire because of the drain on the social safety net. Add to this the fact that global labour market pressures will be exacerbated, particularly when there’s a predicted shortage of 38 million to 40 million high-skilled workers by 2020, so even if we could (on paper) afford to retire, the economy will be stung without us. It’s not looking good folks. My advice is to try to enjoy what you have, find simple pleasures, don’t deprive yourself, eat out once in awhile and save what you can, when you can. Don’t drink the early retirement “kool-aid”: it’s going the way of the unicorn.

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