Vanier Institute’s report on family finances 2009

has just been published and is avalaible here. It largely confirms research conducted by PEF members on household wealth, indebtedness and income. 

The report highlights the state of financial precarity of many households, the gap between income and spending, the growing debtload and the important impact the “recession” (if we still want to call it that, given its deflationary driven dynamic and probable L shape) and higher unemployment levels will have in the long term on family finances given their level of indebtedness. 

Here’s an excerpt:  

Recessions are very hard on families 

  – We are in recession. 

About 350,000 jobs were lost during each of the last two recessions. In the 1990s, it took fi ve years for jobs to return to the 1990 level. 

Average household incomes fell by $3,800 during the last recession and incomes did not return to the 1990 levels for 10 years. 

Poverty reached a new high during the last recession and did not return to the 1990 level for 11 years. 

Insolvencies doubled during the last recession. 

The “most severe crisis since the 1930s” suggests that families may be hit even harder this time. 

Debt loads are in the danger zone  

Spending and debt rise much faster than income

The wealth that went up has now come down

Unattached individuals aged 18-64 are the forgotten poor 

Though the author does note the importance of re-establishing a more sustainable level of savings, he does this in a non-moralistic way, we are not confronted with the usual rhetoric of thrift and household irresponsibility.

I would still differ on this point, I think that lowering the level of household debt shouldn’t rest solely on cash strapped working families. Not only will would we consolidate this outstanding level of indebtedness largely caused by a low wage consumer demand driven economy, but it would act as a damper on growth as our born again Keynesian governor Carey noted in December. Banks want to regain prior levels of profitability by raising their interest rates on consumer and mortgage loans. I would suggest the opposite, as Bank of Canada’s official target rate goes down, interest rates on consumer loans and mortgages should be lowered and capped, this would represent the banks efforts to help clean up, in a non-depressionary way, the mess they helped create and profited from during the last decade. They can suspend or minimize their dividend pay-outs for a couple of years, we will forgive them. 

Interestingly, the author defends in his concluding remarks the need for “higher wages” as a long term solution and calls for an end to “wage bashing”. He raises many more interesting recommendations in a progressive perspective, pitty that they are mixed with rather personal remarks and musings linked with the 10th anniversary of the report.

Here in Québec the report has made the “Radio-Canada” news headlines, it balances the Bank of Canada’s over optimistic report on growth published today, hope the Vanier report gets media coverage in the ROC…

 

Eric Pineault

ps if someone stumbles upon feed back in the media on this report could they post a comment please