Canadian Manufacturing

Almost half of working Canadians struggle to make ends meet, says survey

Data from a Canadian Payroll Association survey suggests household income growth has stalled, with 39 per cent saying they are overwhelmed by debt

September 7, 2016  by Canadian Staff

TORONTO—Many Canadians are living pay cheque to pay cheque, unable to save and worried about their local economy, according to the Canadian Payroll Association’s Research Survey of Employed Canadians, released today ahead of National Payroll Week.

The survey of more than 5,600 employees across the country reveals that only 36 per cent expect the economy in their city or town to improve, down from an average of 39 per cent over the past three years and off significantly from 66 per cent in 2009 when the survey was first launched.

Canadians still living pay cheque to pay cheque

Many working Canadians are barely making ends meet. Almost half (48 per cent) report it would be difficult to meet their financial obligations if their pay cheque was delayed by even a single week (consistent with the three year average of 47 per cent). Illustrating just how strapped some employees are, 24 per cent say they likely could not come up with $2,000 if an emergency arose in the next month.

“A significant percentage of working Canadians carry debt, have a gloomy view of their local economy and are fearful of rising interest rates, inflation, and costs of living,” says Patrick Culhane, the Canadian Payroll Association’s President and CEO. “In this time of uncertainty, people need to take control of their finances by saving more. ‘Paying Yourself First’ (by automatically directing at least 10 per cent of net pay into a separate savings account or retirement plan) enables employees to exercise some control over their financial future.”

Incomes flat, saving capacity drained by spending and debt

“Survey data suggests that household income growth has stalled, as respondents reporting household income above $100K has hardly increased in five years,” says Alec Milne, Principal at research provider Framework Partners. “In fact, real incomes have actually declined when inflation is taken into account.”

While pay has remained largely unchanged, employees’ spending and debt levels have affected their ability to save. According to the survey, 40 per cent of employees say they spend all of or more than their net pay, and 47 per cent are able to save just 5 per cent or less of their earnings—far less than the 10 per cent of net pay recommended by financial planning experts.

Despite employees’ challenging financial situations, only 28 per cent of respondents cite higher wages as a top priority. This is down from the average of 34 per cent over the past three years. Instead, an overwhelming 48 per cent are most interested in better work-life balance and a healthy work environment.

More Canadians feeling overwhelmed by debt

Over one-third (39 per cent) of working Canadians feel overwhelmed by their level of debt, up from the three-year average of 36 per cent. Debt levels have risen over the past year for 31 per cent of respondents. And 11 per cent do not think they will ever be debt-free.

Similar to prior years, 93 per cent of respondents carry debt, with the most common debt being mortgages (26 per cent), credit cards (18 per cent), car loans (17 per cent) and lines of credit (16 per cent). Not surprisingly, credit card debt is the most difficult to pay down, with 22 per cent of respondents selecting this option.

Over half of respondents (58 per cent) said that debt and the economy are the biggest impediments to saving for retirement.

Half of Canadians think they will need a retirement nest-egg of at least $1 million, and 75 per cent project that they will not be able to retire until at least age 60.

Unable to save adequately, the vast majority of working Canadians have fallen far behind their retirement goals, with 76 per cent saying they have saved only one-quarter or less of what they feel they will need.

Even among those closer to retirement (50 and older), a disturbing 47 per cent are still less than one-quarter of the way to their retirement savings goal.

Nearly one-half of employees (45 per cent) now expect they will have to work longer than they had originally planned five years ago, primarily because they have not saved enough. Respondents’ average target retirement has risen to 62, whereas these same respondents’ target retirement age five years ago was 60.

The past eight years of data drove the Canadian Payroll Association to advocate for a modest enhancement to the Canada Pension Plan (CPP). The decision to enhance CPP by federal and provincial governments was partly due to the Canadian Payroll Association’s multi-year advocacy on behalf of both employers and employees.