Amidst the rhetoric of intergenerational warfare and a pending pension penumbra, there is a harmful caricature popular among youth and some segments of the media. This effigy of the baby boomer, members of that generation born between 1946 and 1965, portrays those approaching retirement as lazy and feeling entitled, promising each other generous social benefits with little care or concern for the financial impact on future generations. But this is hardly an accurate representation of those approaching the age of retirement. According to recent statistics, boomers are not sedentary takers but people finding new ways to innovate and contribute to the Canadian economy well past the age of 65.
A recent CIBC report finds that more than 30 per cent of Canadian start-ups are owned by those over the age of 50, more than double the proportion owned by this demographic in 1990. In contrast, those under the age of 30 account for less than 3 per cent of start-up ownership, with only 40 to 49 year olds coming close to the rate of ownership among those over 50 at just under 30 per cent. The share of new businesses owned by baby boomers is also rapidly increasing. Between 2007 and 2012, start-ups achieved tremendous growth among those aged 50 to 59 (approximately 30 per cent) and 60 to 69 (approximately 40 per cent), while growth among other demographics over that same period was either negligible or, in the case of those aged 30 to 39, negative (at least -20 per cent). Contrary to the stereotypes, the start-up generation is not Generation Y, namely those born between the early 1980s and the early 2000s. Instead, it is the baby boomers, so often depicted as out of touch with technological trends and the changing nature of work, who have embraced this new form of entrepreneurship.
This is in part due to the increased longevity of Canadians, as well as the higher level of health enjoyed by individuals in their later years as compared with previous generations. According to a recent Harvard study, disability rates have fallen considerably among seniors. In addition, the study found that old age begets older age among Americans. Although the average life expectancy among American males is currently 77.6 years, a 65-year-old man can expect to live to 81 or 82 years of age. Canadians enjoy even greater longevity according to the latest figures. Boomers have an average life expectancy of 81.1 years (78.8 among males, 83.3 among females). Those Canadians living to 65 years of age can expect on average to live to 85 years of age (83.5 among males, 86.6 among females).
When Social Security began in the United States in 1935, the average life expectancy was roughly 61 years of age. This figure is quite low, in part due to historically higher rates of infant mortality. Even so, when the Canadian pension system was articulated between 1957 and 1965, few would have imagined a retirement lasting roughly 15 years. It makes sense that few pensioners would enjoy 15 years of torpidity either. Running a start-up has clearly come to be seen as a happy middle state. The baby boomer can take it easy and enjoy a potentially slower pace of work away from the office, but at the same time, start-ups offer opportunities to remain active and to maintain an overarching sense of purpose.
In this sense, it is intuitive that boomers would embrace start-ups, embarking on a type of employment lite in their later years. What is surprising, however, is that Generation Y has been much more reluctant to explore these opportunities. With youth unemployment as high as 14.7 per cent in 2012, members of Generation Y have been turning increasingly to non-traditional forms of work in order to make a living. In 2012, 13.6 per cent of the Canadian workforce was employed in a temporary position, either through a fixed-term contract or through a temp agency. There is a lack of reliable figures regarding internships, but estimates suggest that as much as 1 per cent to 1.5 per cent of the workforce is employed as interns at any given time.
Although these jobs are non-traditional in the sense that they are not permanent positions, they are part of the traditional work culture that sees employees working for big, well established institutions. Clearly, with youth unemployment lingering at such high levels, that traditional work culture is not working out for Generation Y.
The reluctance among Generation Y to take the plunge and create jobs for themselves merits some consideration. According to the same CIBC report cited previously, start-ups grew approximately 10 per cent among those aged 20 to 29. While respectable in its own right, this rate pales in comparison with the tremendous growth enjoyed among those over the age of 50.
Part of this hesitation may stem from a relative lack of contacts and experience. Baby boomers have had decades to develop connections in their chosen fields. These connections can become clients, suppliers, partners and promoters. On the other hand, even the most gregarious and outgoing youth will find it challenging to develop as strong a support base for their business as the boomer who has been networking for decades. The experience that comes with having previously owned and operated a small business also lends a sense of comfort to baby boomers. For youth with little previous employment experience, the decision to go for it and start a business is intimidating – it is one thing to take the plunge but it is another to do it in unfamiliar waters. There is some supporting evidence for this: Of Canada’s start-up owners in 2012, 80 per cent had previously been self-employed at some point in their careers.
Noting the relative lack of experience and connections among younger generations is not intended to explain away higher rates of unemployment among youth, nor is it intended to excuse the low rate of youth involvement in the Canadian start-up industry to date. After all, innovation is never without risk. Even with a wealth of connections and experience, as well as some capital, a start-up founded by a baby boomer can fail just as readily as a Generation Y business can. The reluctance to innovate and contribute through non-traditional work, therefore, is a generational issue and one that Millennials will have to confront if prognostications of financial gloom and doom, of a lost generation, are to be forestalled.
However, there are some signs of hope that Generation Y might catch up. This stems from the changing nature in angel investors. Whereas start-ups were once dependent on government grants or capital from large investment firms, the wake of the global recession has seen a growing role for individual investors. These angel investors provide capital in exchange for convertible debt or ownership equity. In some cases, advice and expertise might be provided to portfolio companies. A growing number of these investors are successful start-up owners themselves, saving money to invest in other newer start-ups. This could well be the remedy to risk aversion among youth. Angel investors with experience in a similar field could provide crucial advice and capital to get new Generation Y start-ups off the ground.
Canadian society is on the verge of unprecedented intergenerational co-operation. Many boomers are seeking new ways to contribute to their communities, sometimes even setting off on new careers to do so. If boomers were indeed so entitled and eager to spend 15 years or more on their front porches, Canada would not be experiencing explosive start-up growth. Though some had expected boomers to draw upon pension benefits longer than at any other point in history, it has become more prevalent for boomers to give for longer than predicted to the pension system. What’s more, this is a testament to the virtue of self-interest. A long retirement without meaningful activity can be very boring.
The leadership already set by baby boomers can encourage Generation Y to find its entrepreneurial spirit. Boomers who have become, or will soon become, successful start-up owners can further increase their profits by also becoming angel investors. As discussed here, the mentorship and investment capital such boomers can provide is just what many youth need to attain the confidence necessary to begin self-employment. This alliance of generations has the power to make a lasting change in the workplace.
Intergenerational co-operation remains in its formative stages. Talk of entitlement or laziness among retirees and baby boomers should be suspended. They are doing their part. For those of us among the ranks of Generation Y, it is time we pitched in and did ours, too.
Paul Pryce is a research analyst at the Atlantic Council of Canada and a Millennial. A graduate of the University of Calgary and Tallinn University, he writes frequently on foreign and defence policy issues.