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Leaving a job

Labour Market Challenges: Who is leaving a Job and Why?

It’s a topic of conversation small business owners increasingly have with their peers: why is it so difficult to keep people employed these days? There are many reasons why people are leaving their jobs, but in addition, what’s new is that they are doing so across multiple generations. For these reasons, it’s important for both investors and their advisors to understand financial vulnerabilities each demographic has when they leave their jobs, no matter the reason.

  • How do I make the transfer of investments to and from my former spouse?
  • What about the RESPs for the children’s education?
  • We may have to sell our home, what are the implications?
  • Do I need a new investment portfolio?
  • What will happen to my company pension?
  • How will my cash flow be affected by my marriage breakdown?
  • How will my government benefits such as OAS and CPP be affected?

The Backdrop

Traditionally we think about the financial implications of leaving a job as a conversation with older clients.  However, that landscape has changed.   According to a July 2023 survey, 40% of Canadians are looking to leave their job by the end of 20231.  That provides a new opportunity for advisors in the tax and financial services to have high value conversations. 

Who is leaving a job and why? 

The vast majority of these are GenZs.  Looking more closely however, there is a threat to employers from employees who have been with a company for several years and with  GenZs and Millennials who are working parents:

  • 64% - GenZs
  • 51% - Marketing and creative professionals
  • 51% - Working parents
  • 56% - Employees who have been with their company for 2-4 years

Contract Work Appeals. 

As interesting is the fact that 31 per cent of workers are expressing an interest in taking on contract roles in the future. For Gen Z professionals that is a big draw:  43% would quit their current jobs to take on contract work, and 42% would take on part time contract work and keep their permanent job2.  But that comes with the responsibility of saving for your own retirement and funding both portions of your Canada Pension Plan at tax time.  Tax remittances, too, are your responsibility, not that of the employer. 

Economic Threats Differ.

While GenZs are job hoping the most, they have different risks to manage in their future:   73% younger workers have serious concerns about the affect of Artificial Intelligence on their jobs.  Their future job security – and with it, pensions and health benefits - is on the line, going forward, despite the fact that freedom and self-employment are a draw now. Other generations are less concerned but should be equally worried:  AI will be at the forefront of a rapidly changing economic landscape, already happening.  

Family Life Has Changed.

Millennials,or Gen Y,   who are now in their 40s and often leaders in their organizations, on the other hand, want to have the most flexibility and therefore can provide challenges for traditional employers:   fully 58% want flexibility in when and where they work and 55% want autonomy to make decisions, supplemented by feedback from management3.  Many in this cohort are older parents of young children, and as the stats show, in the case of working parents, the majority of them would quit without the flexibility they need.  

 

1 https://press.roberthalf.ca/2023-07-27-Job-Optimism-Remains-High-More-than-4-in-10-Canadian-Workers-Plan-to-Change-Jobs-by-Year-End

2 https://www.roberthalf.com/ca/en/insights/research/we-still-have-multiple-generations-in-the-workplace-but-what-they-want-has-changed

3 https://content.roberthalfonline.com/Canada/files/multigenworkforce-ebook-0623-can-en.pdf

 

Inflation Stings

For those content to be employed, job hunting is about three things:

  1. A higher salary (55 per cent)
  2. Better benefits and perks (28 per cent)
  3. Flexibility:  Remote work options (26 per cent)

Economically speaking, Millennials and Gen X cohorts  have numerous concerns4 as shown in the chart below, and they should because many of them have debt in a high interest rate environment.  The cost of living is their biggest concern:

  • How do I make the transfer of investments to and from my former spouse?
  • What about the RESPs for the children’s education?
  • We may have to sell our home, what are the implications?
  • Do I need a new investment portfolio?
  • What will happen to my company pension?
  • How will my cash flow be affected by my marriage breakdown?
  • How will my government benefits such as OAS and CPP be affected?
Top concern
GenZs Cost of living Unemployment Climate change Mental Health of my generation Crime/personal safety
35% 22% 21% 19% 17%
 
 
Millennials Cost of living Climate change Unemployment Healthcare/disease prevention Crime/personal safety
42% 23% 20% 19% 18%

 

Retirement Looms

Gen X is not financially ready for retirement. Over 25% of this generation has saved nothing for retirement 5 and they have high consumer debt, using credit cards for essentials, driving up Canadian consumer debt to a record $2.32 trillion in the first quarter of 20236.

Retirement Not Possible for Some

Labour Force Participation studies from Stats Canada show that in the course of a working lifetime of a generation - 44 years – from 1978 to 2022,  labour force participation for seniors has increased from 13.9 % in 1978 to  28.5% in 2022.  In fact, labour force participation for those age 70 and over has almost doubled from 4.9% to 8.0%. 

 

Table 8. Labour force participation rate by gender and age (%)
  Both sexes Men Women
  1978 2022 1978 2022 1978 2022
25 to 54 years 75.5 88.6 94.6 92.0 56.2 85.1
55 to 59 years 59.4 76.9 83.0 82.1 37.4 71.9
60 to 64 years 43.4 56.9 65.1 62.8 23.6 51.2
65 to 69 years 13.9 28.5 21.5 33.8 7.1 23.6
70 years and over 4.9 8.0 8.5 11.2 2.3 5.2
Source: Statistics Canada, Table 14-10-0327-01

 

4 Source:  2023 Gen Z and Millennial Survey, 22,000 GenZ and Millennials in 44 Countries

5 Source: Franklin Templeton Investments Corp. Survey 2018

6 2023 report from TransUnion, https://www.ctvnews.ca/business/canadian-consumer-debt-hits-all-time-high-reaching-2-32-trillion-in-q1-2023-transunion-1.6421851

The Bottom Line

The subject of leaving a job is an important one, across all generations, and a reason for both investors and their advisors to revisit discussions about the tax and financial implications of a career move.  Here’s a checklist of topics to be addressed:

 

Checklist - Key Investment Opportunities to Review

·        Building:  RRSP, TFSA, FHSA, non-registered accounts

·        Preserving:  Portfolio Management – consider asset diversification including non-financial assets – first home, rental property, cottage property, acquire a business, plan multi-generational living arrangements

·        Extending:  Building Tax efficient Income & Capital, revisiting risk management including insurance needs of all kinds

Tax Measures:  Opportunities for Discussion with Tax Accountants

  • Gen X - Severance Packages: usually taxable – top up tax preferred investment room – RRSP, TFSA, FHSA?
  • Gen Y - Entrepreneurship: business structures – set up potential for Lifetime Capital Gains Exemption (LCGE); plan salary, dividend, bonus mix, or if employed, how to tap into stock options, RCAs for higher earning executives 
  • Gen Z - Quitting a job:  EI, costs of setting up a consulting business, how to save for retirement
  • Boomers and Ailing Parents: 
    • Donation strategy for HNW clients
    • Multi-generational home renovation tax credit – refundable credit maximum $7500 (15% x up to $50,000)
    • Federal Caregiver Tax Credit –caregiving for spouse, or your and your spouse's child, grandchild, parent, grandparent, brother, sister, uncle, aunt, niece, or nephew (if resident in Canada at any time in the year).  Includes common law spouse.  Must be dependent on to regularly and consistently provide some or all of the basic necessities of life:  food, shelter and clothing.
    • Claim for spouse, eligible dependent or under 18 - $2350
    • Claim for adults over 18 – up to $7525
    • Set up pension income splitting opportunities – registered accounts, non-registered accounts.
  • Marriage/Divorce:  Proper splitting of capital assets – tax free rollovers possible
  • How do I make the transfer of investments to and from my former spouse?
  • What about the RESPs for the children’s education?
  • We may have to sell our home, what are the implications?
  • Do I need a new investment portfolio?
  • What will happen to my company pension?
  • How will my cash flow be affected by my marriage breakdown?
  • How will my government benefits such as OAS and CPP be affected?