Families not in good position to cope with recession: study - Vanier Institute says families living 'closer to the edge' than in last recession
CBC News
January 22, 2009

It will likely take years for families in Canada to recover fully from the current recession, according to a study released Thursday by the Vanier Institute of the Family.

The study — The Current State of Family Finances, 2008 Report — finds that family incomes were barely covering expenses when the economy began to slow down last year. It says recessions are "very hard" on families.

Clarence Lochhead, executive director of the Vanier Institute, said families have been spending and going into debt at higher rates than they were during the last recession of the 1990s.

That means families are now in no position to cope with any major changes in household incomes brought about by the recession.

"Average Canadian family finances were not in good shape when the economy turned sour," Lochhead said. "The capacity of families to absorb economic shocks like the one we're going through now is not nearly as good as it should be.

"Families have been living a lot closer to the edge of the monthly budget, and in many cases, far beyond it."

Most family incomes are based on two salaries, he said, and both are needed to keep families at a certain standard of living.

"If one of those jobs is lost, it's not just an inconvenience. It can have a crippling effect on how a family houses, feeds and clothes itself," Lochhead said.

Roger Sauve, author of the study, examined household income and employment levels to pinpoint the amount of time it took for family household incomes to return to the levels they were when the last recession began in the 1990s.

He found it took five years for the economy to recover the 350,000 jobs lost, nine years for the unemployment rate to recover and 10 years for family income levels to return to the levels they were when the economy was healthy. Average family incomes fell by $3,800 during the last recession.

The study finds that debt loads are in the "danger zone," ….It also finds that annual savings shrank to three per cent of disposable income in 2008, compared to 13 per cent in 1990, and the debt to net worth ratio is higher in families than it has been in 44 years.

And it finds that unattached individuals between the ages of 18 and 64 are the "forgotten poor." It says the last recession had a devastating effect on this group. But it says this group is left out of almost all discussions about poverty in part because the assumption is people in this group should simply "get a job."

Lochhead said the federal government should spend on "social infrastructure" and make investments in "human capital" when it delivers its budget on Jan. 27 in a bid to help Canadian families weather the recession.