Dealing with income volatility
Fluctuations means financial challenges for millions of Canadians: Study
TORONTO — About 3.3 million Canadians say they are dealing with income volatility to the extent their monthly income can fluctuate by 25 per cent or more, according to a study published Wednesday.
Toronto-Dominion Bank commissioned the survey to look at income volatility and how those subjected to it are more likely to face financial challenges and ultimately lack confidence in their financial future.
“Our aim was to take an emerging issue — income volatility — and to shed light on how it’s affecting the day-to-day lives of Canadians,” Bharat Masrani, chief executive of TD, said in a statement. “Our findings suggest the impact is both pervasive and profound — making it hard for many people to live the life they want today, let alone plan for and feel confident about their future. It’s a subject worthy of closer examination.”
The survey found 37 per cent of adult Canadians — about 10 million Canadians — maintain they experienced moderate to high levels of income volatility over the past year.
The survey defines income volatility “as income which is inconsistent (not received on a regular and predictable basis), unstable (amount varies each time it is received), and that fluctuates month to month by a significant percentage.”
The survey, which was conducted online by Ipsos Canada from April 13-23, 2017, using a representative, national sample of 3,000 Canadians, 18 years or older.
The credibility interval for this sample size is plus or minus two percentage points, 19 times out of 20.
The study shows income volatility is more likely to be experienced by part-time, selfemployed, seasonal workers and the unemployed.
The top three causes of fluctuation in month-to-month income were irregular hourly pay (28 per cent), multiple sources of variable income (19 per cent) and selfemployment (18 per cent).
“Young adult Canadians – particularly young women, as well as men aged 45-54 — are also more susceptible, as are lower-income Canadians,” the bank said.
By using reported behaviours and perception when it comes to saving, spending, borrowing, and financial planning the report attempts to gauge the overall financial health of Canadians. In all four categories, those with higher income volatility show significantly lower financial health.
When it comes to savings, the survey found 44 per cent of Canadians with high levels of volatility show low financial health versus 28 per cent of those with low levels of income volatility. As for financial planning, Canadians with high levels of income volatility are almost twice as likely — at 34 per cent to 18 per cent — to show low financial health than those with low levels of income volatility.
“Income volatility can erode people’s confidence in creating a future they want for themselves and their families,” said Masrani. “Everyone deserves to look forward with a sense of certainty and purpose. It is important for us as individuals but also, more broadly, as a country.”
The survey also found respondents experiencing moderate to high levels of income volatility were more likely to delay buying groceries, paying down a minimum amount on a credit card or paying off monthly bills. Those with high level of income volatility are twice as likely to feel stressed about their personal finances as those with low amounts of income volatility.
“This confirms what many community organizations have suspected for some time — that there has been a sea change in the financial lives of Canadian households. Rising income volatility appears to be making it far more challenging for households at all income levels to manage financially, but Canadians with lower incomes are really feeling this most sharply,” said Elizabeth Mulholland, chief executive of national charity, Prosper Canada, which participated in the release. “We need to broaden our focus to address, not just income poverty and inequality, but income volatility as well, if Canadians are to truly prosper.”