Could millennials be the first generation ever to earn less than their predecessors? According to a new report by Laura Gardiner at the Resolution Foundation, that is a distinct possibility if current trends continue. The report, ‘Stagnation Generation’ sets out to outline the intergenerational gap and covers such issues as the labour market, household wealth, and the welfare state. It proposes a commission to renew the intergenerational ‘contract’ and alleviate the growing imbalances between the baby boomers and millennials.
As a young person and a recent graduate myself, this is a threatening thought and one which is in no doubt in need of resolution. Mindful of this, the Resolution Foundation brought together twelve leaders from business, academia and policy-making to propose a solution.
It is not surprising that living standards differ between the older and new generations because we live in morally and financially contrasting times. It is worth being aware of the advantages we enjoy: although millennials live in a time of huge financial struggle, they have other types of wealth which they seem to discount such as technological advances, globalisation of people and progress in equality which were simply not around in generations before and which make us more wealthy in that respect. However, unlike those before us, we don’t have what the report describes as the ‘big ticket’; substantial things like houses and secure jobs. Indeed, a key theme in MRM’s most recent Young Money report was young people’s inability to save or invest through a lack of disposable income.
Housing is a huge topic in the debate about fairness between generations.
As a millennial myself, I understand this dilemma all too well. This other ‘wealth’ (such as breakthroughs in technology) is all well and good but without the income to enjoy this advances, then that argument is somewhat of a moot point. It seems that, although we are progressing technologically and are apparently becoming a more tolerant society, fiscally we are retreating and returning to a state worse off than those who came before us. This can never be a good thing.
Another part of the commission that really stands out – especially for me as I take my first steps in the world of ‘grown ups’ – is its aim to reduce the gap on household wealth. Housing is a huge topic in the debate about fairness between generations, with the ONS reporting that baby boomers are statistically 50% more likely to have owned a home at the age of 30 than a millennial at the same age. With a growing number of homeowners being landlords that means that those who cannot afford to buy a property of their own further compounds the problem. As current renters are having to pay more housing rent than ever before, more money is going into the pockets of older generations who own those properties.
Consequently, it can be deduced that millennials have less money to put a deposit down on a house and landlords have more money to invest in further properties. As a result, this appears to be something of a losing battle for first time buyers. To add insult to injury, the report notes that a deposit for a house which stood at 5% in 1990s, rose to 10% in 2007, now typically stands at 17% for buyers in 2016. So it will take even longer to save for a deposit, and longer still because millennials’ money is being sucked up by the renting market. So, we shall see how that one pans out over the next 18 months or so but, I am sure I am not alone amongst millennials in being sceptical about this having any effect on the London rental market.
As Gardiner says, there is no doubt that the older generations want the best for their children and grandchildren. I don’t think this intergenerational gap is a question of purposeful property greed but instead it is an organic societal progression. A sad one for the property poor millennial generation but one no doubt. Perhaps this problem will resolve itself as the millennial generation inherits the properties that their grandparents have accumulated. Perhaps that is the way that they will make it onto the property ladder. But for those whose families are not property rich, the future is starting to look very uncertain.