Young people unlikely to attain wealth of previous generation, says study

By staff writers
March 12, 2015

A London School of Economics-led report published today (12 March 2015) finds that youg people have suffered a disproportionally large fall in earnings and are unlikely to reach the levels of wealth of their parents' generation.

The study finds that median household wealth (income plus assets) of those aged 25-34 is £365,000 less that of those 30 years older and despite being better qualified than ever before, an average 30-year-old would have to save £33 a day for three decades to achieve the average wealth of today’s 60-year-olds.

The lead author of the paper and head of the LSE’s Centre for Analysis of Social Exclusion, Professor John Hills, said: “The costs of the crisis have not been evenly borne and, disproportionately, young people have paid the price.”

The researchers found that full-time employment betwee 2006 - 2013 among the 20-24 age group fell by more than 10 per cent for men and nearly eight per cent for women. Those above 30 saw far smaller falls and, for some groups over 55, there was a rise in overall employment.

The report finds a similar picture for earnings, with hourly pay for men and women in their late 20s dropping by 14 and 16 per cent respectively from 2007-13. The effect can be seen across income levels: men in their late 20s in the top 10 per cent of earners have seen a 13 per cent drop over the same period.

When rising housing costs are factored in, those in their 20s were 18 per cent worse off than their counterparts five years earlier. “It’s not that there haven’t always been differences between generations – older people have had time to save, to buy a house and pay off the mortgage and build up pension rights – but the differences are now very big indeed", said John Hills

He continued: “That’s partly because the previous generation was lucky, as house prices doubled on their watch, and some of them had more valuable pension schemes than are available to younger people today. But what’s now striking is how big that age wealth gap is in relation to people’s incomes. To close the gap you’ve got to save £12,000 a year, and that’s pretty difficult when you’re talking about households with incomes of £24,000 for all their expenses.”

“Clearly that is not happening at the moment and almost certainly cannot happen, which then makes it far more important for this generation who they are related to.”

The report's conclusion says the disproportionate impact on the young present politicians with a big challenge: “The economic crisis and its aftermath have not affected everyone equally. These differences in economic fortune and misfortune over the last seven years will form a key part of the social inheritance of whatever government is elected, or re-elected, in the coming general election. That in turn will affect the way society and public policies evolve over years and decades to come.”

Frances O'Grady, General Secretary of the Trades Union Congress said: “Britain is lucky to have a generation of young people that is so well educated and so hard-working. But the government has left many young workers shut out of the recovery and open to exploitation by underpaying employers and over-charging landlords. And the Conservatives want to make young people’s lives even harder by cutting back social security protection for young workers.”

[Ekk/4]

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