The figures released today, which show that the generation born in the early 1980s are the first post-war cohort not to enjoy higher incomes in early adulthood than those born in the previous decade, should send an urgent message to Theresa May.
The stagnating wages and employment rates of young adults are reaching crisis point while her Government’s policies continue to fail young people in Britain. The gap between those with wealth and those with none is rapidly becoming the gap between the old and the young, too.
Intergenerational inequality has been exacerbated by efforts to cut the national deficit through austerity policies. This week, Chancellor Philip Hammond announce that he will end the Help to Buy mortgage guarantee scheme established by the coalition government in 2014, cutting off another lifeline, however short, for young aspiring homeowners. The remaining parts of the Help to Buy policy, which includes help raising a deposit, has been criticised as ineffectual or even counterproductive by charities, housing providers and even former members of the Bank of England monetary policy committee.
Ms May might have delivered a rousing speech about “social justice” and “making Britain a country that works for everyone” on the steps of her new Downing Street home, but her failure to introduce any policies that directly benefit struggling twentysomethings, coupled with a “triple lock” on pensions, leaves little room for optimism.
By 2020, working-age adult payments per head will be 9 per cent lower than before the 2008 recession, while pensioner payments will be 19 per cent higher, according to the Resolution Foundation. Abolishing the triple lock on pensions – which means the state pension rises every year by inflation, earnings growth or 2.5 per cent a year, whichever is higher – may not sound ideal, but we are no longer operating in an ideal economic climate. Locking pensions in this way means forcing young people to pay, through their salaries, for older generations to continue to claim the generous benefits of later life today that will never be available to them tomorrow.
Indeed, pensioners themselves would – if not overwhelmingly, then largely – offer their support to the end of this destructive policy. They are, in many cases, helping to plug the generational salary gap by lending large amounts of money to their children and grandchildren for living costs, for tuition fees or in the form of a deposit for a house. Often, large sums of inheritance is being passed on years before the death of a loved one because the imbalance in income and opportunities between parent and child is too stark to ignore.
The new Work and Pensions Secretary, Damian Green, has said the Government recognises there is a need for “intergenerational fairness” and is reported to be reviewing the state pension and pensioner benefits. Together, Mr Green and Ms May have the opportunity to turn this all around, but it will cost. Tackling this problem means spending money – on developing apprenticeship schemes, building houses and supporting young people below the age of 25 with a proper system of welfare benefits if needed.
A new approach to the housing crisis is now urgent, considering that renters born in the 1980s spend 30 per cent of their income on housing costs while Britain’s homeowners spend 15 per cent on the same; this was not so in the 1960s, when renters and homeowners spent an equal amount of their income on shelter. The situation risks trapping hundreds of thousands of people in poverty. It must be remedied.
While the research paints a picture of a country divided, there is good reason to believe that all generations would be happy to see this disparity corrected. Ms May will no doubt reiterate her statements about increasing fairness and opportunity at the Conservative Party annual conference, which opens in Birmingham this weekend, but it’s time that more ambitious plans were put into place to make this happen, before Britain risks the effects of youth neglect – a brain drain, and a destabilised economy future economy as a result.
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