Gen Y actually might be poorer than their parents

More spending and less saving means no increase in wealth for the young in 25 years.

One of the most notable aspects of Britain's austerity drive is the generational inequality with which it has been applied. The best example of that is the difference in the government's approach to pre- and post-retirement benefits. The former have been put in a double bind to keep them low, rising at just 1 per cent a year or the rate of increase in CPI, whichever is less. The latter have been "triple-locked", ensuring that they rise at the higher of inflation, wage inflation, or 2.5 per cent.

There's a real reason to complain about that, given that young people have already taken an enormous hit with soaring youth unemployment, a tripling of tuition fees and the removal of EMA. Not to mention the raising of the minimum age at which you are no longer expected to houseshare from 25 to 35, the below-inflation increases to the minimum wage, and the increase in the pensionable age in the future.

But occasionally, the concerns crystallise into a specific phrasing: "this generation will be the first to be poorer than their parents." That is something I have real trouble with, for the simple fact that most of the history of the last 30 years—or 20, or 40, or whatever we take a generational difference to be—there has been growth. Take a look:

Obviously, GDP is not equivalent to personal income; and as I've written elsewhere, for it to be a real comparison, we'd have to take into account population growth, wage stagnation, and issues of distribution.

Nonetheless, by the standard measure, the British economy is over twice the size it was when my parents were my age. There would need to have been an enormous transfer of wealth from the young to the old to overcome the prima facie belief that I am richer than they were. Indeed, you don't have to look far to realise why that might be the case. In 1982, you literally could not have bought—no matter how rich you were—the magic slab of glass and aluminium that connects to all the world's knowledge that I keep in my pocket and moan when I forget to charge it. Technology goes a long way.

But it seems that that prima facie impression really might fall apart if you look into the data. A new study, looking into the American situation, gives us reason to doubt it. The researchers, from the Urban Institute, write that:

Average household wealth approximately doubled from 1983 to 2010, and average incomes rose similarly. For many, the American dream of working hard, saving more, and becoming wealthier than one’s parents holds true. Unless you’re under 40.

Today, those in Gen X and Gen Y have accumulated less wealth than their parents did at that age over a quarter-century ago. Their average wealth in 2010 was 7 percent below that of those in their 20s and 30s in 1983.

In the US, the net worth of those aged 47 or older is roughly double that of someone the same age 27 years earlier. But the net wealth of someone aged less than thirty is no greater than it was 25 years ago.

It's important to note that this is using wealth in the strictest sense possible: net value of owned assets (though it does account for inflation). It's not a discussion of the relative size of the social safety net, or the difference between the quality of consumer goods now and then. As a result, the main driver of the discrepancy is spending and borrowing habits. If younger people today are forced to spend a higher proportion of their income—or borrow even more—than they did 25 years ago, that will show up as a loss.

As, indeed, it does. The authors attribute the difference to the "Great Recession", and particularly the housing crash, which had a bigger impact on net wealth the more of a mortgage you had outstanding. And for those of us too young in 2008 to own a home, the fact that we are now locked out the housing market through crippling deposit requirements also impacts on our wealth, as we are forced to continue renting rather than building equity.

Intergenerational transfers mean that that's a trend which can't last forever. Eventually, old people die. It's kind of a thing they've got going. But even that means that young people are only likely to amass a significant chunk of wealth when their parents die, which may be quite late in life indeed. The impoverished 30-year-old is unlikely to be satisfied by that.

But the really interesting thing is that the young were falling behind even before 2008. The authors explain why:

Factors likely include their reduced job prospects, lower employment rate, and lack of educational attainment that was higher than previous generations.

As for possible solutions, they suggest increasing the amount spent on education, boosting state pension contributions for the young, and subsidising new home-ownership to a much greater degree.

To be clear, I'm not sure if the findings hold for the UK; but many of the same trends are at play, and are exacerbated by the imposition of austerity targeted mainly at programmes used by the young. It may actually be the case that the young of today actually are poorer than their parents.

Some young people—well, Adam and the Ants—in 1981. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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We still have time to change our minds on Brexit

The British people will soon find they have been misled. 

On the radio on 29 March 2017, another "independence day" for rejoicing Brexiteers, former SNP leader Alex Salmond and former Ukip leader Nigel Farage battled hard over the ramifications of Brexit. Here are two people who could be responsible for the break-up of the United Kingdom. Farage said it was a day we were getting our country back.

Yet let alone getting our country back, we could be losing our country. And what is so frustrating is that not only have we always had our country by being part of the European Union, but we have had the best of both worlds.

It is Philip Hammond who said: “We cannot cherry pick, we cannot have our cake and eat it too”. The irony is that we have had our cake and eaten it, too.

We are not in Schengen, we are not in the euro and we make the laws that affect our daily lives in Westminster – not in Europe – be it our taxes, be it our planning laws, be it business rates, be it tax credits, be it benefits or welfare, be it healthcare. We measure our roads in miles because we choose to and we pour our beer in pints because we choose to. We have not been part of any move towards further integration and an EU super-state, let alone the EU army.

Since the formation of the EU, Britain has had the highest cumulative GDP growth of any country in the EU – 62 per cent, compared with Germany at 35 per cent. We have done well out of being part of the EU. What we have embarked on in the form of Brexit is utter folly.

The triggering of Article 50 now is a self-imposed deadline by the Prime Minister for purely political reasons. She wants to fix the two-year process to end by March 2019 well in time to go into the election in 2020, with the negotiations completed.

There is nothing more or less to this timing. People need to wake up to this. Why else would she trigger Article 50 before the French and German elections, when we know Europe’s attention will be elsewhere?

We are going to waste six months of those two years, all because Prime Minister Theresa May hopes the negotiations are complete before her term comes to an end. I can guarantee that the British people will soon become aware of this plot. The Emperor has no clothes.

Reading through the letter that has been delivered to the EU and listening to the Prime Minister’s statement in Parliament today amounted to reading and listening to pure platitudes and, quite frankly, hot air. It recalls the meaningless phrase, "Brexit means Brexit".

What the letter and the statement very clearly outlined is how complex the negotiations are going to be over the next two years. In fact, they admit that it is unlikely that they are going to be able to conclude negotiations within the two-year period set aside.

That is not the only way in which the British people have been misled. The Conservative party manifesto clearly stated that staying in the single market was a priority. Now the Prime Minister has very clearly stated in her Lancaster House speech, and in Parliament on 29 March that we are not going to be staying in the single market.

Had the British people been told this by the Leave campaign, I can guarantee many people would not have voted to leave.

Had British businesses been consulted, British businesses unanimously – small, medium and large – would have said they appreciate and benefit from the single market, the free movement of goods and services, the movement of people, the three million people from the EU that work in the UK, who we need. We have an unemployment rate of under 5 per cent – what would we do without these 3m people?

Furthermore, this country is one of the leaders in the world in financial services, which benefits from being able to operate freely in the European Union and our businesses benefit from that as a result. We benefit from exporting, tariff-free, to every EU country. That is now in jeopardy as well.

The Prime Minister’s letter to the EU talks with bravado about our demands for a fair negotiation, when we in Britain are in the very weakest position to negotiate. We are just one country up against 27 countries, the European Commission and the European Council and the European Parliament. India, the US and the rest of the world do not want us to leave the European Union.

The Prime Minister’s letter of notice already talks of transitional deals beyond the two years. No country, no business and no economy likes uncertainty for such a prolonged period. This letter not just prolongs but accentuates the uncertainty that the UK is going to face in the coming years.

Britain is one of the three largest recipients of inward investment in the world and our economy depends on inward investment. Since the referendum, the pound has fallen 20 per cent. That is a clear signal from the world, saying, "We do not like this uncertainty and we do not like Brexit."

Though the Prime Minister said there is it no turning back, if we come to our senses we will not leave the EU. Article 50 is revocable. At any time from today we can decide we want to stay on.

That is for the benefit of the British economy, for keeping the United Kingdom "United", and for Europe as a whole – let alone the global economy.

Lord Bilimoria is the founder and chairman of Cobra Beer, Chancellor of the University of Birmingham and the founding Chairman of the UK-India Business Council.