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.

Photo: Getty
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The Prevent strategy needs a rethink, not a rebrand

A bad policy by any other name is still a bad policy.

Yesterday the Home Affairs Select Committee published its report on radicalization in the UK. While the focus of the coverage has been on its claim that social media companies like Facebook, Twitter and YouTube are “consciously failing” to combat the promotion of terrorism and extremism, it also reported on Prevent. The report rightly engages with criticism of Prevent, acknowledging how it has affected the Muslim community and calling for it to become more transparent:

“The concerns about Prevent amongst the communities most affected by it must be addressed. Otherwise it will continue to be viewed with suspicion by many, and by some as “toxic”… The government must be more transparent about what it is doing on the Prevent strategy, including by publicising its engagement activities, and providing updates on outcomes, through an easily accessible online portal.”

While this acknowledgement is good news, it is hard to see how real change will occur. As I have written previously, as Prevent has become more entrenched in British society, it has also become more secretive. For example, in August 2013, I lodged FOI requests to designated Prevent priority areas, asking for the most up-to-date Prevent funding information, including what projects received funding and details of any project engaging specifically with far-right extremism. I lodged almost identical requests between 2008 and 2009, all of which were successful. All but one of the 2013 requests were denied.

This denial is significant. Before the 2011 review, the Prevent strategy distributed money to help local authorities fight violent extremism and in doing so identified priority areas based solely on demographics. Any local authority with a Muslim population of at least five per cent was automatically given Prevent funding. The 2011 review pledged to end this. It further promised to expand Prevent to include far-right extremism and stop its use in community cohesion projects. Through these FOI requests I was trying to find out whether or not the 2011 pledges had been met. But with the blanket denial of information, I was left in the dark.

It is telling that the report’s concerns with Prevent are not new and have in fact been highlighted in several reports by the same Home Affairs Select Committee, as well as numerous reports by NGOs. But nothing has changed. In fact, the only change proposed by the report is to give Prevent a new name: Engage. But the problem was never the name. Prevent relies on the premise that terrorism and extremism are inherently connected with Islam, and until this is changed, it will continue to be at best counter-productive, and at worst, deeply discriminatory.

In his evidence to the committee, David Anderson, the independent ombudsman of terrorism legislation, has called for an independent review of the Prevent strategy. This would be a start. However, more is required. What is needed is a radical new approach to counter-terrorism and counter-extremism, one that targets all forms of extremism and that does not stigmatise or stereotype those affected.

Such an approach has been pioneered in the Danish town of Aarhus. Faced with increased numbers of youngsters leaving Aarhus for Syria, police officers made it clear that those who had travelled to Syria were welcome to come home, where they would receive help with going back to school, finding a place to live and whatever else was necessary for them to find their way back to Danish society.  Known as the ‘Aarhus model’, this approach focuses on inclusion, mentorship and non-criminalisation. It is the opposite of Prevent, which has from its very start framed British Muslims as a particularly deviant suspect community.

We need to change the narrative of counter-terrorism in the UK, but a narrative is not changed by a new title. Just as a rose by any other name would smell as sweet, a bad policy by any other name is still a bad policy. While the Home Affairs Select Committee concern about Prevent is welcomed, real action is needed. This will involve actually engaging with the Muslim community, listening to their concerns and not dismissing them as misunderstandings. It will require serious investigation of the damages caused by new Prevent statutory duty, something which the report does acknowledge as a concern.  Finally, real action on Prevent in particular, but extremism in general, will require developing a wide-ranging counter-extremism strategy that directly engages with far-right extremism. This has been notably absent from today’s report, even though far-right extremism is on the rise. After all, far-right extremists make up half of all counter-radicalization referrals in Yorkshire, and 30 per cent of the caseload in the east Midlands.

It will also require changing the way we think about those who are radicalized. The Aarhus model proves that such a change is possible. Radicalization is indeed a real problem, one imagines it will be even more so considering the country’s flagship counter-radicalization strategy remains problematic and ineffective. In the end, Prevent may be renamed a thousand times, but unless real effort is put in actually changing the strategy, it will remain toxic. 

Dr Maria Norris works at London School of Economics and Political Science. She tweets as @MariaWNorris.