“Don’t it always seem to go, that you don’t know what you’ve got till it’s gone”
Joni Mitchell’s lyrics may refer to her first trip to Hawaii, but they could just as easily apply to UK trends in generational living standards that the Resolution Foundation’s Intergenerational Commission has uncovered. That’s particularly so in light of new analysis comparing these trends internationally.
While there are huge living standards differences between high-income countries, there is also much shared ground, with the financial crisis and demographic patterns putting pressure on younger generations’ living standards everywhere. But the UK stands out. With the partial exception of Spain, no other country in living memory has experienced as large a “boom and bust” in generation-on-generation progress across both incomes and home ownership rates.
On incomes, the millennials (born 1980-2000) who have reached their early 30s are just 6 per cent better off than generation X (born 1966-80) when they were the same age. This is very small progress indeed when compared with the progress older generations are enjoying – baby boomers (born 1946-65) in their late 60s are 29 per cent better off than the silent generation (born 1926-1945).
These sorts of slowdowns have occurred in most countries, but not to the same extent. In the US, millennials in their early 30s are doing 5 per cent worse than their predecessors, but this compares to relatively modest 11 per cent gains for generation X relative to the baby boomers. In fact, in the US – despite higher levels of income – the absence of generational progress is what stands out. Typical incomes in the US for those aged 45-49 are no higher for those born in the late 1960s than they were for those born in the early 1920s.
Back to the UK. The “had it then lost it” story is also clear when we look at housing. Our previous research has shown that young people in the UK face much higher housing costs (relative to incomes) than older generations did when they were making their way in the world. In a large part this is driven by the rise and fall of home ownership.UK home ownership rates surged by 29 percentage points between the greatest generation (born 1911-1926) and the baby boomers, but this generation-on-generation progress has been all but wiped out for millennials. Their home ownership rate in their late 20s, at 33 per cent, is 27 percentage points lower than the rate for the baby boomers at the same age (60 per cent).
This fall between generations is much smaller in other countries in which housing is a key areas of concern such as Australia (a 12 percentage points fall from boomers to millennials) and the US (a 6 percentage point fall). As with incomes, the UK shows the strongest boom and bust – large generation-on-generation gains for today’s older cohorts followed by stagnation or declines for younger ones.
Let’s be clear though, the UK is a relatively good place to grow up. Ours is one of the most advanced economies in the world, with high employment rates for all age groups. In other advanced economies, young people have suffered immensely as a result of the financial crisis. For example, in Greece millennials in their early 30s are a shocking 31 per cent worse off than generation X were at the same age. In Spain today the youth (15-30) unemployment rate is still above 30 per cent, over three times higher than it is in the UK.
But, if everything is relative – before the parking lot came the paradise – then the UK’s situation isn’t one to brush away. Small income gains are, obviously, better than big income falls. But what matters for a young person in the UK today probably isn’t how well they’re doing relative to a young person in Italy but how this compares with their expectations, which have been shaped by the outcomes of their parents and grandparents. It’s no surprise that the UK is one of the most pessimistic countries about the prospects for today’s young.
The good news, though, is that it doesn’t have to be like this. In other parts of the world and at other times, large generation-on-generation progress has happened. Building more homes, having strong collective bargaining and delivering active labour market policies that incentivise work are things we know make a difference. As politicians attempt to tackle the UK’s intergenerational challenges, they should remember to look overseas for lessons.