The millennial generation is now the poorest in Britain while older people are getting richer, according to the Institute of Fiscal Studies.
The future doesn’t look much brighter. Britain’s vote to leave the European Union — a decision bolstered by the baby boomer vote — will leave economic uncertainty and reduced opportunities for young people in its wake.
While overall incomes rose by 2% in real terms between the 2008 financial crisis and 2015, the study found that most of the wealth went to the older generation.
The income disparity between age brackets makes pretty depressing reading for millennials.
Here are some highlights:
- 22 to 30 years old — income fell by 7%.
- 31 to 59 years old — no change in incomes since the financial crisis
- 60 years old and over — income jumped by 11% over the period, when measured before housing costs.
The IFS looked at data from the government’s Department for Work and Pensions (DWP)’s Households Below Average Income (HBAI) series, published on June 28, 2016. It is a survey of more than 20,000 households in the UK, which asks detailed questions about income from a range of sources.
The income disparity between age groups is down to a few things:
1. Old people’s pensions and subsidies are healthy — during the recovery period from the financial crisis, the government “triple locked” the state pension, meaning that old people would receive a return on their pension, whichever is the highest out of inflation, earnings, or 2.5%. On top of that, they have non-means-tested subsidies on winter fuel payments.
Pensioners also get free bus travel and free prescriptions, and even a Christmas bonus. But a lot of people aged 60 and over are still working.
2. The younger generation have stagnant wages and higher living costs — in contrast to pensioners, younger people are either struggling to get into the jobs markets, despite record low unemployment, and if they do work, their wages are pretty meagre when weighing up living costs.
Millennials and those aged up to 60, do not have subsidies like older people. They are less likely to own a home, have savings, and therefore pour most of their money into rent, transport, utility bills, and food.
Brexit is going to make everything worse
The IFS warns that it is only going to get worse for young people.
“Tackling low income is increasingly about tackling the problems faced by low-earning working households. In the short term this would be aided by a continued recovery in the number of hours worked by those on low wages or by more second earners entering work,” said Robert Joyce, an author of the report and an Associate Director at IFS.
“Ultimately substantial progress will depend crucially on economic policies that push up productivity. Economic uncertainty following the Brexit vote will only serve to make these challenges all the tougher.”
Brexit has already caused chaos — the pound slipped to 30-year lows, the stock market has been all over the place, and companies are thinking of pulling out of Britain or relocating jobs.
The IFS warned:
“Virtually all serious analysis suggests that the uncertainty over the UK’s future relationship with the EU will lead to a smaller economy and hence lower living standards over the next few years than we would otherwise have had. But precisely how this will feed through into employment, earnings, and tax and benefit policy is impossible to predict with confidence.
“The vote for Brexit is highly likely to have a significant negative impact on national income over the next few years. But the impact on inequality will depend on which households’ earnings and employment are most affected and on the government’s tax and benefit policy response.”
And guess what? It is actually old people that can be largely to blame for this — they were the ones who overwhelmingly voted to leave the EU.