A TUC report published today (Monday) reveals that young people’s falling long-term economic prospects are not down to older people in society hoarding all the wealth, and will not be improved by cutting pensioner benefits to fund more public spending on young people.
The new Touchstone pamphlet Young against old? What’s really causing wealth inequality? finds that young people’s deteriorating prospects are due to a toxic combination of increased university tuition fees, unemployment, poorer job opportunities, lower pay and rapid house price inflation.
It was written for the TUC by the Director of the Strategic Society Centre, James Lloyd, drawing on analysis by Andrea Finney and David Hayes at the University of Bristol.
Wealth, age and inequality
The dismal outlook for many young people is often contrasted with apparently high levels of wealth amongst older people. However, the report finds that pensioners do not comprise the majority of the UK’s wealthiest households.
More important, says the TUC, are the significant wealth inequalities within age groups. The report finds that while six per cent of those aged 75-84 are in the wealthiest decile, six per cent of this age group are also in the very poorest decile.
Workers in their 40s and 50s who are high earners and home-owners are most likely to be wealthy. Two-thirds of those in the wealthiest decile are aged between 45 and 65 – although again others in this age group are very badly off.
The report recognises that there have been some intergenerational shifts. Some recent retirees have experienced exceptional above-inflation increases in property wealth, while young people without access to large deposits are less able than the generation before them to buy their own homes and, given the decline in social housing, are more likely to live in insecure private rented accommodation.
However, the analysis refutes the claim that these new wealth inequalities are driven solely by age, and shows that they are also a result of wider changes in terms of how well some jobs pay and how much some wealth households have.
Wealth, earnings and location
Young against old? uncovers significant wealth variations by region and nation. The wealthiest households are far more likely to live in London and the South East than Wales, the North East and other regions.
It also uncovers how hard life is for many lower-income households across the UK, with half of low earners never having money left over to save at the end of the month and 20 per cent of low and middle earners reporting that they run out of money most of the time. While high earners have median savings of £12,200, low earners only have an average of £300 in the bank (and many have significant debts).
Young people’s earnings were hit particularly hard during the recession. For some young workers, wider changes in the labour market mean that their jobs are now far less secure than those their parents had.
Tackling inequality and disadvantage for young people
The report demonstrates that simply taking benefits from pensioners to give to young people would be a short-sighted and inappropriate approach to addressing the difficulties young people face.
For example, means-testing public spending on pensioners’ winter fuel allowance (which in 2012 constituted £2.16bn of the £190.9bn spending on those over 65) would have very little impact on intergenerational inequality or the future prospects of young workers, leaving most of their large challenges unaddressed.
It is vital that the government acts fast to improve young people’s life chances, says the TUC. Tackling the youth crisis effectively, and increasing fairness between and within generations, requires an ambitious and progressive economic strategy. Targeted action for young people must include investing in skills, improving access to better jobs, setting higher pay rates and giving young people more equal access to home ownership.
TUC General Secretary Frances O’Grady said:
“This government is not on the side of young working people. Today’s young people are bearing the brunt of the failures of the Chancellor’s economic plan, stuck in zero-hours, low-paid jobs, saddled with decades of student debt, with no chance of saving a deposit to rent – let along buy – their first home or with any money left in their pay packets to save for a pension.
“These young workers have not been held back by pensioners but by a government that has polarised opportunity, income and wealth, and as a result many will find themselves poorer than their parents.
“We need a new economic plan for productivity and growth, so that the recovery works for the many and not just the few. We need to make profound changes in how we structure our economy and how we distribute wealth. That means increasing the taxation of assets, ambitious investment in new affordable and council housing, tougher regulation of private rented property and decent jobs and fair pay for all working people.”