Why We Need To Talk About The Millennial Pay Gap
The Debrief: We’re broke and it has absolutely nothing to do with spending all our money at brunch
There’s a story we’ve been told about why millennials don’t have any money. It begins with a passion for avocado-based brunches, muses on entitlement in the middle, ends with us all supping £7 unicorn lattes whilst simultaneously bemoaning our overdrafts and has always seemed somewhat implausible to me.
I know lots of young adults who don’t have any money, can’t afford to buy houses and struggle to save even the smallest amount and not once has it been because they eat too many avocados.
Now, this isn’t to say that some millennials spend all of their money on avocados. I’m sure it happens. But, no, on the whole, the expensive green fruit which is near impossible to purchase at perfect ripeness is not responsible, as great a story as that makes…
The real reason for the millennial pay gap is this: we are a generation that has borne the brunt of the hangover of the 2007 financial crash and come of age just as our country’s overheated housing market finally boiled over. This particular pay gap is less talked about than the gender pay gap, Lara Prendergast called it a generational pay gap in The Evening Standard. She is one of a very small handful of people to acknowledge the problem. So, it logically follows, that by extension politicians are doing less about it. There are working groups on the gender pay gap, and rightly so. But where is the working group on the millennial pay gap?
This isn’t about moaning millennial snowflakes begrudging baby boomers their million pound houses, nor is it about us expecting to be paid for posting selfies. Don’t be so glib, you can’t afford to be. Long term, the consequences of generational inequality for the future of this country and its public institutions, could be very devastating indeed. And no, I’m not generally one for hyperbole.
Let’s put it this way: who funds the NHS if nobody is earning enough to pay high rate taxes? Where do people turn if they aren’t able to save enough in their own pension pots? How do we fund social care for the elderly if those elderly don’t have expensive houses to sell off by way of payment?
The Institute for Fiscal Studies (aka the IFS, it sounds pretty boring, I know, but they do important, rigorous and meticulous work with data) has published research which shows that pensioners have seen their income growth in real terms, not just because of inflation. Meanwhile, the income of the under-30s has actually fallen by 7 percent. While baby boomers have seen their wealth grow in real terms, quite the opposite is true for young adults today.
So, avocados aside, where does this story really start? Andrew Hood, is a millennial. He’s also a senior research economist at the IFS. He’s worked on lots of the headline-grabbing reports which lay bare the stats about just how much worse off young adults are today than our elders were at our age.
‘The big challenge that faces Millennials’ he tells me ‘is that for most people in the UK the way we accumulate wealth is through housing and pensions. And, if you look at young adults they’re much less likely to own a home than previous generations were at the same age and they’re also significantly less likely to have access to generous salary related company pensions.’
Where does that leave us I wonder? Suspecting the answer is up the creek without a paddle. ‘Those two factors together, combined with the very low-interest rates that we have at the minute, make it very challenging to accumulate wealth as you move through life in the way that previous generations were able to’ Andrew says. He goes on to explain that there is very real cause for concern because ‘the normal course of things is that each age cohort would have more earnings in real terms than the generation before them but, because earnings have flat lined in the last few years and actually done particularly badly for young adults that’s no longer true.’
2007 was the year after I went to university, like many people my age it was the time in which we were neither children not quite yet adults. It was also when the financial crash occurred, changing the course of our fortunes. ‘Its now ten years since the financial crisis’ Andrew says, ‘and the shadow of that financial crisis still looms over the whole economy – basically earnings fell a lot in the years after the recession and the recovery has been very slow ever since and the really bad news is that on the governments official projections real earnings – that’s relative to prices – will be lower in 2020 than they were back in 2007.’
It’s not sexy and it’s not going to get people as excited as the prospect of a policy like…oh…I don’t know…scrapping tuition fees…but, fixing this economic stagnation is the biggest challenge that our government could possibly face. Unfortunately, they’re rather preoccupied right now because of a little something called Brexit.
Andrew says that what happens to our generation now ‘really depends on what happens to the economy over the next 10 years. In terms of income and pay it depends whether what we are seeing is a long-lasting recession with a bad hangover and eventually we’ll get back to where we were or whether things are just going to be worse than they used to be. It might be a problem if people are still paying rent in retirement but people not owning their own home isn’t necessarily in and of itself a problem, it’s the cost of renting that’s the issue.’
As things stand, however, the facts speak for themselves. If you look at the actual housing costs young people face in real terms, compared to those experienced by people born in the 60s when they were in their late 20s, rents and mortgage repayments were basically the same. Today, however, repaying a mortgage is much cheaper than renting because interest rates are so low. But, by a cruel twist of fate, rents are so high that an increasingly small number of people are able to save enough to buy in the first place, let alone pay into a pension.
‘Things were just as hard in my day’ is a maxim by which baby boomers live their lives. You can’t really blame them, after all, it’s the prerogative of every generation to say, think and truly believe that things have gone to the dogs as they get older because their successors aren’t as hardy or hardworking as they were. By the same token, you can allow younger generations a bit of leeway when it comes to their belief that nobody has ever experienced things exactly as they experienced them. But, when it comes to the millennial pay gap, I have to say, with the weight of world weariness beyond my years, I really do think things have gone to the dogs and I’m waiting for someone to come along and sort it out…
Don’t be swayed by anyone offering to wipe off your student debt or promising future generations free university tuition. What you really need to ask of anyone who wants to represent us from here on in is this: WTF are you planning to do about the millennial pay gap?
We’re listening. We're waiting to hear how this story ends.
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