Inter-generational tensions are likely to continue growing as young people face up to the fact that they are worse off than the generation before them.
Addressing our annual Grigor McClelland lecture Torsten Bell, Director of the Resolution Foundation think tank, said the golden rule that earnings would always increase in line with national GDP had now been broken and this was having significant consequences for the economy and society.
“There has always been a certainty that national progress feeds through to individual progress, but that link has been broken. The young are not feeling optimistic about the future because the things they thought Britain was going to promise them in terms of a job, and the things they saw their predecessors achieve, are not what they are getting.”
Recent research from the Foundation’s Intergenerational Commission found that men in their 20s will earn on average £12,500 less by the time they reach 30 than men of the generation before them. Bell said this was partly down to the severity of the recession nearly 10 years ago, but added that poor pay growth among the Millennial generation – those born between the early 1980s and the early 2000s – actually preceded the financial crisis.
He said another issue was poor job mobility among the young. “Moving jobs is important when you are in your 20s as this helps drive up your income. One of the problems today is that young people are less prepared to move jobs and that has an impact.”
Bell stressed that there were positives amidst this changing landscape of UK employment. For instance young women were in general doing much higher skilled jobs than previous generations. “The data is pretty consistent, feminism has trumped automation over most of the past 20 years,” he added. “With the exception of the care industry there are not very large numbers of women going into very low paid work,” he added.
However he stressed that although the gender pay gap among those in their 20s was now at a record low, this was only a relative measure and one of the reasons the gap had reduced was because men’s pay had fallen.
“Young men are shifting into low paid work previously dominated by women such as retail, bars and restaurants. At the same time, between 1993 and 2016 the number of young men in routine manufacturing jobs has fallen 40 per cent. It is not just about the jobs that young men are doing either, it is also about how they are doing that work. For instance there has been a four-fold increase in the number of young men doing part-time work.”
Bell added that soaring house prices were drastically changing how wealth was being accumulated, with the result that many young people today have little chance of ever owning their own home. “Yet home ownership is the best hedge that anyone can ever take out against housing costs going up in the future.”
Contrary to popular wisdom, this wasn’t just a London or South East housing problem either. “Today there are more people renting than owning their own home in a city like Greater Manchester too. On average if you are in the private rented sector you spend 30% of your income on housing, whereas if you are a homeowner the average is 25%.”
He added that by the age of 30 the Baby Boomer generation – those born between the end of the Second World War and the mid 1960s – were 50% more likely to be already owning their own home compared to the Millennial generation.
Our lecture was held in honour of Professor Grigor McClelland, the first director of Manchester Business School when it opened in 1965.