Monday’s Work and Pensions Committee session on intergenerational fairness further ignited the debate about the hardships facing today’s younger generation. Views from witnesses, including Paul Johnson of the IFS, Shiv Malik of the Guardian and Philip Booth of the IEA, did little to dispel the perception that as far as the intergenerational fairness debate goes, the older generation are winning hands down.
Today’s pampered pensioners currently enjoy a raft of benefits including non-means tested fuel allowance and a triple-lock protection on their state pension. This ensures their state pension rises every year by the highest of price inflation, earnings growth or 2.5% and has been described by experts as both arbitrary and unsustainable. In fact, work carried out by The Joseph Rowntree Foundation for the Guardian (cited in the session) found that those aged 25-29 were worse off than 10 years ago, whereas those aged 65-69 were £5,500 better off.
Today’s young people have been disproportionately hit by the financial crisis and continue to struggle. Unemployment in this age group is high and job security poor. They have been priced out of the housing market and forced to rent at ever-spiralling costs. Conversely, home ownership remains high amongst retirees. Dishearteningly, young people have also missed out on perks enjoyed by their parents’, such as free university education and generous, defined benefit pension schemes.
Not surprisingly, confidence is low amongst the young. Research by the financial services agency MRM found 36 per cent of young people feel they are worse off than their parents at the same age.
Is this generation becoming a ‘lost generation’? Let’s consider the facts. Levels of debt are high – Citizen’s Advice found unsecured debt among 17-24 years old averages £12,215 – and levels of engagement and trust with financial services are low. However, MRM’s research found that young people are actually very keen to save but being prevented from doing so by a lack of disposable income – 43 per cent said they didn’t earn enough to save.
This is very concerning. It seems young people today are shouldering so many other financial pressures that it is not easy for them to put in place measures that will help them achieve their financial aspirations. Even though they have lost the advantages taken for granted by their parents, they are being expected to manage their financial futures by themselves – all in a climate of financial uncertainty.
Work clearly needs to be done to redress this imbalance. The government did make a helpful nod in this direction when it unveiled the Lifetime ISA at the last budget, designed to help young people save more flexibly for pensions and property. However, as alluded to during Monday’s intergenerational fairness session, protecting pensioners’ benefits at the expenses of services for younger people is not helping. While fuel allowance, which many older people will admit to not needing, was safeguarded, much funding for young people’s services was cut, such as the Educational Maintenance Allowance, the Future Jobs Fund and university grants for the poorest students.
We are starting to see some worrying social trends as a result of the hardship on the young. Many are putting off major life events, such as marriage, starting a family or even moving to a place of their own – the average age of first time parents and those getting married have both risen over the last 20 years. Debt charities have reported that they are seeing a sharp increase in younger people contacting them for advice, more so than any other age group. This has knock on effects such as mental health problems linked to money worries.
These trends also have an economic impact. With so many young people either unemployed or overqualified for their jobs (one in six workers in the general population are overqualified according to the latest ONS figures), national productivity starts to decrease and pressures on individual income increase. Over the longer term, however, this incubates a disaffected and disappointed generation.
Failing to reach the standards expected of them by society is inevitably damaging, leading to reduced aspirations, pressure on support services and an increase in unsociable behaviour caused by unfulfilled young people. The government needs to step in before young people begin to lose patience.
Sophie Robson is a consultant at MRM and author of the Young Money report
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