Right at the start of filming for Dispatches on the generation wealth gap (8pm on Ch4 tonight), we were working around a striking claim: that the young were so shafted that people in their 20s are earning less now that they were 20 years ago. I asked the Office for National Statistics to check this out and when their figures came back, it was the opposite to what I expected – and to what everyone seems to believe. Not only are the 20-somethings paid more, but their disposable income is up by a third on where it was two decades ago.
The idea that the young ones are paid substantially more than their parents contradicts all established wisdom. But the ONS had never released the research before, so no-one knew. The Resolution Foundation, chaired by David Willetts, is midway through a commission on this topic and released a report called the ‘Stagnation Generation’. It claims that the Millennials – those now aged between 20 and 35 – are ‘at risk of becoming the first ever generation to record lower lifetime earnings than their predecessors’. Now, that’s a great story – and one I’d rather hoped to tell in the documentary. But it’s one which (as economists say) is unsupported by the data.
First, the ONS research. It kindly gave me two data sets – I’ve uploaded them on to Google Sheets (here and here) to put them on record. The first one compares incomes of people in their 20s: all up significantly on 20 years earlier. Here’s the chart:
The ONS data shows that the incomes of the 20-somethings is down on 2009 levels. That’s depressing, but well-documented: we’re in the longest wage freeze in economic history. There’s no generational element to this: incomes are down on 2009 about 8pc, give or take a couple of points, for every age group. Even folk in their 50s. The last few years have sucked for everyone.
But incomes are still up on the previous generation – if you take the most conservative definition of ‘generation’ as being 20 years. (This matters: the longer the figure, the better-off today’s Millennials seem by comparison).
If you look at disposable income, it’s up by a third more over 20 years. Here’s the ONS data on disposable income of households headed by people in their 20s:
Again, note the stagnation of the recent decade. But claiming it shows one generation with incomes down on the last is a step too far. Yes, rental costs are up. But the cost of other essentials have not risen in the same way. The cost of clothing, for example, has been cut in half since I left university 20 years ago. As far as I’m aware, this is the first time the ONS has released figures for disposable income by age group: an important contribution to this debate.
The other factor is the elephant in the room of intergenerational fairness: working tax credits. They didn’t exist a generation ago; now they top up low pay, typically experienced by people in their 20s.
Now, young people do face a lot of problems – the asset boom, the housing market, including a government that protects the old from the cuts, thereby sharpening the blow for everyone else. I devote most of my documentary to that, and I’ll blog about it later.
But I do find it strange, given the public interest, that this information hasn’t come to light before. There’s a parliamentary inquiry being held on inter-generational fairness. The well-funded Resolution Foundation has set up a whole commission on very topic. My hunch is that not enough people are looking for the good news, or are burying it by (for example) airbrushing out tax credits or massaging the figures using dodgy deflators. That too many people investigating this field having already arrived at their conclusion (the young are screwed!) and are just looking for statistics to corroborate it.
The figures show that this is the best-educated generation of young people in history, with spending power that would have dazzled their parents generation. They struggle to get a house, they face a government that protects only the elderly, their anger is real. But so is the size of their opportunity.
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