Debt and Housing Costs Make Young Worse Off Than Past Generations
by Phillip Inman
August 05, 2014
Source: The Guardian
Young people face a steeper climb to achieve the lifestyle of today's baby boomer generation, according to an index measuring intergenerational fairness which recorded a rise from last year.
The declining affordability of housing for the under-30s accounted for the increase alongside a rise in government debt, which future generations must pay.
The intergenerational fairness index, which was created by a charity, the Intergenerational Foundation (IF), to compare the burden faced by younger people with that of older workers and retirees, rose to 133 points in 2014 from 130 last year.
The IF also found that under-25s suffered from stagnant employment levels and low levels of house-building.
It said there has been a rise in the cost to the workforce of the state pension, while a fall in GCSE pass rates would put an immediate brake on the earning capacity of many young people. The index also measured a decrease in democratic participation by young people and increases in greenhouse gas emissions.
Angus Hanton, the co-founder of the IF and joint author of the index, said: "Like overloaded packhorses, our young people are becoming increasingly burdened by other generations' debts while loaded down with debts other generations have never had to pay, such as £9,000-a-year student tuition fees and record housing costs. When will government realise there's nothing left to take from the young?"
He added: "In spite of repeated government assurances that the burden of government debt is decreasing, the 2014 IF index reveals a record total of £1,254 billion of public debt, equivalent to £42,000 for each person in the workforce."
The index shows median incomes for people aged 22-29 have risen by 1% while median house prices have increased by 2.8%.
According to figures from the Office of National Statistics, retirees have seen their incomes increase by 5.1% between 2007/08 and 2011/12, while working households saw typical incomes fall by 6.4%.
Hanton said: "When government debt and public-sector pension liabilities are combined, the resulting debt per member of the workforce is now over £70,000, equivalent to more than three times median household incomes."
Laurence Kotlikoff, a professor of economics at Boston University, and the father of intergenerational accounting for the World Bank in the 1990s, said the index showed "intergenerational inequity continues to be the moral issue of our day".
He said: "Like an adult report card, the Intergenerational Foundation's vitally important intergenerational index makes it clear that the UK is failing its young."
The IF called on the government to embark on a programme of "intergenerational rebalancing". It said: "This could be achieved by encouraging a nationwide housebuilding programme to reduce house prices, reducing student tuition fees and student loan interest rates, better targeting of universal benefits for older generations, increasing public-sector pension contributions, scrapping the exemption from national insurance payments for those working post-retirement and shifting taxation towards property wealth rather than earned income."