The plight of the young is not just a Canadian phenomenon. The pressure on younger generations is also increasingly apparent in the UK and other countries with ageing societies. This led to the establishment of the Intergenerational Foundation (www.if.org.uk) in 2011, writes Co-Founder Liz Emerson.
Part think tank, part charity, IF exists to help young people fight for a fairer deal by identifying areas where we believe younger and future generations are most at risk of disadvantage. We measure the extent of this disadvantage and publish our findings to policy-makers, academics, business, the media and the public in order to provide the evidence required for much-needed policy change.
Feeling the same pain?
It would seem that young Canadians and young Brits face the same key issues – expensive housing, declining wages, high education costs and high spending on the old compared to the young. In the UK we have attempted to measure the change taking place. Our 2015 Intergenerational Fairness Index, a tool IF created to quantitatively track the position of younger generations relative to older generations in the UK, makes worrying reading. We have witnessed a 10% deterioration in the prospects of younger generations relative to older generations in the last five years alone. Nowhere is this felt the most than in housing.
A home of one’s own?
The UK national media is awash with apocalyptic stories referring to the current housing crisis created by older generations but experienced by younger generations. While the over-55s sit on nearly £1 trillion (C$2 trillion) worth of property, and show no signs of making way for younger generations, the young are unable to afford a home of their own. The average age of a first-time buyer – a person buying their first home – has risen from their early 20s in the 1970s to around 35 years of age today. Our house-price boom, driven by a combination of lack of supply, home-grown and international property speculation, the sell-off of most of our social housing, and a lack of new building, means that few young people can afford to buy a home of their own even with family help. A lifetime of rent is now the overwhelming expectation of many young people.
A room of one’s own?
A lack of housing supply has led to increased rents, which has in turn led older generations to move away from investing in poorly-performing pensions, annuities and stocks and shares, towards property speculation. The buy-to-let (BTL) landlord industry is still going strong in spite of recent government reforms to cool demand. The number of young renters paying rent to older landlords has more than doubled between 2004 and 2014, and they are paying average rents of more than £900 (C$1,800) per month for the UK as a whole but more than £2,500 (C$5,000) for a property in London.
As a nation we are addicted to rising house prices but blinkered to the devastating effect this has on younger generations. Generation Rent has a choice – save for a home or save for old age. Doing both is beyond the means of many. One of the factors for this is a decline in median wages for the young.
Wage declines, a move to short-term precarious contract work and the rise and rise of zero hours contracts, means that younger generations are now also locked out of workplace protection without access to pension plans, sick pay and maternity cover enjoyed by older generations. Work may be irregular but bills are regular. It may come as no surprise to learn that stress and depression is increasing among the young. IF has researched the intergenerational pay gap emerging and found that poverty is now less likely to be among the old and more likely to be among the youngest workers who have faced a 19% decline in wages since the global financial crisis. The result is that many young people simply cannot afford to leave the family home, with 3.3 million 20–34 year olds living at home, unable to start out on their own, put down roots and lead independent lives.
The loss of free education
Nowhere has the UK let down its young more than in higher education, when in 2010 the government decided to triple fees for university students. Now, current students face paying interest rates of RPI +3% while at university, leaving university with a debt of £42,000 (C$85,000), and paying a graduate tax in all but name of 9% of income over earnings of £21,000 (C$42,500). While this may seem small fry compared to the student loan regime in Canada, IF fears that it will not be long before UK undergraduates are facing the same level of student debt as that faced in North America. The student loan books have been sold, and the government is currently consulting on retrospective charging, which means that previous students may also be dragged into the repayment net. What is so blindingly intergenerationally unfair is that previous generations did not have to pay to go to university in the UK. In fact they were paid to go, with government grants given to cover their study and living costs.
The rise of gerontocracy
That the UK young are living in a gerontocracy is beyond dispute. In 2009 local elections 18–24 year olds were outvoted 7:1 by over-65s. In the 2010 General Election young people came out to vote in force for a political party that promised not to increase tuition fees. Once in power, the LibDems did the dirty and agreed to an increase in tuition fees. This wilful disregard has further alienated the young from participating in our democracy and may not be forgotten for years to come. But the result of the young turning away from democratic participation is that government expenditure has followed those who vote the most – the old. So, while younger generations have seen savage cuts to housing benefit, in-work tax credits, education maintenance allowance, travel concessions, and income support for the poorest students, and increases in students fees, older generations continue to receive over-favourable benefits irrespective of their increasing wealth. These include free travel, free winter fuel payments, free eye care, free prescriptions, no in-work national insurance payments, free TV licences and even government-backed market-beating pensioner bonds.
The end of social welfare?
The UK’s world-famous social welfare system, which rose from the ashes of WWII, and which promised to provide cradle to grave care, is in crisis. And the elephant in the room is increasing longevity combined with two population bulges of post-war babies coming up to retirement. Our system is facing unaffordable costs due to the sudden, though welcome, increase in longevity. In 2013 the UK had more than 500,000 people over 90 years of age. The needs of our eldest members mean that our welfare system is creaking and our National Health Service is unable to cope with an ageing population that requires more in-hospital days, and longer treatments for chronic illnesses. The dementia time bomb has yet to hit.
Rather than to ask the wealthy old to pay a little more for their own old-age care, successive governments have preferred to use the UK taxation system to plug the funding gap, but only by those under 65 years of age. Our system is designed in such a way that age, not wealth, is used as a proxy for need. This means that an entire tranche of benefits listed above, and costing more than £5 billion a year, kicks in automatically once someone reaches the female state pension age. This is despite our current State Pension liability of £3.8 trillion, our public sector pension liability of £1.2 trillion and our National Debt of £1 trillion. In short, the UK is in debt to the tune of around £6 trillion.
It is clear that younger generations in the UK are in desperate need of help and IF and its supporters are doing all that we can to highlight the many unfairnesses so apparent in policy-making. It is indeed great news that sister organisations such as Generation Squeeze are emerging across the world, all calling for greater fairness between the generations. An international movement is emerging that we hope will give our children and grandchildren a fairer future by balancing the interests of different generations equitably.