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What does the chart show?
It shows that generational progress in the UK seems to be grinding to a halt. Historically, every generation has enjoyed higher living standards than the one before. But for millennials in their 20s and 30s, their incomes are barely any higher than “Gen X-ers” were at the same age.
In fact, this chart understates how badly things have gone for millennials, because it shows incomes before housing costs. If you look at how much people have left to live on after they have paid for housing, millennials are now slightly worse off than the previous generation were at the same age.
You might argue that millennials should stop complaining. They still have historically high living standards, even if they aren’t any richer than the previous generation. But it is still a big break with the past. People in the UK have grown used to the idea that their children will be significantly better off than they were. Compounding the issue, house prices have surged at the same time as young people’s incomes have faltered. Average house prices rose 152 per cent in the 20 years to 2015-16, while net family income for 25-34-year-olds only grew by 22 per cent.
That has enriched older people who already owned their homes but made it very hard for young people to get on to the housing ladder. At the age of 27, people born in the late 1980s had a homeownership rate of 25 per cent, compared with 33 per cent for people born just five years earlier and 43 per cent for those born 10 years earlier.
These trends — together with student debt and meagre pensions — seem to be having a psychological impact on millennials. Perhaps because life seems more uncertain, they have become more risk averse in the labour market. They are less likely to switch employers or move regions for work than previous generations were at the same age.
That has an impact on the economy as a whole. It is probably helping to depress wage growth, since people who move for work tend to receive bigger pay rises than people who stay put.
But won’t millennials inherit their parents’ wealth?
Yes, in fact they are likely to inherit far more wealth than their parents or grandparents. But there are a few catches. For a start, for many millennials these inheritances will come too late to help them get on the housing ladder when they are raising children. The Resolution Foundation thinktank estimates the average age to inherit will be 61. And some of that wealth might actually need to be spent on caring for parents with long-term conditions such as dementia.
The other catch is that these inheritances will not be spread evenly. It will depend on whether a person’s parents own their home or not and, if so, how much it is worth. That is likely to exacerbate wealth inequality within the millennial generation. Millennials who have already accumulated at least £200,000 of housing wealth have parents who, on average, own property worth £195,000 per child. But millennials who do not own their own homes have parents who own, on average, just £85,000 per child of property wealth. More than half of millennials who don’t own homes have parents who don’t own homes either.
Are young people in other developed countries in dire straits too?
In some places, it is worse. Millennials in Italy, Spain and Greece — where youth unemployment rocketed after the financial crisis — now have incomes that are far lower than previous generations at the same age. In the US, the trend is similar to the UK, but it started earlier and hit Generation X too.
But it isn’t grim everywhere. One country stands out as an exception to these trends, where millennials are doing comfortably better than the generation before them. If you are young today, Norway looks like the place to be.