On top of all its other failings, this government has managed to break one of the most reliable economic trends in the UK: that each new generation earns more than previous ones.
The Resolution Foundation keeps a close eye on how different age groups are faring in the UK economy in something called its Intergenerational Audit. For millennials, the generation born between 1981 and 2000 the research makes for depressing reading.
It has found that people aged 30 are earning on average 8% less than Generation X (born 1965-1980) was at the same age. Millennials should be earning more than previous generations, but not only are they not keeping up with their elders, they are falling behind.
The consequences for their long-term wealth, home ownership, pensions and pretty much everything else are huge. Millennials are paying the price of austerity, higher taxes on income, appalling low growth and desperately poor productivity.
All of this is because the British economy does not produce enough highly paid jobs for graduates or the skilled. We seem to be increasingly reliant on a low-skill, low-pay economy.
And this is really worrying; it is nothing to do with Britain producing too many graduates but is instead a measure of how the economy has performed over the last 15-20 years (of which the Tories have been in power for almost 14)
There have been plenty of signs that this is a trend. Even in the middle of a huge downturn, companies hang onto skilled staff because they are terrified they won’t be able to find such skills again when the economy recovers and when firms do expand they tend to do it by hiring more cheap workers rather than investing in machinery, equipment and computers.
This seems to be a UK problem; in America, it is not happening at all.
The US economy has grown well when the UK’s hasn’t, increasing in size by 17% between 2007-2021 – not bad at all given the huge scale of the credit crunch. The UK over the same period had managed growth of just 2%. Over 14 years this is disastrous, clearly indicating that we are not investing in or developing new dynamic jobs, let alone well-paid ones.
In America too, income growth has been more favourable for the young. Millennials in America have enjoyed higher than average income growth since 2007, whereas the opposite is true in the UK.
And there is another kick in the teeth for millennials – UK taxes are rising and will continue to rise strongly in coming years and those taxes are loaded onto the young. As The Resolution Foundation puts it “Changes to personal tax and benefits since 2010 has left non-pensioners more than £2,200 a year worse off on average. By contrast, pensioners are less than £200 a year worse off.”
As today’s 30-year-olds are discovering, that all adds up to 8% less money than their older siblings and parents earned, when they should have been earning more not less.
Reversing this trend is going to be difficult and may even be impossible. Britain may just be in long-term decline, with an ageing population, non-existent growth and ever-higher debts.
This intergenerational evidence is just the canary in the mine. Things can not only get better. They can get far, far worse.
You can read more from Jonty Bloom in Jonty’s Jottings on Substack.