Older generations enjoyed higher incomes in their peak earning years compared to today’s workers. Older people are much wealthier than younger people today.
Income Differences by Age
The Baby Boomers enjoyed high incomes for most of their working lives because they were part of a relatively small birth cohort and their peak earning years were before globalisastion really kicked into gear.
When China opened up to world trade in the 1990s this meant British workers had to compete with cheaper labour from abroad. By this time most of the Boomers had most of their working years behind them and were well set up financially to cope with this.
The 2008 financial crisis changed things dramatically for the worse, and wages for younger generations have been going down in relative terms. 30 year old Millennials today have 4% less disposable income than Gen X had when they were a similar age.
Moreover, younger generations feel as if they are more hard done by, meaning they are more likely to question the social contract. 40% of Millennials think they have a low income compared to only 30% of Generation X.
The Stereotype of spend-happy youth
Younger generations are often criticised for being materialistic and more likely to report they think it is important to be rich, with some commentators suggesting the young can learn lessons in frugality from their elders.
However, the stats suggest younger people in fact spend less, and thinking it’s important to be rich is a function of them having lower and less secure incomes!
The over 50s account for one third of the population but 47% of consumer spending. 55-64 year olds spend around 20% on consumer items than 24-35 year olds.
Wealth distribution by age
Wealth is mainly concentrated among older people.
Since 2007 nearly all the extra wealth created has gone to the over 45s, with over two thirds going to the over 65s. Mostly driven by the increase in property prices.
This wealth hasn’t come because of frugality, but because of government policies creating windfalls: low interest rates, printing money keeping property rates high.
And the ability to save for the younger generations has been harmed by stagnating wages and student loans.
Younger people increasingly rely on their parents helping them out financially, most obviously when they purchase their first house. In 2017 34% of first time buyers received help from their parents to buy, and the Bank of Mum and Dad was in the top ten of mortgage lenders!
However this only serves to increase inequality: those at the top are better able to help out their kids, who get richer faster while those at the bottom have nothing.
And it’s a long wait for inheritance, even for those lucky enough to be in receipt of one: age 61 is the average age.
Despite all of the above, there is no mass resentment against the old, and no real desire for wealth to be passed down en masse. The main problem is the inequality of wealth within the top generation and the economic inequality this increases across generations.
Sources and Signposting
ONS: Wealth distribution by age and other characteristics dataset.
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