Young adults have less to spend on non-essentials, study says
Avocado on toast was the snack that became a synonym for millennial excess. But along with holidays and tickets to shows, dining out is proving beyond the budget of Britain’s youngest adults, who, according to new figures, have suffered a slump in their spending power for life’s non-essentials while their parents’ generation have splashed out with increasing abandon.
In an inaugural national audit of intergenerational spending power, which is likely to reignite tensions between young and old, the Resolution Foundation thinktank concludes that today’s 18- to 29-year-olds are also spending less on shoes and clothes, hobbies and travel in real terms than those at the same age in 2001 as housing costs have soared. Compared with people the same age at the turn of the millennium they are 7% poorer in real terms, after paying rent, or if they can afford it, mortgage dues.
Meanwhile, in a story that will be familiar to the rising millions of twentysomethings who can’t afford to move out from their parents home, baby boomers have cranked up their spending on fun, laying out more on recreation, restaurants, hotels and culture, as people aged 65 and over have enjoyed a steep 37% rise in spending power compared with the same generation in 2001.
The audit is published by the Resolution Foundation’s new Intergenerational Centre, which is led by the former science minister David Willetts, and it said the findings debunked “the idea that young people are devoting growing pots [of money] to eating in restaurants and cafés (be that those that serve avocado on toast or others) or flying abroad”.
The proportion the young spent on fuel and groceries was up two percentage points while their spending on recreation and culture was down two points, the share spend on restaurants and hotels was down one point and clothing and shoes down two points. The 65s and over spent three percentage points less on groceries, two percentage points more on restaurants and hotels and three percentage points more on recreation and culture.
“The clear picture in terms of day-to-day living standards as measured through household consumption is of generational progress for older generations, and generational decline for younger ones,” the report said.
A spokesman for Generation Rent, which represents young people who have been priced out of homeownership, said in response to the report that “resentment is growing” and the founder of the Intergenerational Foundation, which promotes the interests of younger generations, accused older people of “breaking the social contract”.
Far from wasting potential housing deposits on fripperies, as suggested in 2017 by one millionaire property developer, millennials have been obliged to allocate a greater proportion of any money left over after housing costs to groceries, utilities and education. In 2018 they spent £380 a week on non-housing items on average – 7% less in real terms than they would have done at the turn of the century, analysis of official figures showed. At the same time the spending of people aged 50-64 rose 11% to £460, and pensioner spending rose to £390 a week.
The audit also assesses sharp increases in housing costs, cuts to in-work benefits, stagnant pay since the financial 2008 financial crisis and widening gaps in absolute wealth between young and old as key factors in one of the biggest social changes of this era.
Half a million more twentysomethings are living at home than would have been the case if the pre-crisis trend had not been disrupted, the report found. In 2007, half of 21- to 24-year-olds lived with their parents but by 2018 this had risen to 60%. The increase for those in their late twenties was even greater, up a third from 24% to 32%.
Lord Willetts said it was clear that big gains in standards of living enjoyed by previous generations had stalled, but he noted that in the last couple of years there had been stronger pay growth for younger millennials.
“By looking for solutions through a generational lens we can repair the social contract between generations, and help bring our country back together again,” he said.
In absolute terms, young people today remain better off than baby boomers were when they were young and the report makes clear the strain on the intergenerational contract is not one way. The Office for Budget Responsibility has identified a looming £36bn annual shortfall in health, social care and pension funding because of the ageing population, which is likely to have to be filled by taxing income or inheritances.
Claire Turner, a director at the Centre for Ageing Better, urged caution at framing challenges in terms of intergenerational fairness and using statistical averages “which could distract us from the very real poverty and disadvantage experienced by people across all ages”.
“Many of the issues identified in this report are the result of decades of political short-termism and a failure by successive governments to respond to Britain’s changing population structure,” she said.
But Angus Hanton, the co-founder of the Intergenerational Foundation, said older voters have allowed policies that levied high taxes on the young, and made it hard for them to save for a pension or own their own home.
“When asked to ease the pressure on the intergenerational contract by contributing a little more if they have it, older generations demand intergenerational solidarity and universal benefits for their generation, but not for others,” he said.
guardian.co.uk © Guardian News & Media Limited 2010