Millennials in the UK are still bearing the “economic scars” of the 2008 financial crisis according to the Resolution Foundation. No doubt they will be delighted to see David Cameron, one of the main authors of the period of austerity during the Coalition government, being appointed as Foreign Secretary this morning (Monday 13 November – we did check it wasn’t 1 April).
First, some quick definitions for you. Generation X are those between 1966 and 1980 whilst millennials are usually defined as those born between 1981 and 2000. Some would define millennials (also known as Generation Y and famous for eating avocadoes) as being born before 1997, when Generation Z took over. Why we started naming at X is anyone’s guess.
In its annual “intergenerational audit”, the Resolution Foundation (an independent think-tank focused on improving the living standards for those on low to middle incomes) compares the fortunes of millennials with their predecessors, including Generation X and Baby Boomers. The report’s headline is millennials are struggling to catch-up with the living standards of older groups in contrast with those across the pond who have managed to close the gap.
The Foundation found that after the recession following the 2008 financial crisis, the historical trend which saw children earn more on average than their parents at the same age had been broken. “Millennials earned, on average, 8% less at age 30 than their counterparts from the Generation X cohort when they were the same age,” the report said.
Sophie Hale, the thinktank’s principal economist, continued: “Young people across advanced economies were hit by the financial crisis, putting a stop to decades of progress. Fifteen years on, this ‘crisis cohort’ are no longer young. And while many US millennials have bounced back, their counterparts in Britain are still wearing economic scars as they approach middle age.”
The report placed the blame on wage stagnation in the UK and high housing costs. The Resolution Foundation found “around the turn of the millennium, 67% of households aged 30-34 were homeowners, but by 2021 this figure was 20 percentage points lower, at 47%.”
The situation is unlikely to improve in the short term with the news late last week that the UK economy failed to grow between July and September. The chancellor said higher rates were hitting growth but added that the economy had performed better than expected this year (which is admittedly a pretty low bar).
Paul Dales, the chief UK economist at Capital Economics, said the latest data suggested "the drag from higher interest rates is growing", but he does not expect the Bank to start cutting rates until late next year.
Jeremy Hunt, told the BBC: "Naturally interest rates do have an impact and the judgement of the Treasury is that the main reason growth has slowed is because of that. When pushed on whether he would be looking to reduce taxes at next week’s Autumn Statement (Wednesday 22 November), he said his priority would be on lowering business taxes rather than personal ones.