Friday 30 September 2016

30 somethings half as wealthy as 40 somethings

Interesting report from the Institute of Fiscal Studies. Younger people are poorer on average than older people.

As ever, I love anecdotal evidence from my own view, my large team at work would confirm this. Many people happily working for the wages the same or lower than I had when I was their age.

Note the SAME wages, not adjusted for inflation. So when combining that with rent increases and cost of living increases they have a much harder time. Yes, due to social media and internet technology (and cheaper travel) they do I think have richer cultural lives than were possible; but it is on more of s shoestring and a live for today mentality prevails ever more.

Yet the report for me lacks one huge point (which they note they will get around to later), which is longevity. One of the reasons younger people are poorer is because their parents are still alive - for which overall they will be very grateful for in the round.

With every passing generation the age of inheritance is set to increase, possibly by 5-10 years each time. Plus of course the elderly will spend more of their wealth on supporting themselves, thus leaving less to hand on.

As I said, this is a hugely great thing for us all collectively, but does have ever bigger ramifications down the ages, literally.

It is an odd thing for a report like this to miss though, as this skew is one of the larger longer-term trends that affects the whole study and so renders what is left fairly incomplete.


Electro-Kevin said...

Sorry to spoil it but the elderly, beyond 80, I know are very lonely and anxious.

It's not doing many that much good really.

andrew said...


It depends
My parents are doing fine (touch wood) and live 2h away, but are planning to move closer 'next year'.
My aunty is not so great, children in ireland/australia /5.5h from me and does fit your narrative.


Largely agree, but would add that the number of children per household has been dropping for many years (outside incomers).

Nick Drew said...

It's just an early symptom of how society is going to pay for (a) the banking crisis fall-out; (b) the NHS keeping everyone alive for longer

when we discover we actually need Armed Forces again ...

CityUnslicker said...

EK - It was not to imply that the elderly are all living well, but in a harsh analysis the increasing age of the population means wealth will spread more as there is a higher top to reach. Thus the young, all things being equal, will get relatively worse off as a result of demographic effects.

this report manages to ignore the central cause of the facts they find.

Electro-Kevin said...

OK - but the fact is that over 40s aren't any more wage wealthy than the young, but they are propertied.

Overcrowding (house price inflation) and competition for jobs (wage depression) is what is making the young poor and it is significant that the delineation seems to be at the advent of Nu Labour.

By enlarge twenties aren't competing with the elderly for retirement bungalows or wages.

markc said...

Another factor which may be having its effect now but will only increase with time is the paucity of pensions started in the past 25 years or so. As DB schemes (public sector unfortunately excluded, of course) have dried up and been replaced by DC schemes, pension incomes have on average reduced and those in their forties and fifties are simply not paying enough into their pension schemes to have any chance of a dreamed-of retirement of holidays and swanning about the Aegean or further.

Combine this with house prices and property owners feeling wealthy when really and truly, they're illiquid debt slaves - even with interest rates as low as they are, and there's a world of hurt waiting for many when rates do rise.

Electro-Kevin said...

MarkC - This Oldies Vs Youngies thing. It's as deliberately divisive as the Remainer's saying that the Old caused us to leave the EU.


What is causing our young to be poor is wage depression and overcrowding and what caused that ?

Importing 3 million more young people.

Electro-Kevin said...
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Electro-Kevin said...
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Lord T said...

Sounds reasonable to me. I know my 5 year old is a lot poorer than the 10 year old who is a lot poorer than the 15 year old who is a lot poorer than the 20 year old..... and so on.

I can't wait till I'm 200+ and can afford my own Aston Martin.

markc said...

Electro-Kevin, it's not an Oldies V Youngies thing. It's a simple, unassailable fact that pension provision is poorer now than it's been in decades, and that people are generally not committing enough of their salaries to providing a future income.

It may be you have a point about 3 million young people, but the principal reason people don't invest for their future is that property prices have gone through the roof and even at low interest rates, in many parts of the country the carrying cost of a house is absorbing a huge proportion of available income. Having been forced into investing, ahem, gambling, in a single asset class they kid themselves that it'll be OK later because of the equity in the house.

I don't have a particular problem with the European kids coming here - I maintain that by and large they're better educated, less socially inept, more willing to work, and lack the enormous sense of entitlement of our home grown ones. Their cultures are sufficiently like ours not to amount to an existential threat. Others, though, well....... serious reservations, but that's drifting off topic.

Electro-Kevin said...

Can you not see ?

Wage rises are no longer index linked to the true costs of the most basic requirement - a roof over one's head.

Why ?

Because there is an abundance of people prepared to work for less.

Why the demand for housing ?

Because there is an abundance of people prepared to work for less.

Until we scrap welfarism we cannot call this the free market in action. It is cruelty. Keeping a corpse alive with the infusion of virgin blood.

Have the balls to take it away and our kids will deliver the same. Packing the country to breaking point is not the solution. The 'Tariff Free Zone' is not 'Tariff Free' at all. The Tariff comes in the form of our bloated welfare system, loss of culture and loss of political autonomy.

A huge cost.

Of the 'others'. Well I'm sorry. But that's an inexorable component of the EU deal. Mr Nissan threatens to take away 5000 Sunderlandese jobs if we cease to accept 3 million EU unemployed and god knows how many jihadis. Some deal.

Anonymous said...

The Sunderlandese voted for Brexit - one of the first places to do so.

It's a funny old world.

markc said...

Wage rises are no longer index linked to the true costs of the most basic requirement - a roof over one's head.

Why ?

Wages never were indexed to house prices, of course. The demand for housing has been created by strangling supply, starting with the worst piece of legislation in the country's history - the Town and Country Planning Act, Comrade. Successive gubmints encouraged home ownership as a means to make a tax-free profit. Housebuilders are in no rush to build houses because they make more money out of their land banks and the longer they delay the more they'll make when they do finally, grudgingly, build a few chicken sheds. Add the lowest interest rates ever and a 100% correlation between house prices rising as interest rates fall, and boom! Houses many can't afford, and homes that - when rates rise - almost nobody'll be able to afford. Watch folk get ruined when that happens and the (unfree) market collapses.

Until we scrap welfarism we cannot call this the free market in action. It is cruelty. Keeping a corpse alive with the infusion of virgin blood.

Completely agree. Virgins are in perilously short supply, too.

Mr Nissan threatens to take away 5000 Sunderlandese jobs

George Osborne threatened an immediate recession and massive tax rises. The BBC, Bank of England, The Independent and the FT all agreed we'd be hunting rats and squirrels if we left. Nissan is more likely just taking an opportunity to send a ranging shot so folk remember they're there and in the hope that gubmint will bung them a sweetener or a freebie or a favour sometime.

James Higham said...

We're none too flush ourselves, wealthwise, at our age.

Anonymous said...

EK - that is a cracking (and succinct) comment.

hovis said...

Long time ago I was waorking for the finacial services arm of a company serving people serving those of a certain age.

I was tasked at looking into possibilities of developing a reputable product for long term care via equity release - the thing I remember apart from it never got off the ground because reputation risk was far too great - the figures didnt add up - at the time the states were once you go into long term care the average life expectancy is approx 5 years with every increasing need for care which gobbles up cash at an alarming rate.

So the relevance - will there be anything left for generation rent? quote possibly not.