Sunday 23 October 2016

Entitled brats? It's not millennials who destroyed the world economy

Published 19/07/2016 | 02:30

A man protests outside the Lehman Brothers building in New York on September 15, 2008, as the bank filed for bankruptcy. The previous generation allowed zero-regulation capitalism to run rampant Photo: REUTERS/Joshua Lott
A man protests outside the Lehman Brothers building in New York on September 15, 2008, as the bank filed for bankruptcy. The previous generation allowed zero-regulation capitalism to run rampant Photo: REUTERS/Joshua Lott

Young people today are derided by older generations as being entitled brats, but the truth is that it is the middle-aged and pensioners who are spoiled rotten in our society.

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Last week, the Economic Social and Research Institute (ESRI) released a report confirming what most of us should already know - young people have been disproportionately affected by the recession.

Measuring quality of life using 11 separate indicators - including income poverty, housing quality problems, inability to afford basic goods - it found those aged between 18 and 30 are nearly twice as likely than those aged over 65 to experience multiple problems.

Putting flesh on the bones of this study yesterday was a report from a UK think-tank, Resolution Foundation, which outlined how millennials' future prosperity was torched in the flames of the financial crisis.

While previous generations could always be reasonably assured they would be financially better off than their parents, that certainty no longer exists. A typical millennial today earns £8,000 (€9,600) less during their twenties than the preceding generation, those in Generation X.

Alarmingly, researchers have estimated this could be the first generation whose lifetime earnings will be lower than those who came before them. One only has to look at the yellow-pack contracts being offered to young gardaí and nurses to find evidence of this.

Coupled with lower earning potential is the fact that home-ownership is increasingly out of the grasp of many young people. Millennials aged 30 are 50pc less likely to own their own home than a baby boomer at the same age. In fact, 30-year-old millennials have lower levels of home ownership than either equivalently aged baby boomers or the silent generation, who were around 55 years earlier.

Millennials hoping to get their foot on the property ladder may be able to do so, but only with the help of Mummy and Daddy. In the UK, the proportion of first-time buyers relying on their parents for a dig out increased from 30pc in 2005 to 50pc in 2014. Separate studies have estimated the "bank of Mum and Dad" will transfer £5bn for house purchases this year, making it one of the top-10 mortgage lenders in the UK.

Similar figures have been reported here, with cash buyers now comprising nearly 50pc of the residential housing market, with some 15pc of these being first-time buyers. Excluding young Lotto winners and self-made millionaires, this means it is increasingly only those with wealthy parents who can afford the luxury of home ownership.

Unable to afford to buy a home, most millennials are stuck renting - and, thanks to soaring prices and huge demand, paying a fortune for the privilege of doing so.

Regrettably, things are not expected to get better for millennials when they reach retirement, largely due to the fact that defined benefit pension schemes are a thing of the past. In 1993, all 100 FTSE100 companies offered their employees a defined benefit pension. Today, that figure stands at just three.

Meanwhile, even though millennials are doomed to live in penury when they retire, they must toil away for companies in the knowledge that increased revenue from their productivity is being used to fill massive holes in pension funds to which they have no access.

It has been estimated that companies are diverting some £35bn annually to plug deficits in defined benefit schemes for retired or older workers - money that would previously have been used to fund wage increases for younger employees.

This bleak economic forecast would be easier to deal with if older people did not continually deride millennials as being lazy and self-obsessed. Have the temerity to mutter a whisper of complaint about the erosion of pay or skyrocketing rents and older people will launch into some bitter spiel about all of the advantages young people enjoy today.

Millennials may have smartphones, Facebook and Pokémon Go, but previous generations had secure jobs, decent pension entitlements and the ability to buy their own homes.

Worse, millennials are continually disparaged as feckless for their obsession with social media by a generation whose greed and recklessness blew up the world economy and wrecked the environment.

Before older readers start reaching for their blood pressure medication en masse, it is not being suggested that you, personally, as an individual unit, set fire to the future and are now sitting on a big pile of cash. However, it is true to say your generation took huge gambles by allowing zero-regulation capitalism to run rampant and younger people have been left holding the tab.

In the UK, all of the £2.7 trillion increase in aggregate wealth recorded since 2007 can be accounted for by the over-45s, with two-thirds accruing to the over-65s, who now hold more wealth than the entire population aged under 45. In contrast, wealth has fallen by around 10pc among those aged 16 to 34.

This intergenerational inequality does not have to become some kind of zero-sum war. Older people have children and grandchildren they would presumably like to see in secure housing and well-paid jobs.

However, time is running out for governments to devise policies that can correct this imbalance before the impoverished future of an entire generation of workers becomes a reality.

Irish Independent

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