Robyn Vinter: How the economy is screwing over a whole generation of young people

Can’t get a job? No spare cash? Can’t buy a house? This is why

Perhaps there are people in every generation who feel royally screwed over by the time they reach their mid-20s.

But those of us who were born in the 80s and early 90s make up Generation Y – a generation to which economic policy hasn’t been particularly kind.

Jobs

We were encouraged en masse to apply to university, told a degree would guarantee us a good job, as long as we worked hard and did well. After all, for the previous generation that was true. But for a lot of us, we graduated just as the recession was hitting where many firms were making redundancies, and not even close to hiring graduates.

In fact, the number of applicants for each job pretty much doubled around the time most of us graduated.

Job vacancies graph

Earnings

Since getting a job, our wages have been falling steadily. (This is true no matter how old you are.)

While most of the time average weekly earnings haven’t technically fallen, when you take into account how the cost of everything has gone up, they actually have. So you might be earning more in numbers this year, but your pay probably stretched further last year.

This graph shows inflation (in black), ie how much everything is going up by, pay including bonuses (pink) and pay excluding bonuses (blue).

I’ve put some handy stars on the graph to show how many times our pay has actually risen in real terms since spring 2009.

Pay and inflation

Housing

So we’re suffering with falling wages, but we’re still trying to get on that darned property ladder, like the previous generations did at our age.

Yesterday, the Bank of England suggested interest rates would stay at the same historically low rate of 0.5% for the rest of the year. This is by far the lowest level in at least the last century. In the last few decades, the interest rate norm has been around 5%. The BoE is keeping rates low to encourage businesses to invest and to stop people defaulting on their mortgages, because the amount of interest added to their repayments is low. Unfortunately for anyone attempting to save for a deposit on a house, it means we’re earning next to no interest on our savings. (That’s if we can afford to put aside anything at all.)

Let’s face it, most of us will stay perpetual renters for the rest of our lives.

Just 3% of people who bought a house in June were aged 18-30 because prices are spiralling out of control.

Home buyers

The average property price in the UK has risen to more than a quarter of a million – there are signs that growth is slowing but I’m not convinced it’s about to reverse any time soon.

Even if we can scrape together enough to buy a house or have parents who are in a position to help (and not many are) we’re still going to really struggle to buy in London. The average price in the capital surpassed £500,000 a few months ago with double-figure annual growth. You can see how much your borough has gone up in this infographic. It’s just crazy.

The reason this hideous distortion has been allowed to go on for so long is that everyone who can directly influence the property market such as the government and the Bank of England are pretty much exclusively middle-aged people with plenty of money who own their own home (and probably a few more). They personally have a vested interest in allowing prices to continue rocketing and are not brave enough to address the problem to help younger generations and the economy as a whole.

New mortgage rules have made it harder for first time buyers too. We now face a lengthy interview and can be blocked from borrowing more than 4.5 times our annual salaries. The average full time worker in their 20s would actually need to borrow 10 times their salary to afford the average UK property. While this will put a slight dampener on the UK housing market, it mostly blocks first time buyers who typically need big mortgages, allowing those buying with cash to have the best choice.

I admit government scheme Help to Buy has aided some first time buyers, but on the whole, it’s a teeny-tiny sticking plaster trying to sort out a huge economic problem, which it’s actually making worse. Help to Buy has been widely acknowledged it’s been responsible for pushing property prices up further, meaning if you’re not one of the small minority who have been directly helped, it’s actually hindering you.

And while property prices rise, as do rents, making it even harder to put money aside. In London, we now pay twice as much rent as the rest of the UK, averaging £1,412 a month per property. If, like me, you moved from another part of the country, you’ve probably made quite a sport of telling your friends and relatives how much rent you pay and watching their mouths hang open.

What’s the point?

It’s getting to the point now where young people are not saving at all. Either they simply can’t, or they choose to spend the money on trying to enjoy their otherwise miserable lives. If you actually do the calculations based on your salary and the amount of money you have spare (taking into account the cost of living and your sky-high rent), it would take years of forgoing the pub every week and missing holidays to even get close to a deposit (and that’s assuming property prices won’t keep going up).

Politicians really need to start thinking about how they can tackle this. We’re not going to put up with it for much longer.

Tweet me your thoughts @robynvinter

NOW READ: Economic recovery won’t solve long-term youth unemployment, think tank warns

 

Readers' comments (3)

  • Anonymous

    I totally agree with this article. How the hell are we going to tackle social division and imbalance when this immensely valued part of our society is so neglected and exploited. This is literally our future.

    I speak as someone who is late middle aged with a partner of 30. I am an ex Londoner of twenty years ago and could NEVER afford to return there ...

    If i lost my property , i would never qualify for a mortgage(even though I have run my small business for 15 years ) and would be destined to spend the rest of my life at the mercy of unprincipled landlords.

    The recession has cost my age group dearly. Most I know have lost ALL of their savings .... we feel the pain also - we are too old to be valued (except in some patronising way ) and now not wealthy enough to look forward to any future. As most of my freinds say in my age group , ' i will work until I drop ...'

    It is my priority to gift my property to my partner to avoid this nightmare haunting them when my time is up .

    I have nothing but sympathy for this age group and nothing but disgust for the powers that live in the 'London bubble' that show zero concern over the quality of life of those younger than themselves.

    The answer in purely business terms , is to emigrate so that the UK does not have the talents it needs to make further profits for its greedy banks and corporations.

    Then and onlty then , will it become a national priority to help the young with decent housing and decent affordable education.

    Having a good number of freinds and colleagues that sit in the latter end of this age band, I find an incredible irony that both generations seem to be facing the same level of hopelessness .

    I certainly am keeping an eye on emigratiing !!

    Rod (Southampton)

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  • What a great comment - thanks Rod!

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  • Anonymous

    If, as you say Rod, you are in the late middle age, age group, then you and your 'age group' are nothing to do with Generation Y. Having lost everything (which by the way is not a characteristic normally associated with the wealthy 'Baby Boomer' age group - that you actually belong to) - you declare that the only solution is to emigrate - but you do not say where to, nor do you offer any reasons WHY, to back up this little gem of wisdom. I'm afraid to say that You come across as more of a whingeing looser who in your age group has benefitted from some of the greatest increases in standards of living that have ever taken place, and the UK is one of the places where this has been most striking. I can imagine that you would feel hard done by if whilst watching everyone else gain wealth and health, you lost it all, but don't suggest that it is anyone elses fault than your own. - Perhaps you should emigrate - this country doesn't need any more failures and losers.

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