• Dec. 7, 2016, 6:13 pm

Each generation should be better off than their parents? Think again

Powered by Guardian.co.ukThis article titled “Each generation should be better off than their parents? Think again” was written by Larry Elliott Economics editor, for The Guardian on Sunday 14th February 2016 13.14 UTC

Perpetual progress has been at the heart of western society for the past 150 years or more. The idea has been simple: each generation should be better off than their parents.

So it was that the generation that came of age in the early 1950s looked back at the mass unemployment and poverty of the 1930s and thought they were blessed to live in an age of full employment and a cradle-to-grave welfare state.

The children of the 1950s generation, leaving school or university in the 1970s, could expect to earn more than their parents, were more likely to own their home, and enjoyed far more personal freedom following the social reforms of the 1960s.

The idea that each generation would be more fortunate than the last no longer applies and perhaps helps explain why young people feel that traditional politics has little to offer them. The political economy of the analogue age was based on the idea that people would have secure, full-time employment that would enable them to save the deposit on a home relatively quickly.

Two new reports show how that model has completely broken down. The first comes from the Resolution Foundation, which launched an in-depth study of inter-generational fairness with a look at the housing market.

The findings are shocking. So-called millennials – those born between 1982 and 2004 are on average 16 percentage points less likely to own their own than their parents in generation X. They, in turn are 10 percentage points less likely to own a home than their parents in the baby boomer generation.

For those on low to middle incomes the situation has become particularly tough. As recently as 1998, more than half of those earning 10-50% of average national income had a mortgage. That figure has now dropped to one in four and will be around one in 10 within a decade on current trends. Owner occupation is increasingly becoming the preserve of the elderly and the well off.

It’s not difficult to see why it has become harder for a young person on a modest income to get a foot on the housing ladder: in the late 1990s it took them three years to save up for a deposit, while today it would take 22 years. Soaring house prices have been marvellous for baby boomers, who have often used their windfalls to create their own mini buy-to-let empires, but have been disastrous for generation rent. London has become a virtual no-go area for young people with ambitions to own a home.

Rising house prices are, however, not the only reason young people find themselves trapped in rented accommodation. The other factor is that they are struggling to make a decent wage in an increasingly insecure and casualised labour market in which low pay is endemic.

That emerges from the first in-depth study into the number of “crowd workers”, people who are paid for work through online platforms such as Uber, Upwork and Taskrabbit. Prof Ursula Huws of the University of Hertfordshire says that 5 million people are being paid through these online platforms, with more than 3 million of them regularly engaged in various forms of crowd work. Delivery drivers, cleaners, tree surgeons, plumbers are increasingly likely to get jobs this way, with the online platform taking a cut of whatever they earn.

Crowd workers tend to be young, according to Huws, who says a third of those aged between 25 and 34 have sought work through online platforms.

“A new kind of working life is emerging,” she said. “For many it is a life in which they do not know from one week, day or even hour to the next when or whether they will have work, so they keep their smartphone always to hand, ready to hit ‘accept’ at a moment’s notice. They are, in short, permanently logged on.”

The sales pitch for crowd working is that it matches people who want a cleaner with someone ready at a minute’s notice to come round with a mop and a vacuum cleaner. It offers freedom, flexibility and greater economic efficiency. What’s not to like?

What’s not to like is that the benefits of crowd working are clearly skewed in favour of those who buy in services through online platforms and against those who find work in this way. Crowd working is driving down the cost of labour and is one reason that average earnings growth in the UK is so weak. It forces people, as the Huws research notes, into “a precarious online zero-hours contract existence without benefits such as sick pay, holiday pay, pension contributions or minimum wage guarantees”.

There are clearly many policy challenges posed by crowd working: how to ensure that those who own the platforms, often based in the US, pay tax on the work that is being done in the UK; how to ensure that crowd workers enjoy the same labour rights and welfare benefits as those in traditional employment; how to make it possible for freelance workers to band together to form unions.

But it is also odds-on that the growth in this sort of labour market will exacerbate inter-generational unfairness, since those doing the hiring from online platforms tend to be older and better off, while those doing the work tend to be younger and poorer.

The big unanswered question is whether this sort of economic model is sustainable, because at present it is hard to see how it will be.

Here’s the state of play. Young workers joining the labour market often do so with tens of thousands of pounds of student debt, and will struggle to find the sort of permanent well-paid, pensionable job that their parents would have walked into three or four decades ago. They have little prospect of buying a home and if they work in London will be sharing a flat with some mates in one of the less desirable districts of the capital. At the same time, there will be pressure on them to pay more tax. Britain’s pay-as-you go pension system means that payments to retirees come from those people currently in employment, and as the years go by there are going to be more pensioners and fewer workers.

The same basic dynamic applies to the NHS, which is already creaking under the strain. Healthcare is more expensive for old, frail people than it is for young fit people, with costs really escalating in the last year of life. Inevitably, the NHS is going to require more resources, and unless the elderly are prepared to shoulder some of the financial cost themselves (which is highly improbable) only one of two things can happen: young people pay more tax or the quality of care will go down.

This is a rotten deal for young people, who have every right to be angry. The real surprise is that they are not angrier.

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