The Strategist

Will Brexit speed up impoverishment of British millennials?

07/20/2016 - 15:12

Each new generation of British is poorer than previous, and Brexit is only exacerbating this trend.
Institute for Fiscal Studies argues that the millennium generation in the UK is poor, and continues to peter out, while older generations are getting richer year by year. The experts think that this trend promises an extremely bleak future. The UK referendum has created economic uncertainty, and reduced potential for development of young people.

Despite the fact that total income of the population grew by 2% in the post-crisis period (from 2008 to 2015), IFS research has shown that one of the richest strata of the UK population is just the older generation.

Income inequality between age groups looks pretty depressing for the millennium generation.

- Income of people aged 22 to 30 years fell by 7% since 2008 

- Income of people aged 31 to 59 years has not changed since 2008

- Income of people aged over 60 jumped by 11% since 2008, mainly due to a sharp rise in property prices

IFS analyzed data of the Ministry of Labour of Great Britain, published June 29, 2016. Subsequently, it was found that income inequality between age groups is formed due to the following factors:

1. A high level of pensions and benefits for the older generation. In the period of recovery after the financial crisis, the government has established a "triple protection" for pensions, which means that the older generation can count on pensions in any case. Furthermore, they do not need subsidies for fuel during the winter period. Retirees are also eligible for free bus rides, Christmas discounts, and, in addition, for free prescriptions during treatment course. At that, quite a large number of people older than 60 years is still working.

2. The younger generation is forced to put up with stagnant wages and rising housing costs. In contrast to the pensioners, young people are either struggling to get a job, despite record low unemployment, or, if they already work, their wages are relatively scarce. Millennials and people under the age of 60 years do not receive such grants as the elderly does. It is less likely that they have their own home or savings. The biggest part of their income is eaten up by rent, transportation, utilities and food.

IFS warns that the situation for young people would only worsen in the future.

"The struggle with low-income is growing, the government is taking measures to address problems faced by working families with low income. In the short term, this will contribute to continued growth in the number of working hours on a background of wage stagnation. In the end, progress will depend on the economic policy which promotes growth of labor productivity. Economic uncertainty after Brexit only exacerbates these problems," said Robert Joyce, author of the report and Deputy Director of the IFS.

Brexit has already provoked chaos: the pound fell to a 30-year low; companies are thinking about leaving the UK.

The most interesting thing in this situation is that those responsible for this is the older generation: they overwhelmingly voted for withdrawal from the EU.