Millennials may be the most economically divided generation yet, according to new research from The Sunday Times that exposes the vast wealth gap within a group of people who have traditionally been bracketed together.
We all know the stereotype: millennials are the skinny-jean-wearing, side-parted-hair generation who spend their wages on iced coffee and avocado on toast. They can’t afford to get on the housing ladder so they go out for brunch instead. Some of them quit the 9 to 5 entirely and retrain as yoga instructors or interior designers.
Like all clichés, this doesn’t give the full picture. The Sunday Times research shows that those born in the 1980s and early 1990s are shaping up to be the highest-earning generation yet, benefiting from a higher real-terms income by the age of 40 than any previous group. The catch? That income doesn’t go anywhere near as far as it used to. The true inequality isn’t do with who earns more; it’s about who does or doesn’t receive support from the Bank of Mum and Dad. While some will benefit from a phenomenon known as the ‘Great Wealth Transfer’ – according to data from the IFS, a quarter will inherit more than £280,000 – others who do not will still be paying off student loans while trying to save for their first home (private renting among 35- to 44-year-olds has increased from just 9% in 1997 to 28% today).
For the author and historian DrElizaFilby, whose book Inheritocracy demonstrated that financial support from parents is now the greatest determining factor of economic success, the effects of this inequality are felt at every level of society. ‘Nowadays, you could get two managerial-level millennials on the same salary but living materially different lives – that can be divisive both within friendship groups and in the workplace,’ she points out. ‘Employers need to understand that just because you give someone a pay rise, they might not be significantly better off.’ Ultimately, Filby believes it is incumbent on the Government to address this through wholesale reforms to our tax system: ‘We’ve overtaxed wage and undertaxed wealth.’
‘Employers need to understand that just because you give someone a pay rise, they might not be significantly better off’
Dr Eliza Filby
The gap within the millennial generation is only likely to widen with time. Those who have had the advantage of getting on the housing ladder early on (and whose financial cushion is regularly being boosted by parental ‘gifting’ – another practice that current tax loopholes encourage people to engage in) tend to have a higher risk appetite so are more inclined to be bullish in their investment strategy; they may also have the financial confidence to start their own businesses that will in turn make them more money. And as for the idea that ours is the generation of the multi-hyphenate, that option is really only available to the lucky few. ‘Career pivots are for the privileged – usually those who have a parent backing them up,’ says Filby.
The big unanswered question is what happens when this generation leaves the workforce. According to research by the Resolution Foundation, up to a third of millennials could still be renting in retirement, while a newly released HSBC report shows that even affluent individuals believe they need a fifth more to retire than they did a year ago. ‘Pensions have been on the back-burner for many people, given the cost of living,’ warns Filby. ‘I think we’ll really see the millennial generational divide when we’re in our sixties.’
There are some upsides to this story, at least in terms of the way we now interact with our families. ‘We’re witnessing a real migration among millennials back to where their parents live,’ observes Filby. ‘People are spending more time with their parents – we’re going on holiday with them, inviting the mother of the bride to a hen do… I’d say that family is more economically and emotionally aligned than ever.’ And while the avocado-on-toast jibe is silly and unfair, it’s underpinned in truth: namely, that millennials aren’t prepared to sacrifice experiences – whether that’s a bucket-list trip or simply the pleasure of spending time with their children – in order to chase a £100,000 salary that in any case may turn out to be a poisoned chalice.
‘Family is more economically and emotionally aligned than ever’
Dr Eliza Filby
Discussion of the friction that comes from having a four-generation workforce isn’t new – what feels surprising is the discovery that the divisions are just as sharp among those we have always considered as like-minded. Looks like Lena Dunham was right: being a millennial is a complicated business.