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29 March 2024

Incomes of young hit hardest by UK recession

Published
By Reuters

Younger people saw their incomes fall furthest in Britain's recent recession, a study by the Institute for Fiscal Studies (IFS) thinktank said on Wednesday, highlighting the impact on generations facing the prospect of lower living standards than their parents enjoyed.

During the crisis of 2008-2009, the average income of households where the eldest member was aged under 35 slumped by 8 percent, with their spending down 7 percent, the IFS said.

This compared with an average fall of 2 percent in income and 5 percent in spending for households aged 35-65, with no significant change in that of households above retirement age, making a greater age disparity than in either of the country's two previous recessions.

Economist Cormac O'Dea, one of the authors of the IFS study, noted that the young often suffered disproportionately in recessions.

"Young people have been much more likely to lose their jobs. And even if they didn't lose their jobs, they've seen their income fall. And even if they haven't seen their income fall, they're more afraid that it might," he said.

The study's release coincided with a separate report by the Intergenerational Foundation charity that said Britain's youth face a desperate housing shortage caused by older people staying on in outsized homes seen as a secure investment.

"While younger families are increasingly squeezed into small flats and under-sized homes, older people are often rattling around in big houses with many bedrooms standing empty, often for years," said the study, entitled 'Hoarding of Housing'.

The charity - which aims to redress what it says are undue advantages given to older generations at the expense of the young - said one-third of all houses in Britain are now under-occupied, up from 20 percent a decade ago.

House prices in relation to income are close to a record high scaled during the economic boom years of 2004-2005. The market remains buoyant in southern England, while prices are lower further north and west.

Chris Stitt, 26, a marketing professional with a young family renting a two bedroomed house in the southern city of Portsmouth while he saves for a deposit, said he understood why young people felt disenfranchised.

He said he noticed that managing high levels of debt had become commonplace among his friends since they began university, some taking out short term loans at high interest rates just to manage month to month.

"Buying a house is nigh-on impossible. People are struggling to make ends meet full stop," he told Reuters.

"Where are they going to get the grand or two every month to put by for a deposit? Then you've got to find a bank that will actually lend to you. We still rent, and I can't see that changing any time soon."