This angry millennial was glad to see the Resolution Foundation’s final report of its Intergenerational Commission, entitled “A New Generational Contract“.
This thorough and vital piece of work has been pieced together by a crack team of cross-party wonks, including former Conservative minister David Willetts, former Ed Milliband advisor Torsten Bell, the TUC’s Frances O’Grady, Sarah O’Conner of the Financial Times, and Paul Johnson of the IFS.
Let’s start with some some facts.
Millennials have the same average earnings and the same average disposable income at the same age as previous generations did, despite all other generations seeing an increase in comparison to their elders. Millennials are more likely to work part-time, to be self-employed, and to work in low-paying sectors such as care and leisure. They are 20% less likely to move jobs than Generation X were at the same age, and therefore see slower career and pay progression. Consumer spending by 25-34 year-olds is now 15% less than that of 55-64 year-olds.
The statistics are far worse when it comes to housing. Millennials are half as likely to own a home by age 30 than the baby boomers were. They are four times more likely to live in the private rented sector, and on average have less space in their residences and commute for longer than previous generations at the same age. Millennials now spend a quarter of income on housing, compared to less than ten per cent for the Silent Generation.
The younger generation’s prospects for retirement are also bleak, with millennial workers in the private sector half as likely to be on a defined benefit pension as the generations before them.
The indebted millennial elephant
Have you spotted the spectre at this bleak statistical feast yet? Willetts’ leading role in this otherwise excellent report likely explains the absent fact that university-educated millennials have been served a 9% marginal tax increase, above either £18,300 or £25,000, compared to their university-educated elders.
As one of a small number of HE commentators actually feeling the bite of these fiscal challenges every month on my payslip, allow me to indulge in picking this apart. All politics is personal, after all.
Seven years on from completing my undergraduate degree, funded via ‘plan 1’ (£3,000) loans, I pay an effective tax rate of 28.4% on my income: 23% of income tax and national insurance, plus 5.3% paying back my student loan.
|Item||Effective rate||Marginal bands|
|Total effective tax rate||28.4%||Marginal tax rate at 41% of earnings above £18,300|
|National Insurance||9.7%||12% of earnings above £8500|
|Income Tax||13.3%||20% of earnings above £11,500|
|Student Loan||5.3%||9% of earnings above £18,30|
For every £20 I earn, I pay £1 more tax than someone on equivalent income who either did not go to university (which seems fair), or did go but is fortunate enough to be a decade or more my senior (which does not). Their marginal tax rate, assuming they do not enter the higher-rate band, is 32%. Mine is 41%.
The elephant in the room is that if I happened to be four years younger and had incurred the ‘plan 2′ (£9,000) fees, my effective tax rate would actually be 1.5% less than it is. This is because the repayment threshold for the £3,000 fee-plan loans is currently at £18,300, as opposed to recently being lifted to £25,000 for the £9,000 loans. In either case, the marginal tax rate is a whopping 9% above the respective thresholds.
As Times columnist Jenni Russell put it in a recent Red Box podcast, no government would dare impose a comparable tax increase on the rest of the population. One can spend a lot of time in Wonkhe circles debating the relative progressiveness of the current student loans system in-and-of-itself. Far less time is given to considering the fairness of student loans compared to the wider tax system, and compared to those who have never incurred the debt at all.
It is frustrating how little the economic (for young graduates) and political costs (for Liberal Democrats and Conservatives) of all this are appreciated in universities. There are many legitimate (and illegitimate) reasons for some of the hostility directed at the sector over the past year, but the growing numbers of loan payees out there must surely be part of the puzzle.
One might expect a politician such as David Willetts to be in some denial about the unjust intergenerational legacy of his own time in office, but universities should definitely not forget it. For all the loathing of “consumerism” and newly-expected deference to millennial students’ whims and wishes, over 35s working in universities would do well to remember that it is recent graduates who have lost out to sustain their wages (and pensions) over the past decade and a half.
The wicked web
In the grand scheme of real-world injustices, it would be easy and fair to write much of my moaning off as a fringe and largely middle-class concern. But as WG Runciman’s famous study of “relative deprivation” from the 1960s shows, relative inequality often matters more politically than real inequality. People get angry when their situation doesn’t match their comparators or expectations. For middle-class graduate millennials, this is usually their middle-class graduate parents.
In fairness to the Resolution Foundation, their focus has been instead turned to the plight of the non-university educated young, who have seen their educational opportunities decimated by successive funding cuts to further education, greater crowding out in the labour market by the dominance of higher education graduates, and employers unwilling to offer apprenticeships or work-placements in order to develop skills or experience.
And quite rightly, a great deal of attention is given in the report to the greatest millennial challenge of them all: housing. But this cannot be divorced from education for two reasons. Firstly, as the NUS Poverty Commission report demonstrated only a couple of weeks ago, housing is one of the most significant cost-barriers for students. Current maintenance provision is insufficient to cover average housing costs, as Martin Lewis has been at pains to point out. And beyond graduation, it is not difficult to draw a direct line from my student loan repayments to my lack of a mortgage deposit and the inability to independently build up any personal assets. It’s certainly more substantive than my expenditure on avocados.
The paradox of higher education’s role in the story of intergenerational injustice is that millennials are the best-educated generation in UK history. But it has come at a cost – specifically, somewhere in the region of 3% to 6% of most middle-class graduates’ incomes. Where previous expansions of educational opportunity have been collectively funded and often put pressure on universities’ resources, now the pinch is being felt simultaneously with unreliable landlords, unaffordable rent, unobtainable mortgages, inadequate pensions, limited opportunities for career progression, and a general mentalité of insecurity.
The best minds of my generation are not starving, hysterical or naked – far from it. But many of us are still a bit fed-up.