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Pensioners are far better off – but young people are suffering Pensioners are far better off – but young people are suffering
(4 months later)
Official figures describing the distribution of income have just been released. It won't come as any surprise to know that household incomes fell in 2011-12, the latest year of data. Since the recession, household incomes have fallen enough that in 2011-12 they were lower than in 2002. They will fall further as earnings continue to rise less quickly than prices, and as benefits are cut. Fifteen years into the new century, household incomes will be much the same as they were at the start of the century. Such a period of stagnation is territory untrodden in all the years for which we have data.Official figures describing the distribution of income have just been released. It won't come as any surprise to know that household incomes fell in 2011-12, the latest year of data. Since the recession, household incomes have fallen enough that in 2011-12 they were lower than in 2002. They will fall further as earnings continue to rise less quickly than prices, and as benefits are cut. Fifteen years into the new century, household incomes will be much the same as they were at the start of the century. Such a period of stagnation is territory untrodden in all the years for which we have data.
As ever, the averages hide myriad differences though, and a long-term perspective helps to understand the quite dramatic changes that have been unfolding across the population.As ever, the averages hide myriad differences though, and a long-term perspective helps to understand the quite dramatic changes that have been unfolding across the population.
For once, the differences are not so much between rich and poor. Incomes fell by much the same amount (in percentage terms) right across the income distribution.For once, the differences are not so much between rich and poor. Incomes fell by much the same amount (in percentage terms) right across the income distribution.
There were big differences though between old and young. The one demographic group that has not seen its incomes fall since the recession is those over the age of 60. Pensioner incomes have continued to rise on average, albeit very modestly. Despite low interest rates they have continued to enjoy pensions protected against inflation. And each new generation of pensioners is better off than the one before. By contrast, the incomes of working age people have fallen.There were big differences though between old and young. The one demographic group that has not seen its incomes fall since the recession is those over the age of 60. Pensioner incomes have continued to rise on average, albeit very modestly. Despite low interest rates they have continued to enjoy pensions protected against inflation. And each new generation of pensioners is better off than the one before. By contrast, the incomes of working age people have fallen.
The gap between pensioners and the youngest adults is even more striking. While pensioner incomes have risen a little since before the recession, young adults – those in their 20s – have seen their incomes fall by 12%. This drop has been driven by falls in real wages and an increase in unemployment which has been much more striking among younger people than for others.The gap between pensioners and the youngest adults is even more striking. While pensioner incomes have risen a little since before the recession, young adults – those in their 20s – have seen their incomes fall by 12%. This drop has been driven by falls in real wages and an increase in unemployment which has been much more striking among younger people than for others.
But this contrast is not a new phenomenon. Young people enjoyed no increases in their incomes in the years preceding the recession. This generation of 20-somethings is very much worse off than they might have hoped. Over time each generation can generally expect to be better off than the last. Yet people in their 20s now have significantly lower incomes than those in their 20s at the turn of the century.But this contrast is not a new phenomenon. Young people enjoyed no increases in their incomes in the years preceding the recession. This generation of 20-somethings is very much worse off than they might have hoped. Over time each generation can generally expect to be better off than the last. Yet people in their 20s now have significantly lower incomes than those in their 20s at the turn of the century.
The contrast with pensioners could not be greater. Their incomes have been rising faster than the average for more than 30 years now. In fact, the increase in pensioner incomes has been a triumph of social policy. While pensioner poverty has certainly not been abolished, pensioners are now less likely to be poor than people of working age. In the 1970s, pensioners were at least six times more likely to be poor than other groups.The contrast with pensioners could not be greater. Their incomes have been rising faster than the average for more than 30 years now. In fact, the increase in pensioner incomes has been a triumph of social policy. While pensioner poverty has certainly not been abolished, pensioners are now less likely to be poor than people of working age. In the 1970s, pensioners were at least six times more likely to be poor than other groups.
This is a change to celebrate. The UK used to be known for the meanness of its pension system and the poverty of its pensioners. A combination of higher entitlement to state pensions, more generous means-tested benefits and higher incomes from private pensions have lifted the incomes of the older population such that they now largely match those of the working age population.This is a change to celebrate. The UK used to be known for the meanness of its pension system and the poverty of its pensioners. A combination of higher entitlement to state pensions, more generous means-tested benefits and higher incomes from private pensions have lifted the incomes of the older population such that they now largely match those of the working age population.
The flip side of this has been an increase in working age poverty. And largely because the last government put so much resource into reducing child poverty it turns out that the most striking increases in poverty over the past three decades have been among working age people without children.The flip side of this has been an increase in working age poverty. And largely because the last government put so much resource into reducing child poverty it turns out that the most striking increases in poverty over the past three decades have been among working age people without children.
The other new group in poverty are the working poor. In the past, the large majority of both adults and children in poverty lived in workless households. That is no longer true. In fact there are now twice as many poor children living in households where someone works as there are in workless households.The other new group in poverty are the working poor. In the past, the large majority of both adults and children in poverty lived in workless households. That is no longer true. In fact there are now twice as many poor children living in households where someone works as there are in workless households.
The traditional pattern of poverty as something which afflicted largely the old and the unemployed no longer holds true. It is time for social policy to recognise this.The traditional pattern of poverty as something which afflicted largely the old and the unemployed no longer holds true. It is time for social policy to recognise this.
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