Why today’s young adults are struggling financially in western societies
New data from the Luxembourg Income Study (LIS) has revealed that although wealth is being generated in western societies, this is not translating to the income of young people, specifically those born between 1980 and the mid-1990s.
Carried out over recent decades, the LIS study examined the disposable income and wages of young families in eight of the 15 largest developed economies in the world.The results showed that the average disposable income of people in their early 20s is now more than 20% below national averages. In contrast, pensioners have seen their income soar; over the last few decades they have seen a significantly higher disposable income growth than young people in almost every wealthy country.
The LIS study claims that under-30s in the US are now poorer than retired people, and that their disposable income is scarcely higher in real terms than it was 30 years ago. A large problem for the US is university fees, with young people sitting on $1.3 trillion of student debt. In Europe the most pressing issue for young adults is the lack of jobs. Rising house prices are also of concern with large numbers of young people in their 30s still living with their parents in countries such as Italy and Spain.
Experts have warned that this imbalance of wealth in western societies has implications for both social cohesion and family formation. Economist and former UK Treasury adviser has stated that, "we’ve never had, since the dawn of capitalism really, this situation of a population that is ageing so much and in some countries also shrinking, and we just don’t know whether we can continue growing the economy in the same way we once have."
Carol Graham has written about the challenges of unemployment, aging populations, and unsustainable pensions systems around the world. She notes that creative solutions are necessary, such as “policies that support more flexible labor market arrangements, including incentives for job-sharing and remaining in the labor force after retirement age.”
It has been argued that a higher effective retirement age would lead to more youth employment. However, in René Böheim’s article on this subject he suggests that it would actually lead to more overall employment, and hence support both young and older workers.
Related articles:
Late-life work and well-being, by Carol Graham
The effect of early retirement schemes on youth employment, by René Böheim