Today we are pleased to welcome to the Cornerstone blog a new (to us) author and recognized authority on global business. Dr. Daniel Thornily is based in Vienna and works closely with over 400 corporate clients. Danny’s Global Business Reports each year stand apart for their insight and clear-eyed recognition of emotions and motions in play around the world. The following article is a case in point.
The current middle-age adult generation of 2000-2020 in the developed world will be “the worst one” since 1945 in the sense of not passing on a better future to their children.
The young are getting poorer; the old are getting richer.
The prosperity of the young generation across the developed world has plummeted:
Youth unemployment is close to 50-year record levels across the developed world and especially so in Europe (see below)
63% of the youth in Europe are either unemployed or have temporary jobs!
In the US for the first time since 1776 under 30s are now poorer than retired people
Last year in the US the income of pensioners rose faster than the income of people younger than 25 for the first time in 200 years, a trend that was replicated in France for the first time since 1789
Real incomes of young people today in the US and Italy are less than 30 years ago
In the UK in recent years the disposable income of pensioners has risen 3 times faster than the income of young people
In the developed world generation Y earn 20% less than the average citizen
The big time-bomb: student loans in the US and globally. In the US youths, who are getting older, are burdened with $1.3 trillion of student loans which now affect 35mn “students”.
Education costs in the US have risen 1,120% between 1978 and 2010 and have risen way above inflation since 2010.
27% still live at home
Astonishingly 27% of youths in the EU aged between 25-32 (which is not that young) live with their parents!! This number is shocking and reflects that young people do not have proper jobs and decent incomes, do not have financial security and are unable to put down deposits for property mortgages.
They are so fragile economically that they are not even able to find affordable rental accommodation in the public or private sector.
It appears that the outlook for a property-owning democracy in the West is becoming more elusive. House ownership in the UK is at its lowest level in 33 years and more people do not have the financial resources to catch up with ever-rising house prices.
In the UK, renting tenants spend 47% of their disposable income on rent and in London this leaps to 72%!
Not much left to spend on anything else.
How did we get here?
Albert Einstein once said: “There are only two things which are infinite: first, the universe, and second human stupidity. But I’m not sure about the universe”.
Sadly we have seen so much human stupidity in the global financial and business world in recent years which in 2008 brought us close to global financial collapse. The after-effects are still with us.
According to a 2016 report by McKinsey, 66% of households in 25 advanced markets saw real incomes stagnate or fall between 2005-2014. This compares with just 2% who experienced the same in 1993-2005.
What does it all mean?
And what does this all mean for the generations?
The older generations have everything: property, houses that have made them millionaires, decent savings and good pensions from the good old days when jobs were based on contracts and with social, health and holiday benefits
The younger generation has none of this. From a cynical and purely financial point of view, most children could be forgiven for wanting to see their parents dead!!
They love you, of course, and you are wonderful parents but strictly speaking in financial terms………..
More seriously on this point, many parents are transferring their wealth and property to their children while they are alive and seek to provide as much support as they can.
Not much in the way of universal security or opportunity for today’s youth. This is by any account a tragic generation gap.