A recent report from the Grattan Institute has revealed what many of us have been feeling for a while now, younger generations are not making the same economic gains as their predecessors. Economic growth has slowed down over the past decade, we have an aging population and youth unemployment continues to increase.
For much of the past century, strong economic growth has produced growing wealth and incomes. Older Australians today have substantially greater wealth, income and expenditure compared with Australians of the same age decades earlier.
What the research shows is the wealth of households headed by someone under 35 has barely increased since the early 2000’s. Contrary to popular belief, this is not the result of too many lattes and smash avocado on toast.
Rather, unlike those over 35 who are on average spending more on essentials such as housing, the youth are cutting back on non-essentials: including alcohol, clothing, furniture and recreation.
Wage stagnation since the global financial crisis and climbing underemployment have hit young people particularly hard. Older people tend to be better cushioned because they have already established their careers and are more likely to have other sources of income.
If low wage growth and fewer working hours become the “new normal”, we are likely to see a generation emerge into adulthood with lower incomes than the one before it. This is a trend that has already happened in the United States and United Kingdom.
A series of tax policy decisions over the past three decades has resulted in older Australians having to pay a lot less income tax than was once asked of them.
This has resulted in older households paying much less tax than younger households on the same income. As a result, current working Australians are increasingly underwriting the living standards of retirees.
Every generation faces its own unique challenges, and having this generation fall behind the others is not a legacy Australians will be proud of.
That is why at OakView Financial we have dedicated ourselves to helping those who need it the most. The one benefit the youth has on their side is time, unfortunately younger Australian’s are less likely to speak to a Financial Adviser.
Early engagement and creating a plan for not only retirement but how to navigate an ever-changing financial marketplace is more critical than ever.