Rebuilding the intergenerational contract

The gulf between the earnings of younger and older people has increased by 50% in the last 20 years, leaving young workers struggling to survive. Does this mean the Intergenerational contract is breaking down?

The TUC report, Stuck at the start: young people’s experience of pay and progression, reveals that the pay gap between over and under-30s has grown from 14.5% in 1998 to 21.9% in 2017 – meaning that younger workers get on average £2.81 per hour less than their older colleagues.

And it's not only about pay. The number of 21 to 30-year-olds working in precarious, often low-paid work has exploded, particularly in private care and the hospitality sector. A YouGov poll of 1,500 young people carried out for the report found that only three in 10 felt their current job made the most of their experience and qualifications; four in 10 had been given little or no training in the last 12 months, while one in five had worked on a zero-hours contract in the last five years.

As the TUC's Frances O'Grady puts it; “We’re creating a lost generation of younger workers. Too many young people are stuck in low-paid, insecure jobs, with little opportunity to get on in life,”

So why don't young people just get organised? Some argue that young people can’t organise in the workplace because they’re too narcissistic. They can’t afford houses because they eat too many avocados. They don’t need living rooms because they’re always out eating £15 burgers. They’re anxious because they’re snowflakes.

These arguments simply miss the point. As Zoe Williams argues in the Guardian, there are structural reasons like student debt which means that buying a house is out of the question for young people who don't have the bank of mum and dad to support them. The “gig economy” is a euphemism for chronic precariousness. Internships are no more than the repudiation of the precept of a fair day’s work for a fair day’s pay. Apprenticeships are code for exploitation.

And there is no shortage of activism amongst young people. In particular, young trade unionists are at the cutting edge of new campaign techniques. They are tuned into party politics, appreciate the wider labour movement and give confident speeches to the public. Jeremy Corbyn’s overwhelming support among 18- to 24-year-olds is written off as naivety by those whom it pleases to believe that anything not resembling the status quo is unrealistic. 

The Resolution Foundation has taken a detailed look at the intergenerational contract.  Their report argues that the intergenerational contract works because everyone puts in and everyone takes out. We are happy to support and feel obligated to older generations because we believe and expect that we will be treated the same when we are old. We support children as they develop just as we were supported and nourished when we were young. 

We celebrate the good times and deal with the nation’s challenges together, across the generations. This feels natural, but that does not mean that we can take the intergenerational contract for granted. Increasingly, there is a sense that it is under threat, on pay, working conditions, housing and pensions. Young people are making no income progress and accumulating less wealth.

The recommendations in the report are politically challenging but should stimulate a debate. The costs of social care should be met by a property-based contribution towards care costs. There should be greater employment and housing security while turning around our housing crisis. A legislative framework for ‘collective defined contribution’ pensions that better share investment risk. 

Possibly the most radical recommendation is abolishing inheritance tax and replacing it with a lifetime receipts tax that is levied on recipients with fewer exemptions, a lower tax-free allowance and lower tax rates. The extra revenues should support a £10,000 ‘citizen’s inheritance’ – a restricted-use asset endowment to all young adults to support skills, entrepreneurship, housing and pension saving. This would be an important step towards breaking intergenerational inequality.

People are increasingly concerned about the prospects of other generations within their families and communities, and electoral turnout gaps by age are narrowing. We need a policy agenda that addresses the concerns of both old and young, and in so doing rebuilds the intergenerational contract. We need to step up to the challenge of building a sustainable society.