2018 is the year in which the babies of the millennium reach adulthood. Back in January, this was mainly marked by existential online angst about how those born when Britney Spears’s ‘Oops!… I Did It Again’ was in the charts are reaching legal drinking age. Today’s 18 in 2018 publication from the Office for National Statistics throws a bit more light on what to make of this milestone.
The focus is on today’s 18 year olds – the tail-end of the ‘millennials’ – compared to older members of this generation so-named due to reaching adulthood since the turn of the millennium. Even within millennials many positive developments are evident: the youngest millennials can expect to live two years longer than the eldest; they’re around a third more likely to go to university; and they’re less likely to have picked up a cigarette habit (or, despite now being of legal drinking age, consume alcohol). Young marriage and parenthood have also tailed off significantly in the past two decades, and social media is taking the place of face-to-face socialising.
If this is what life on the cusp of adulthood looks like for the youngest millennials, how are they feeling about ‘adulting’ their way towards jobs, houses and families? Our Intergenerational Commission – a two-year study into the past and future economic experiences of different generations – provides some pointers.
A post-financial crisis cohort?
In one area in particular, today’s 18 year olds might be more positive than their older millennial counterparts (on whom much of our analysis necessarily focused). Britain’s pay disaster was most acutely felt by those who entered the jobs market in the years during and since the financial crisis. The result has been that those born in the 1980s have similar earnings to the cohorts born 15 years before them when they were the same age.
This 15 years of lost pay growth is unprecedented, and raises concerns about the potential long-term ‘scarring’ effects of being stuck on low pay when starting out. Although still tepid, pay growth is now building, and should gain pace as today’s 18 year olds begin careers over the coming years. The rate at which young people move jobs has also started to pick up – a strong indicator of growing confidence. Should these trends continue, there is a good chance that the youngest millennials could ride on the coat-tails of a long-awaited pay bounce-back as they find their feet in the labour market.
More rent, more tax
But in other areas, the challenges flagged by the Intergenerational Commission loom as large for the youngest millennials as for older ones. Our analysis suggests that the decades-long pattern of lower home ownership rates and higher housing costs through successive cohorts shows no signs of budging without substantial intervention. Many of these millennials will be entering a housing market that is broken – completely in the big cities – with rent providing a huge drag on their incomes.
As well as spending more on rent, today’s 18 year olds are also likely to pay more tax, particularly over the coming decades, as our ageing society puts pressure on the public finances. Maintaining the status quo in terms of health and welfare provision is set to cost an extra £63 billion by 2040. The usual options of borrowing or taxing incomes and consumption would bear down heavily on the youngest millennials during their working lives, something no politician today seems willing to acknowledge, or better still address.
This need not be a birthday present of gloom for those turning 18 in 2018, but we can’t expect the youngest millennials to experience a living standards boom through chance alone. Policy action will be needed.
The Intergenerational Commission’s recommendations include interventions to get more houses built and improve the security of renting privately in the meantime, and a way of funding health and care for members of older generations that doesn’t heap more pressure on young adults. Steps like these would ensure that as well as living longer, being better educated and behaving more sensibly than ever before, millennials get the gift previous generations enjoyed and people across society believe is their due: a higher standard of living than those who came before them.