Millennials will pay a generational penalty
What does a PG Wodehouse Edward ian gentleman and a current-day MBA graduate have in common? What ho, what ho. Ever the late developer, I only recently – about a week ago – started indulging in downtime. The sort where your gluteus stays glued to a seat while you treat yourself to something.
For a few days now I have thoroughly enjoyed sinking into a couch, remote in hand, to watch a TV series of PG Wodehouse’s magnificent characters Jeeves & Wooster.
Wodehouse’s stories are anchored in an Edwardian society of inherited wealth and aristocratic authority. The moneyed young chaps in it don’t work. Can’t work. Wouldn’t dream of working. Accordingly, they are utterly dependent on handouts from various parent-types who have more than them, and occasionally earn a living. What ho indeed. Thing is, many of today’s young chumps are also dependent on handouts. Graduates lucky enough to land fat salaries not withstanding. This comes as no surprise when you learn of the debt they have landed themselves in. According to a survey conducted in the US, grads who earn more have more debt. You might think this is precisely because they spent longer, and larger amounts, on tertiary education.
Not so. The debt I’m delving into includes things such as cars and property, not student loans.
According to the survey, MBA graduates are the most in debt, followed by pharmacists and lawyers. You might think this “reasonable” as property could be considered an investment, and cars, well, are a necessary evil. These high flyers are most likely banking on future income to pay it off. But they also have more unsecured loans – the likes of credit and store- card debt.
This I find remarkable. Why? Because it’s akin to tearing up Dh100 or Dh500 notes –daily – depending on how much debt is outstanding and what interest is being charged. And it makes me wonder whether this is the result of unnecessary lifestyle choices or because life is too expensive for them to make ends meet. It’s probably a case of both.
Not one to ignore a US trend, the UK is experiencing something similar. Once again, according to its Office for National Statistics, it is high earners who have more unsecured debt. Get this – individuals with degrees are found to be almost twice as likely to have outstanding liabilities than counterparts with no qualifications.
You’d think they’d know better. The bally thing is, it isn’t necessarily their fault.
Wodehouse put it beautifully in Very Good, Jeeves.
“Unseen in the background, Fate was quietly slipping lead into the boxing glove.”
I’m talking about generational inequality. There is a general assumption that each generation will do better than the last. That is, earning more and enjoying a higher standard of living. Not quite. High cost of living, low wages and job insecurity. This is what’s in store for many. There’s a rea- son they’re being called the working poor.
It’s official you see – Millennials are worse off than their parents. This is partly because they earn less than Generation X during their first few years of employment. To the tune of 20 per cent less income than their parents as young adults.
There is concern that those in their 20s and 30s, and their younger siblings, could earn less over their entire lifetime than their parents did – this is what is being called the generational pay penalty.
The fear is that this will lead to a cycle of poverty, where the young cannot save money because their earnings don’t stretch enough to cover the increasingly expensive cost of living, no matter what their qualification.
I assume the same applies to the UAE. Especially with inflation expected to be on the rise this year and salaries to stagnate, if you’re lucky enough to still have a job after a tough 2016.
So if you’re a parent of a Millennial, brace yourself.
Reasons aside, they rely on the bank of mum and dad. That’s what a Wooster- type and an MBA graduate have in common. Pip pip.
‘ The fear is that this will lead to a cycle of poverty, where the young cannot save money because their earnings don’t stretch enough to cover the increasingly expensive cost of living