Why parents fear for their children's financial future
COVID-19 has blown out the wealth gap between younger and older Australians to a 20-year high, with those aged 25-34 lagging on economic and home ownership.
The Australian Actuaries Intergenerational (AAI) Equity Index report released this week found the relative wealth and wellbeing of those aged 25-34 is now lower than any other time in the past two decades, and for those aged between 15 and 24, there has been a marked rise in underemployment since 2012.
The share of employed young people actively looking for more work has risen to 20% from 12% over the last decade.
And, having a tertiary education no longer makes a candidate stand out in the job market as the proportion of those with a university or tertiary education qualification has increased 50% over 15 years, from 23% in 2004 to 34% in 2019. Seventy per cent of students have a year 12 education, compared to 56% in 2000.
AAI researchers say impacts of an economic downturn are clear decades later and cite the example of higher ongoing benefit payments remaining for those who entered the workforce in the 1990s and are now in their late 40s.
This may also be the case following the pandemic as the implications of COVID-19 become clearer.
Children no longer better off than parents
"We are all very used to the idea that our children will live better lives than we do," says AAI actuary Hugh Miller.
"We expect continuous improvements in government services, better products, higher incomes and improved health but an increasing majority of parents fear that as today's children grow up, they will be worse off financially.
"There is a broad range of economic, housing and environmental issues that appear to be worsening."
For older Australians, the paper found one of the drivers of better outcomes for older Australians is a rise in government spending from 3.7% of GDP to 4.5% on those aged 65-74, compared to flat spending for the other age groups.
Young workers have been more likely to lose income and are less likely to qualify for government payments such as JobKeeper, the report found.
Home ownership tougher for young people
Home ownership has declined considerably for young people with the rate of ownership dropping from 51% to 37% over the past two decades.
Miller says this is partly because home prices have grown significantly faster than incomes, making it harder to save for a deposit - with particularly steep price rises in Sydney and Melbourne over the past seven years.
"Despite the conjecture that Australians are spending all their money on avocado toast, younger people are spending less on non-essential items such as alcohol, clothing and personal care and more on necessities such as housing, than three decades ago," says Miller.
The average young person faces challenges their predecessors did not including wage stagnation and rising unemployment.
Gender equality takes a hit
While the gender pay gap shrank for those aged between 45 and 55, it remained constant for those aged 25-34.
COVID-19 has hit women hardest, according to the findings of the latest Financy Women's Index.
For every month of the pandemic economic gender equality moves one year further away.
According to the index, COVID-19 has blown out the time frame to gender economic equality to 36 years, from 32 years.
"The index was held back by gender gaps widening in participation rate, full-time employment numbers and the gender pay gap," says report author and Financy chief executive Bianca Hartge-Hazelman.
In terms of job cuts in the June quarter, the most significant were in the female dominated sectors such as accommodation, foodservice and arts and recreation.
"The volume of cuts to full-time female jobs in 2020 reversed two years of female employment growth and derailed a multi-decade trend which saw female workforce participation steadily expand," says Hartge-Hazelman.
The AAI report suggests the gap might be lessened by policies including death duties (inheritance tax), tightening superannuation concessions for wealthy retirees, increasing child rebates and reducing the income traps which face second earners when they increase the number of days they work, implementing policies to keep older Australians in the workforce and replacing stamp duty with land tax.
Get stories like this in our newsletters.