Britain’s youth risk being locked out of any recovery

The great Cameronian cull of the “male, pale and stale” at the start of the summer was, supposedly, about demonstrating diversity at the top table. But with the ousting of David Willetts, one endangered political species has been pushed to the brink of extinction: namely, the frontbencher who can produce a significant book. It is an irony indeed that the former university minister’s The Pinch warned of a developing faultline between – in the crass parlance of a No 10 briefing – the “stale” and the young.

Over its four years, the coalition has taken the side of the greys in the age wars at every pass. Higher college fees, in which Willetts himself had a hand, were one early instance. More damaging has been the diversion of pretty well all of the £25bn in social security cuts away from the old, with the result that the hit on younger families became roughly twice as large. After making such choices it really is no good for the PR PM now to reheat phrases about young families last heard 2010, as he did this week with his pre-election proposal to stick a “family impact assessment” in future white papers.

The most fateful decision for young Britons has been George Osborne’s ditching of his promised rebalanced recovery in favour of a return to growth on the old model, a change encapsulated in his “help to buy” scheme. He reportedly quipped in cabinet last year that he would stoke “a little housing boom, and everyone will be happy as property values go up”. The chancellor’s joke was not one to bring a smile to young lips, since pump-priming assets rather than earnings could leave Generation Y locked out of renewed national prosperity indefinitely.

Even as house prices have soared by double-digit margins across much of the country, average pay has actually shrunk in cash terms over the past year. The central warning in Thomas Piketty’s highbrow hit Capital in the 21st Century concerns a future in which what people own counts for more than anything they could ever earn; that feels more pertinent by the day. Like many on the left, and himself, I was initially sceptical about placing too much emphasis on the generational, as opposed to the class, implications of this: the class divide remains fundamental. But the more data about the recession and its aftermath you interrogate, the plainer it becomes that age matters a great deal too.

Downturns did not always single the young out: during the Great Depression, when physical fitness counted for more, jobs were relatively plentiful for youths, and prolonged worklessness was concentrated among men in their 50s. But in the Great Recession, youth unemployment started out higher and then rose more than twice as fast. It remains above pre-recession levels, even though it is now falling with merciful speed.

The more persistent problems are stagnant pay and insecure employment terms. But these problems, too, are heavily concentrated on the young. British labour market experts Paul Gregg and Stephen Machin calculate that whereas the workforce as a whole has endured a lost decade for pay, the real drop in earnings for the youngest age bracket is now a breathtaking 14%, setting them back a full 16 years to 1998 wage rates. Staying at home with parents is increasingly resorted to as a way to cushion the blow, but for those 20-somethings who choose or are compelled to move out, disposable income is down by around a fifth.

If and when resurgent growth eventually finds its way into most pay packets, the young could continue to be short-changed. The economist Lisa Kahn followed the fortunes of American college leavers and found “large negative wage effects” for those who graduated during downturns that persisted for 20 years. Having come of age in times of scarce opportunity and ample caution, recession graduates missed out on the frequent job changes with which luckier cohorts secured pay rises and earned their spurs.

The toll on living standards will be exacerbated by Generation Y’s continuing inability to escape rip-off rents: the rate of home ownership among 20-somethings has halved in 20 years, an unprecedented turning of the old tide of widening property ownership. The change is so rapid that the contrast that matters is not just between the stereotypical cosseted baby boomers, with their indexed pensions and spacious homes, and their children (emphasised by Willetts) but between cohorts much closer in age. Life is very different for a “just in time generation”, now in their late 30s or early 40s, who had secure careers before the crash hit and perhaps bought a house when that was still realistic, and the under-35s, for whom work is perpetually insecure and home ownership an impossible dream.

Looking beyond the economics, the slump will leave very particular social scars on the young, due to the disruption of the “citizenship careers” that, in a humming economy, develop in parallel with careers proper. Totting up PTA memberships and social club subscriptions for victims of past recessions shows that for mature adults, already enmeshed in secure networks by parenthood or past jobs, civic life was little affected. The real damage befell younger people, whose networks were not yet built. Being laid off knocked them on to a low road that led ever further away from community connections. The shortfall in their civic involvement compared to that of their peers – a fifth less by their early 40s – did not diminish, but actually grew to a deficit of a half by the time they turned 50.

Uncorrected, the washed-up state of Britain’s youth in the slump’s aftermath thus threatens to complete the descent of Cameron’s “big society” from lofty rhetoric to hollow joke. It need not do so. Ditching taxpayer-funded punts on the property market for serious investment in the housing stock, and recalibrating social security spending to give at least some weight to the claims of the young against their elders are two practical choices that could make a vast difference. Instead, the Conservative party is lurching towards denying youngsters all housing benefit, on the absurd assumption that they all have a big cosy home, with ample spare rooms to go back to at any point.

Youth, Aristotle wrote, is “easily deceived, because it is quick to hope”. It would have to be deceived to an outlandish extent to see much reason to hope in Cameron’s Britain.

• Tom Clark is author of Hard Times: The Divisive Toll of the Economic Slump