Work hard, get nowhere – the generation locked out of financial progress

Young people are grappling with the grim reality that the days of social mobility may be over.

Those who own assets – property, equities, precious metals – are watching their values swell, while those who rely on employment for income have seen their salaries stagnate as inflation has eaten away at their living standards.

This has been termed the “K-shaped economy”, reflecting society’s split in two directions.

The young are disproportionately affected by the K-shaped economy; they earn less, have less in savings and are less likely to own assets, such as their own home.

In 1997, the average house price was 3.5 times the median annual wage in England and four times the median annual wage in London. Today, those figures have grown to almost eight and 11, respectively. Rents are hoovering up greater proportions of income, making it much harder to save for a deposit.

The crumbling social contract, in which young people cannot see a straightforward, realistic path to economic prosperity, is having a devastating impact.

A growing “ambition gap” is emerging across the country, according to research by investment firm St James’s Place, with some 24pc of adults having no financial aspirations for the next decade, up from 17pc in July.

Almost three-quarters of young people say that the state of the economy makes them anxious about their future careers, while 71pc say they wish they were not starting their careers in the current economic climate, according to new research from the charity The King’s Trust.

“[Young people are facing fears] that opportunities are out of reach and the chance of a secure future is being quietly eroded,” says Jonathan Townsend, chief executive of The King’s Trust.

The rise of ‘quiet quitting’

Stagnant wages are only an issue for those who can find work. The unemployment rate, which sits at a five-year high of 5.2pc, is higher among the young – 16.1pc of 16 to 24-year-olds are unemployed. Almost a million 16 to 24-year-olds are not in education, employment or training, equating to around one in eight of the age demographic.

University no longer guarantees the viable path to consistent employment and financial stability it once promised. More than 700,000 graduates are out of work and claiming welfare benefits, up from just 485,000 in 2019.

For some, a lack of hope for the future leads to voluntary withdrawal from the system.

One example is the rise of “quiet quitting”, when people subtly reduce the number of hours they work within a job. The trend is particularly pronounced among Gen Z and millennials, according to research by The Inclusion Initiative and the London School of Economics.

“I love the UK, but it’s not a place to build wealth anymore. You can work 60-hour weeks, make six figures and still feel broke. Nearly half of your income goes on tax, but the streets are dirtier, and the NHS is crumbling,” says one TikTok user.

“There is no incentive in Britain to work harder,” another says. “There are record numbers of people claiming state benefits. Can you blame them when, in some scenarios, you’re better off not working? When you do work, you get taxed to death.”

‘All stick and no carrot’

Sam Allen, 31, a freelance designer from Chelmsford, Essex, says: “You always feel like you’re on the back foot. There’s no way I’ll be able to buy a house, and the same goes for most of my friends. It’s really frustrating.”

Allen feels that the Government is entirely clueless about the issues affecting young people and has no hope that it will fix them. He feels that he gets terrible value for the taxes that he pays.

“It feels like it’s very much us and them. They don’t understand what we’re going through at this age. For people aged 27 to 35, we all struggled through lockdown, and we’ve come out in this tough environment where it’s so hard to even get a job. It feels like there’s no support from the Government or resources.

“I feel petrified about what the future holds. No matter what direction we go down, I don’t see myself benefiting from it.”

Chris Wilson-Cambata, 38, also from Essex, runs an agency of freelancers and adds that working life in Britain feels “all stick and no carrot”.

Financial nihilism

Faced with a brutal uphill battle to achieve goals that were much more straightforward for their parents’ generation, young people are losing faith in conventional work. In some instances, they are turning to extreme and unreliable measures.

A study by economists at the University of Chicago and Northwestern University found that making high-risk financial investments, such as in cryptocurrency, is disproportionately common among those unlikely to be able to buy a house.

“As households’ perceived probability of attaining homeownership falls, they systematically shift their behaviour: they consume more relative to their wealth, reduce work effort and take on riskier investments,” the study says.

Renters with relatively low wealth exhibit the same patterns, it says.

“These responses compound over the life cycle, producing substantially greater wealth dispersion between those who retain hope of homeownership and those who give up,” it continues.

An analysis published by market research company Ipsos in January found that young men acknowledge the high risks of investing in cryptocurrency but do so anyway in an attempt to achieve the financial security they may otherwise perceive as out of reach.

The inability to afford a home can feel like a barrier to starting a family or being seen as a viable partner, leading young men to perceive high-risk ventures as a means to unlocking the next stages of life, explains Richie Jones of Ipsos.

Student loan interest rates

Young people who do manage to find work are being hammered from all angles, and it doesn’t look set to improve. The Government’s latest Budget ensures that tax thresholds will be frozen until 2031 to fund welfare increases.

Those who went to university face eye-watering annual student loaninterest rates of up to 6.2pc – significantly higher than the average two-year fixed mortgage rate of around 4.2pc, according to Rightmove.

This means many graduates end each year with a larger outstanding balance than they start it with. In 2024-25, the total interest added to England’s student loans was £15bn, compared with just £5bn in repayments.

One such graduate is Daniel, 28, a software engineer from Hertfordshire. His high salary means he pays around £400 a month in student loan repayments, yet his balance today is £62,000 – £7,000 more than when he graduated.

This has infuriated him, and he is considering paying off his loan early, but doing that will make it much harder to achieve other key milestones.

“On the one hand, the financially smart thing to do is to pay off the loan in full as quickly as possible,” he says.

“On the other hand, it’s a big risk to take because you end up burning most, if not all, of your cash savings, which might otherwise be used on a rainy day, as a deposit on a house, or even to start a business.”

Finding hope abroad

Unable to see a future within Britain’s borders, a growing number of skilled young professionals are eyeing the exit.

Recent polling by the Adam Smith Institute reveals that more than a quarter (28pc) of 18 to 30-year-olds are either actively planning to emigrate or have seriously considered it, driven by the belief that Britain is no longer a viable place to build a life.

In the year to March 2025, an estimated 174,000 Britons aged 16 to 34 left, according to data from the Office for National Statistics.

Destinations such as Australia, Canada, the United Arab Emirates and Spain all offer enticing incentives, including higher salaries, lower taxes, higher standards of living and a more realistic pathway to owning property and other assets.

Until young people feel that Britain can offer them hope, other economies may reap the rewards.

Allen is considering relocating to either Germany or Australia, where he has family.

“At this point, I’m open to living anywhere that isn’t here. A good number of my friends are all thinking about leaving. My nephew is the only thing that’s keeping me here.”

[Source: Daily Telegraph]