Intergenerational Inequality

Intergenerational inequality in the UK affects young people's opportunities and wellbeing. The Bequest motive influences wealth and skill transmission from parents to children. Education is crucial, but low-income areas lack resources, leading to poor quality education. New repayment schemes for student debt may discourage young people from investing in education. This can result in lower incomes and standards of living, impacting the economy. Young people, especially from low-income families, should be concerned about intergenerational equality unless supportive policies are implemented. Today, in Topics and Inequality, I will be discussing the topic of intergenerational inequality and the effect it has on young people in the UK. Intergenerational inequality refers to disparities or differences in opportunities, resources or wellbeing between different generations within a society. These inequalities are often influenced by the transmission of advantages or disadvantages from one generation to the next. The Galore and Zero, 1993, Bequest and Humor Capital paper integrates both the Bequest narrative and Humor Capital assimilation to explain the dynamics of inequality and intergenerational transmission of wealth and skills. The Bequest motive refers to parents leaving an inheritance in the form of Humor Capital wealth, listed down through investing in their children's education and skill development, therefore optimising their future wellbeing and productivity. If the Bequest motive falls short for investing in education, the children at risk persist at a low income level, potentially finding themselves in a poverty trap. Controversially, when the Bequest surpasses the essential threshold, educational investments take place, leading future generations to scale to a high income level. In an article by Cash for Nira, it states better educated parents have higher incomes. This can influence where they live and the quality of education their children receive. They're able to live in more prosperous neighbourhoods that have better schools and higher quality of education. Whereas in low income areas, due to the lack of resources, the quality of education is poor, schools are overcrowded, insufficient infrastructure and shortage of skilled teachers. This causes disparities in performance in schools and can affect admission into universities. The real question is, should young people in the UK be concerned about this or not? An article from the Times Money Mentor states, another upstate on new changes are coming into force from September 2023, with the introduction of a new Plan 5 repayment scheme. Under the current Plan 2 scheme, graduates who still have some student debt outstanding 30 years after finishing university are no longer liable for repayment. However, in this new scheme, this period is being extended to 40 years. Policy changes like these can lead to debt aversion, further deferring young people from investing in education, and it's seen as an additional financial burden, especially in low income households. This could mean a significant reduction in people that are going to higher education, having direct effects on future incomes and standards of living, as failing to invest in higher education means that these young people lack the skills and qualifications to break into higher income labour markets, leaving them with low income jobs and in worse cases, no jobs at all. This has a direct effect on the government, a few people in employment, increases the dependency ratio, leading to lower taxes and GDP as a whole. This creates a continuous cycle of the poverty trap, as the next generation is also affected by this. In conclusion, yes, young people in the UK should be concerned about intergenerational equality, especially those from low income families, as the requests mostly from their parents are already low and have to support themselves. Unless there are schemes and policies put in place to help these individuals out, then yes, they're still a concern. Thank you for listening to the podcast. Have a wonderful day from Topics in Inequality.