Podcast Summary
Real Estate Manager's Perspective and Millennials' Economic Struggles: Principal Asset Management uses a comprehensive approach to real estate investing, while millennials face economic challenges due to underfunded pension schemes and housing market aftermath.
Principal Asset Management, as a real estate manager, utilizes a comprehensive perspective, combining local insights and global expertise across various asset classes to identify compelling investment opportunities. Millennials, a generation defined by their use of social media like Facebook during their college years, have experienced economic consequences of past generations' actions, leading to intergenerational conflict. This conflict stems from younger generations bearing the brunt of underfunded pension schemes and the aftermath of the housing market bubble. Our guest today, Laura Gardner, will delve deeper into these topics. Principal Asset Management's active investment approach and American Express' business gold card offer valuable resources for businesses looking to grow.
Intergenerational Issues: A Deeper Analysis: Older generations in the UK have benefited from a stronger labor market, more affordable housing, and more widespread defined benefit pensions compared to young people today, necessitating a renewed intergenerational contract for fairness.
The economic landscape has shifted in ways that favor older generations over younger ones in the UK. While the Resolution Foundation typically focuses on improving living standards for lower earners, intergenerational issues have emerged as a significant concern. Young people have been disproportionately affected by the pay squeeze since 2009, spending a larger share of their income on housing, and having less access to defined benefit pensions. However, the Stagnation Generation report, which resulted from an 18-month project, revealed that these apparent concerns need a deeper analysis. When comparing young people today with those of the same age 30 years ago, it's essential to consider the broader economic context. Older generations benefited from a stronger labor market, more affordable housing, and more widespread defined benefit pensions. These findings underscore the need for renewing the intergenerational contract to ensure fairness across generations.
Millennials in UK might not surpass predecessors in earnings and homeownership: Millennials face stagnant earnings, rising private rent costs, and a decline in homeownership compared to previous generations.
The millennial generation in the UK might be the first to not significantly exceed their predecessors in terms of earnings and homeownership. While previous generations, such as the baby boomers, saw significant earnings growth and high rates of homeownership, millennials have experienced stagnant earnings and a dramatic decline in homeownership. This trend is not only due to the financial crisis but also indicative of larger societal shifts. Millennials have graduated into a pay squeeze and have been unable to save up for house deposits due to rising private rent costs. These trends could have long-term implications for the economic well-being of the millennial generation.
Economic challenges for millennials: Demographics and policy choices: Millennials face economic challenges due to demographics and policy choices, including lack of career routes for non-graduates, housing crisis, underfunded pensions, and cuts to working age benefits.
The economic challenges faced by millennials, including stagnating earnings and a housing crisis, predate the financial crisis and may persist throughout their working lives. Demographics, such as large birth cohorts, contribute to some of these issues, but policy choices have also worsened the situation. In the US and UK, there's a consistent failure in providing solid career routes for non-graduates, and a lack of sufficient house building has led to a generational housing crisis. Decisions made to underfund final salary pension schemes in the 1980s and 1990s have resulted in huge deficits, and recent austerity measures have brought big cuts to working age benefits while protecting pensioner benefits. These policy choices have exacerbated rather than ameliorated the challenges posed by demographics.
Shifting attitudes towards intergenerational housing policies: Older generations are recognizing the importance of addressing housing issues for future generations, leading to increased support for local house building and a more equitable future.
Despite the common belief that the political influence of baby boomers makes it impossible to introduce policies to help younger generations, there are signs of shifting attitudes and willingness to address intergenerational imbalances. This is particularly evident in the area of housing, where older generations are showing increased support for local house building and recognizing the importance of addressing the housing crisis for future generations. This trend is driven by a growing recognition that the wellbeing of older generations is linked to that of younger ones, and that no one wants to see their loved ones struggle in the labor market or with housing affordability. While there is still work to be done, such as addressing the broken social care system, these shifts in public attitudes offer hope for a more equitable future. Additionally, it's important to note that the decline in homeownership rates and the unequal distribution of housing wealth are significant contributors to overall inequality, and addressing these issues could have a positive impact on reducing inequality as a whole.
Housing Market Changes and Generational Wealth Gap: Policy decisions leading to housing scarcity in the 1990s and early 2000s significantly increased the wealth of baby boomers at the expense of younger generations. Stricter mortgage lending criteria after the financial crisis further widened the gap.
The housing market in the UK has undergone significant changes over the past few decades, with baby boomers benefiting from these trends at the expense of younger generations due to a combination of factors. The housing market took off in the 1960s to 1980s, but prices didn't significantly increase until the 1990s and early 2000s. This period saw the value of baby boomers' assets skyrocket due to housing scarcity. However, the reasons for this scarcity were not accidental. Policy decisions, such as a decrease in house building during the 1950s and 60s, underpinned these trends. Furthermore, during and after the financial crisis, stricter mortgage lending criteria made it much harder for young people to enter the housing market, exacerbating the wealth gap between generations. The housing situation young people face today is not just a matter of luck or the actions of individual generations but is a result of deliberate policy decisions. Therefore, it is essential to critically examine these policies and consider how they can be changed to create a more equitable housing market. Brexit also played a role in this housing crisis, but it is just one of many factors contributing to the current situation. The voting outcome of Brexit may lead to further uncertainty and instability in the housing market, but addressing the root causes of the housing crisis requires a more comprehensive and long-term approach.
Brexit reveals intergenerational divide: Older generations favor Brexit due to economic security, younger generations prefer EU membership, new government acknowledges intergenerational challenges, Brexit presents opportunity to challenge economic orthodoxies and bring generations together.
The Brexit vote in the UK revealed a significant generational divide, with younger people generally favoring staying in the European Union and older generations voting to leave. This divide can be attributed to the different economic experiences of each age group, as older generations are often less directly impacted by economic turmoil due to their retirement or home ownership. However, there are also non-economic reasons for this divide. The new government, under Prime Minister Theresa May, has acknowledged these intergenerational challenges and has signaled a potential shift in policy to address them. The Brexit vote presents an opportunity to reflect on and challenge the economic and political orthodoxies of recent years, and to find ways to bring the generations back together.
Britain's New Government Shifts to Interventionist Economic Policy with Focus on Industrial Strategy: The UK government under Theresa May is moving towards interventionist policies, including industrial strategy, which could address younger generations' housing needs but faces skepticism about intergenerational reconciliation
The new British government under Theresa May is signaling a shift towards an interventionist economic policy, specifically focusing on industrial strategy. This approach could potentially lead to policies aimed at addressing the housing market needs of younger generations, as the industrial strategy is a relatively new concept in the UK and a departure from previous laissez-faire economic policies. However, there is skepticism about the likelihood of intergenerational reconciliation, as some believe the baby boomer generation is not showing signs of prioritizing the needs of younger generations over their own self-interest. The issues of pension obligations and housing affordability are seen as significant and intractable problems, and economists are likely to continue studying them as evidence of human nature's inherent self-interest and comparison-making tendencies.
Expectations impact our perception of financial problems: Our expectations shape how we view financial challenges, even if the actual outcome is better than anticipated.
Our expectations play a significant role in how we perceive and solve financial problems. If we anticipate a certain outcome and don't receive it, even if the actual outcome is better than expected, it can make the situation seem more difficult to deal with. This is a natural phenomenon of the human mind. On a lighter note, we wanted to share some exciting news about a new podcast here at Bloomberg. Our friend Matt Levine, who writes the popular Money Stuff newsletter, is teaming up with Katie Greifeld, a Bloomberg TV host, to bring the newsletter to life as a weekly podcast. Every Friday, they will discuss Wall Street finance and other financial topics that make Matt's newsletter so engaging. You can listen to Money Stuff on Apple Podcasts, Spotify, or wherever you get your podcasts.
