Housing

The link between housing and fertility rates: Forbes features research by Professor Tarun Ramadorai

Evie Burrows-Taylor — Mon, 03 Feb 2025 10:28:50 +0000

The link between housing and fertility rates: Forbes features research by Professor Tarun Ramadorai Evie Burrows-Taylor Mon, 03/02/2025 - 10:28

16 January 2025

Housing

Policy

The Economist features research by Professors David Miles and James Sefton on the global rise in house prices

Evie Burrows-Taylor — Fri, 04 Oct 2024 14:36:24 +0000

The Economist features research by Professors David Miles and James Sefton on the global rise in house prices Evie Burrows-Taylor Fri, 04/10/2024 - 14:36

1 October 2024

Economy

Housing

Boomers versus Millennials: a new perspective on generational wealth in the UK

James Sefton — Mon, 04 Sep 2023 09:16:05 +0000

Boomers versus Millennials: a new perspective on generational wealth in the UK

James Sefton Mon, 04/09/2023 - 09:16

4 September 2023

New research finds evidence that there is more solidarity between generations than the “Millennials versus Boomers” narrative would suggest

Media coverage of generational wealth often pits Boomers against Millennials, claiming older generations have benefited at the expense of younger ones. Undoubtedly, economic conditions are not as rosy for young people today; wage stagnation, a shortage of housing and global crises have certainly made things harder.

But are older generations leaving them with an unfair share of the pain from these circumstances? Or is there more intergenerational solidarity at play than the conventional narrative would suggest? To explore this, we conducted a comprehensive study – potentially the first of its kind – looking at all transfers between generations in the UK.

Wages and ages

The labour market is one of the key battlegrounds in the debate on intergenerational fairness, which is unsurprising given wages have seen historically low growth in recent years. The UK’s average weekly wage has stagnated since 2007, and today’s younger generations simply have not seen the wage rises their parents and grandparents enjoyed.

There is no doubt this slow productivity growth is the definitive challenge currently facing the UK. However, our study asks whether the pain of slower growth is shared equally across generations, or whether one generation is bearing the brunt.

if the bequest flow continues, most of the appreciation in Boomers’ asset value is likely to be passed down to younger generations

We found that, once we adjusted for a change in the timing of labour market participation (younger generations are entering the labour market later) and for recessions (such as in 1992 and 2008), the distribution of labour income has remained relatively stable across generations over time.

However, younger generations are now much better educated: higher education rates have risen from below 15 per cent in 1980 to nearly 50 per cent in 2022. It does therefore appear that younger generations have not benefited in terms of higher wages from their higher levels of education, and this becomes more acute given the resulting student debt burden. Practically, this does make things more economically challenging for them, even if the intergenerational inequality at play may be less severe than is commonly portrayed.

Wealth and bequests

There has been a global wealth boom since the 1990s, including dramatic rises in private property values. Again, the prima facie evidence suggests this has led to intergenerational unfairness: Boomers have enjoyed increases in the value of their homes, while the corresponding rising prices have locked many young people out of property ownership altogether.

However, this doesn’t tell the whole story. Over the past 30 years, we have also seen a significant drop in real interest rates. Our study takes this into account, and we found that, while the value of assets has gone up, the income flow they provide has not changed anywhere near as much.

Today’s younger generations simply have not seen the wage rises their parents and grandparents enjoyed

This means that, while older people have seen their property become more valuable, they have not necessarily gained more liquid income to support increased consumption. In fact, they are more likely to pass the value from their appreciated assets down in bequests to their children than to liquidate it for their own benefit.

In our study, we estimated the flow of bequests to be around £99 billion per year, plus another £11 billion in private gifts between generations (a conservative estimate). Growing this £110 billion total at a 1.5 per cent rate into the future gives us a total of £4 trillion – roughly the value of housing assets held by older generations. This implies that, if the bequest flow continues, most of the appreciation in Boomers’ asset value is likely to be passed down to younger generations.

A different picture

Of course, our findings do not suggest there are no reasons to be concerned for younger generations. Increasingly relying on inherited wealth means we’re likely to see intragenerational inequality increase. But this is not something older generations can control; they do appear to be passing down what they can, consuming only some for themselves, taking at least some of the sting out of unequal circumstances.

When we talk about fairness and “Millennials versus Boomers”, this is the key point. In a society already burdened with conflict, this is one battle that maybe isn’t a battle at all. Circumstances change between generations, but our findings show they support each other through this, passing down wealth to address inequalities that certainly exist, but may not be as attritional as they are sometimes portrayed.

Younger generations have not benefited in terms of higher wages from their higher levels of education

Unfortunately, the public sector is another matter entirely. Public sector net worth (public assets, capital assets, debts and pension liabilities) has dropped off a cliff since the 1980s, coming close to -150 per cent of GDP. This is due to factors including increases in public expenditure following the financial crisis and the pandemic, increased pension expenditure due to people living longer, and steeply rising health expenditure.

The net effect is a public sector generational imbalance that negatively impacts younger generations compared to what their parents experienced. This will require a political solution and will also require generations to work together as much as they do in the private sector to achieve fairness. As our study shows, older generations are good parents – to address public sector inequalities, they may need to become better citizens as well.

Culture and Inclusion

Academic area

Knowledge Categories

Watch: ITV interviews Professor David Miles about the future of the UK housing market

Evie Burrows-Taylor — Thu, 10 Aug 2023 15:04:45 +0000

Watch: ITV interviews Professor David Miles about the future of the UK housing market Evie Burrows-Taylor Thu, 10/08/2023 - 15:04

30 June 2023

Finance and institutional resilience

Housing

"UK mortgage rates rollercoaster is the price to pay for cheap, short-term deals": Professor David Miles in the Guardian

Evie Burrows-Taylor — Thu, 10 Aug 2023 14:23:51 +0000

"UK mortgage rates rollercoaster is the price to pay for cheap, short-term deals": Professor David Miles in the Guardian Evie Burrows-Taylor Thu, 10/08/2023 - 14:23

21 June 2023

Finance and institutional resilience

Housing

Era of “massive” house price rises coming to an end: The Times covers comments by Professor David Miles

Evie Burrows-Taylor — Tue, 23 May 2023 11:06:48 +0000

Era of “massive” house price rises coming to an end: The Times covers comments by Professor David Miles Evie Burrows-Taylor Tue, 23/05/2023 - 11:06

18 May 2023

Finance and institutional resilience

Housing

Our female academics: 8 thought leadership articles on cryptocurrency, climate change and more

Evie Burrows-Taylor — Fri, 03 Mar 2023 09:23:10 +0000

Our female academics: 8 thought leadership articles on cryptocurrency, climate change and more

Evie Burrows-Taylor Fri, 03/03/2023 - 09:23

6 March 2023

From wealth inequality and the impact of violence on business to boardroom diversity and flexible working, here are eight of our most popular IB Knowledge articles by some of the Business School's female members of faculty.

1. Could engaging in corporate social impact work damage your career?

These days, many people are keen to explore meaningful work beyond their job description. But, as this article reveals, it may be career-damaging to take part in socially motivated work.

2. Could the blockchain replace your manager?

The blockchain can allow businesses to organise themselves in new ways, free from traditional corporate hierarchies and established chains of command.

3. Why is the gap between the rich and the poor getting wider? Europe versus the US

European and American households have seen their wealth grow by roughly similar degrees over the last 50 years but, in the US, the gap between the rich and the poor has become much more pronounced.

4. How underperforming companies derail diversity in the boardroom

When a company is going through a tough period, they need to change course. But why does this negatively impact diversity at the top of the business world?

5. What violence means for business

Attacks, protests and civil unrest can severely disrupt economic activity – but in developing economies, they hit some businesses harder than others.

6. How flexible working can work for women

Professional women have been campaigning for more agile and flexible working for decades. So now that many have it, why doesn’t it feel like a victory?

7. 6 ways to reduce the environmental impact of your business

It is now widely accepted that climate change exists – and that there are ways we can help to stop the worst of its effects. This article reveals six ways you and your business can help in the fight against climate change.

8. Neuroticism, deprivation and racial bias: Trump’s unique authoritarian appeal

Some may find support for Donald Trump hard to understand – but what unites his voters, many of whom live in regions of industrial decline, is the feeling they have something to lose.

Careers

Centre for Climate Finance and Investment

Climate Change

Climate Finance

Competition

Corporate Social Responsibility

Cryptocurrency

Culture and Inclusion

Monthly newsletter

Receive the latest insights from Imperial Business School

Women at Imperial Week 2023

Women at Imperial Week 2023 will be taking place from 6 – 10 March, shining a light on the achievements of women at Imperial and the challenges in achieving gender equality

Download PDF

Research Centre

Leonardo Centre on Business for Society

Centre for Responsible Leadership

Knowledge Categories

Finance

Management

Strategy & Leadership

Technology

Watch: Professor Tarun Ramadorai gives inaugural lecture on household finances and financial economics

Evie Burrows-Taylor — Mon, 28 Nov 2022 14:35:43 +0000

Watch: Professor Tarun Ramadorai gives inaugural lecture on household finances and financial economics Evie Burrows-Taylor Mon, 28/11/2022 - 14:35

12 October 2022

Finance and institutional resilience

Housing

Economy

Finance

Why is the gap between the rich and the poor getting wider? Europe versus the US

Clara Martinez-Toledano — Wed, 09 Nov 2022 11:11:53 +0000

Why is the gap between the rich and the poor getting wider? Europe versus the US

Clara Martinez… Wed, 09/11/2022 - 11:11

14 November 2022

European and American households have seen their wealth grow by roughly similar degrees over the last 50 years, but in the US, the gap between the rich and the poor has become much more pronounced

Wealth inequality is a hugely important issue for governments and policymakers, but the current evidence makes long-term country comparisons difficult, and doesn’t help us to clearly understand the reasons behind differences in wealth inequality trajectories.

To address this lack of knowledge, and together with Thomas Blanchet from the Paris School of Economics, we have gathered all the necessary data to build the first Distributional Wealth Accounts for Europe. This enables a comparison of wealth inequality between Europe and the United States over the last five decades. Our project forms part of a bigger international drive by the World Inequality Lab to provide more comprehensive public information about wealth and income inequality across the world.

Having built the database, we started our research analysing the evolution of aggregate wealth by calculating the ratio of each country’s household net wealth (assets minus liabilities) to national income. This ratio indicates whether individual countries in Europe and the US are becoming richer or poorer.

We then drilled down to the individual level and measured how wealth among the richest one per cent of the population changed in each of these countries over the same period.

Finally, we explored the differences in wealth inequality trajectories between Europe and the US by focusing on three key drivers of wealth accumulation: differences in savings, wages, and capital gains (of which the profit from property sales forms a key part).

Europe has experienced (slightly) faster growth in aggregate wealth than the US

We found the evolution of aggregate household wealth (relative to income) was similar in Europe and the US, steadily increasing from three times national income in 1970 to five times national income in the US and six times national income in Europe in 2018. The wealth to income ratio was slightly higher in Europe than in the US in recent years, mainly due to a bigger decline in house prices in the US during the global financial crisis. Individual European countries wealth inequality trajectories had hugely varied.

The evolution of wealth among the wealthiest one percent of the population tells a different story

However, when we analysed the evolution of the top one percent wealth share in each of these regions, we found that, while Europe experienced moderate growth, the growth in the US was significantly higher. In other words, the gap between rich and poor in the US became much more pronounced. This was true whether compared to the European average or any single European country.

How can we explain these differences? To answer this question, we broke wealth down into three key drivers: differences in saving rates (i.e. the ability of individuals to save some of their income), wages, and capital gains rates (i.e. the changes in the value of assets) across wealth groups.

Do these drivers account for the difference in wealth inequality between Europe and the US?

To examine the drivers, we ran simulations that substituted the labour income inequality and asset price trajectories from France into the US figures. When we did this, we found the US wealth concentration levels were lower as a result of the smaller rise in labour income inequality and the larger rise in house prices relative to financial assets in Europe – this benefits middle income individuals more as they have a larger share of housing in their portfolio. The results were similar when we substituted the same figures from other European countries into the US data.

Our research leads us to make two key calls to action for policymakers:

1. Job market policies are crucial to reducing wealth inequality

We have shown labour income inequality has been a huge factor in the growing gap between rich and poor in the US. Controlling unemployment and designing policies aimed at boosting wages at the lower end of the market must be a priority if wealth inequality is to be reduced.

2. Central banks must play a key role in stabilising house prices

Since housing is an asset that has a disproportionate impact on middle income individuals, it is important prices are stabilised to prevent financial crises.

We hope the new Distribution Wealth Accounts for Europe database will be used by other researchers to build on this work and that it will be also helpful to inform the public debate, providing data that hasn’t previously been available. We plan to regularly update the database, so that we retain the most up-to-date information about the state of wealth inequality in Europe and the US.

This article draws on findings from "Wealth Inequality Dynamics in Europe and the United States: Understanding the Determinants" by Thomas Blanchet (Paris School of Economics) and Clara Martínez-Toledano (Imperial London).

Culture and Inclusion

Economy

Housing

Inequality

Monthly newsletter

Receive the latest insights from Imperial Business School

How central bank's interest rate rises affect the richest and poorest families

Received wisdom has it that low rates boost economic growth, spreading wealth in a ripple effect across society. Dr Jose-Luis Peydro and his fellow researchers have now been able to reveal the truth with some exceptionally reliable information

Gap between rich and poor has increased more quickly in the US than in Europe

Wealth inequality in the United States has increased more quickly than in Europe in the last 50 years, according to a new Imperial study.

Download PDF

Academic area

Economics & Public Policy

Knowledge Categories

Finance

BBC Radio 4 interviews Professor David Miles on housing, mortgages and interest rates [08:35]

Evie Burrows-Taylor — Tue, 08 Nov 2022 10:09:38 +0000

BBC Radio 4 interviews Professor David Miles on housing, mortgages and interest rates [08:35] Evie Burrows-Taylor Tue, 08/11/2022 - 10:09

3 November 2022

Finance and institutional resilience

Housing

Housing

The link between housing and fertility rates: Forbes features research by Professor Tarun Ramadorai

Share

The Economist features research by Professors David Miles and James Sefton on the global rise in house prices

Share

Boomers versus Millennials: a new perspective on generational wealth in the UK

New research finds evidence that there is more solidarity between generations than the “Millennials versus Boomers” narrative would suggest

Wages and ages

Wealth and bequests

A different picture

Monthly newsletter

Watch: ITV interviews Professor David Miles about the future of the UK housing market

Share

"UK mortgage rates rollercoaster is the price to pay for cheap, short-term deals": Professor David Miles in the Guardian

Share

Era of “massive” house price rises coming to an end: The Times covers comments by Professor David Miles

Share

Our female academics: 8 thought leadership articles on cryptocurrency, climate change and more

From wealth inequality and the impact of violence on business to boardroom diversity and flexible working, here are eight of our most popular IB Knowledge articles by some of the Business School's female members of faculty.

Monthly newsletter

Watch: Professor Tarun Ramadorai gives inaugural lecture on household finances and financial economics

Share

Why is the gap between the rich and the poor getting wider? Europe versus the US

European and American households have seen their wealth grow by roughly similar degrees over the last 50 years, but in the US, the gap between the rich and the poor has become much more pronounced

Europe has experienced (slightly) faster growth in aggregate wealth than the US

The evolution of wealth among the wealthiest one percent of the population tells a different story

Do these drivers account for the difference in wealth inequality between Europe and the US?

1. Job market policies are crucial to reducing wealth inequality

2. Central banks must play a key role in stabilising house prices

Monthly newsletter

BBC Radio 4 interviews Professor David Miles on housing, mortgages and interest rates [08:35]

Share