How are younger workers expected to compete with ‘Generation Landlord’?

Some older Australians may struggle to understand because it is very different from their lived experience.

But when young people say it’s impossible to save for a property deposit these days, they’re not lying.

According to researchers, the budgeting strategies used by younger generations to try to save for a deposit are “more and more insignificant” in modern Australia.

They say house prices are rising too quickly and the proliferation of precarious forms of employment since the 1980s as well as stagnant wages for young workers mean many young Australians face the prospect of becoming completely homeless. excluded from property ownership.

They say the sharp decline in homeownership among young people is not due to their work shyness or the fact that they have forgotten how to save and make sacrifices.

It’s because old Australia has disappeared.

Australia and the modern globalized economy

When you read the press releases of the Hawke-Keating Labor governments of the 1980s and early 1990s, it is impossible to miss the “narrative” they were promoting.

The overwhelming majority spoke of the new and exciting Australia of the future, where workers would be highly skilled and living standards and wages would rise through increased productivity and export competitiveness.

The old post-war Australia, they said, where it was common for people to leave school after tenth grade to join the workforce, would not be sufficient to adapt to the modern globalized economy.

“During the 1960s, only about a third of young people completed 12 years of schooling,” said Paul Keating. in 1992.

“Most adolescents left school early and obtained unskilled employment. These young people who dropped out of school received little formal vocational training unless they were able to obtain an apprenticeship in the one of the traditional professions.

“In the mid-1960s, almost six in ten young people aged 15 to 19 had a full-time job. Today this figure rises to two in ten.

“On the other side of the coin, 30 years ago only one in three 15-19 year olds were in full-time education, compared to almost two in three today,” he said .

This old economy that Mr Keating spoke of, in which large numbers of young people joined the full-time workforce after leaving school in the 1950s and 1960s, was obviously radically different from today’s economy.

But in this post-war period, Australia’s welfare model was based on broad homeownership and housing was more affordable for unskilled workers.

It’s fascinating to see what kind of rising house prices made Australians anxious 50 years ago. According to the late Professor Patrick Troy, this is how things were perceived back then early 1970s:

“The cost and price of housing remained a source of social and political concern. During the period 1969-1973 the number of years of average income required to purchase a house plot increased significantly. In Sydney it increased from 1.7 to 2.7 years, while in Melbourne it increased from 1.2 to 1.8 years.”

Compare this to what modern researchers say about Australia in 2023:

“Since 2001, the national ratio of median house price to median income has almost doubled to 8.5, and the time required to accumulate a deposit for a typical property has increased from six years of median income in 1994 currently 14 years old.”

In this story, Australians were informed in the 1980s and 1990s of the need for a more flexible and productive workforce, the significant future decline in homeownership among younger workers and of what it would mean for this country’s post-war social compact. is very much part of the vision.

The emergence of the owner generation

By now, many of us are familiar with the term “Generation Rent”, which refers to the generation of young Australians who will never own a property and will be forced to rent for life – with the wealth implications that will follow. .

But the researchers say that the corollary of this phenomenon is “Owner Generation“.

They argue that the emergence of the Landlord generation has been partly fueled by the increasing financialization of housing, reflected in the sharp rise in the number of investors owning multiple properties in recent decades.

They say this has also been underpinned by an ideological shift in politics over the past 30 years, which has seen landownership promoted as a welfare strategy for the market-thinking, responsible, investment-ready individual.

They argue that debt-financed homeowners have been reframed in Australia as “parent investors” who are politically valued as being entrepreneurial, self-reliant and providing essential housing to others, but who, upon closer inspection, are primarily middle-aged and older. , richer and with higher incomes.

They say this valuation of owners has created tensions in Australia, given the situation of winners and losers.

“By privileging the investor class to improve their well-being in retirement, others are denied the opportunity to obtain their own housing, and therefore retirement security,” they say.

And they say the tension between Generation Rent and Generation Landlord is compounded by the change in employment conditions in Australia which has undermined young workers’ ability to earn and save a 20 per cent deposit.

They argue that the collapse in the 1980s and 1990s of the arbitration system that underlay the relatively high wage rates of Australia’s post-war settlement was a crucial step on the path we have borrowed to get there.

“More recently, the rise of the gig economy has meant a move towards more flexible working arrangements in which employment is carried out on a time-limited, contract or temporary basis,” they said. written in March.

“This re-emergence of flexible or atypical working practices has crystallized the concept of the precariat, characterized by economic insecurity. A recent paper from the Melbourne Institute noted that atypical employment now accounts for more than half of total employment.” .

They say the modern unpredictability of young Australians’ household finances now poses a “key constraint” on their ability to plan and control their spending.

And when combined with reforms to the Australian tax system, during the 1990s and beyond, which have increasingly favored current owners over aspiring owners, this means that it has become more difficult for young Australians to be able to buy a house by simply working hard, they say. .

Former Treasurer Paul Keating and former Prime Minister Bob Hawke at a press conference in 1983.(National Archives of Australia)

Undermining the post-war model of citizenship

So when we think about the working and saving habits of young people, we need to keep these things in mind.

Researchers say the traditional route to home ownership simply doesn’t exist for large numbers of young Australians these days.

They say the modern reality of precarious and polarized labor markets is “inextricably linked” to these new housing dynamics, and this challenges the idea of ​​what it means to be Australian.

“The existence of a ‘typical’ life course, during which people acquire an education, gain employment, leave home, start a new home with a long-term partner, and buy and repay a house over the course of of their professional life to guarantee a decent standard of living. to live in retirement, is becoming more and more rare,” they say.

“Given the intertwined nature of employment and housing, such changes could signal a major breakdown in key ‘pillars’ of the post-war model of citizenship.

“In particular, they indicate a breakdown of previous support frameworks as people retire,” they say.

Which begs the question: where does Australia’s image of egalitarianism fit into all this?