The document examines the changing dynamics of wealth distribution between generations in the UK, highlighting that while older generations have benefited from increased asset values, younger generations face stagnated wages and delayed market entry. The sustainability of public sector finances is questioned, revealing a significant deficit that risks future consumption for younger populations. Overall, the findings suggest a necessary shift towards generational equity to address the burden placed on younger generations by current fiscal policies.

2. Wealth booms and debt burdens:
UK Generational Wealth Accounts
David McCarthy, James Sefton, Ron Lee & Joze
Sambt
London, January 2023

3. NIESR
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1. Has the distribution of resources between generations changed significantly over time?
• Adjusting for productivity and changing working patterns, the distribution of labour income
across generations has remained stable.
• The older generations have benefited from a boom in house prices and pension wealth.
However returns to this wealth have not increased by as much.
2. Do the current younger generations have the resources to sustain consumption levels enjoyed
by earlier generations (adjusted for growth)?
• Conditional on Public sector, the older generations are bequeathing sufficient for the younger
generations to sustain consumption levels
3. Does the government transfer system look sustainable? Are projected taxes sufficient to
maintain the levels of public consumption enjoyed by earlier generations.
• Public finances have significantly worsened since the financial crisis. The are now perilously
unsustainable. Rescuing the public sector will disproportionately hit the younger generations.
We ask and find

4. NIESR
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• The average weekly wage has stagnated since 2007.
• Younger workers have not experienced the wage rises enjoyed by older
generations.
Average Real Wage
Source: BoE, A millennium of macroeconomic data and ONS

5. NIESR
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• Full-time participation in higher education has also risen steadily over time.
• Younger generations now have higher qualifications but will enter the labour
market later.
Rising participation in Higher
Education
Source: Dearing Report 1997 and DfE, there is definitional change in the series in 1997

6. NIESR
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• The age profiles are of average post-tax weekly labour income per capita relative to
the average UK gross weekly wage by year.
• Younger generations entered labour market later and are likely to retire later.
Average labour Income by age and
year
Retiring older
Starting Later
Source: Family Expenditure Survey (FES) and Living costs and food survey (LCFS), multiple years.

7. NIESR
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• The time effects are in line with the business cycle, the
recession of 1992 and the ‘Great Recession’.
• Once you have allowed for delayed entry of 2 years of
younger cohorts and later retirement of older cohorts, there
is no significant cohort effect.
Time and Cohort Effects of Labour
Income

8. NIESR
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• Pension wealth includes UK government’s estimate of the value of funded and
unfunded public sector workers pension rights.
• Pension and Property wealth the most important constituents. These are more equally
distributed than financial wealth.
Wealth Boom
Source: ONS, Historical Blue Books, Whole Government Accounts (WGA) and authors calculations.

9. NIESR
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• Asset returns and asset yields have fallen since early 2000s.
• With lower returns need more wealth to generate the same income, this
partially offsets the impact of higher wealth.
But evidence that asset returns have
fallen
Source: Jorda-Schularick- Taylor Macrohistory database, BoE Yield data

10. NIESR
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• Older generations since 2000 have benefited from the wealth
boom.
• Current younger generations have not, they have less wealth
than earlier generations
Average wealth by age and year
Wealth down Wealth Up
Source: 1995 and 2000 BHPS and author estimates of pension wealth, 2005-15 WAS

11. NIESR
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• Probated estates totalled £79bn, Atkinson (2018) suggests adding 25% for under
recording giving £99bn. Recorded inter-vivos gifts totalled £11bn.
• Most estates are bequeathed down a single generation (25 years). Gifts are
predominantly to younger working generations.
Is this wealth bequeathed
Source: WAS (2014-16)

12. NIESR
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• Old-age dependency ratio (>65:20-65) is set to rise to over 50% by 2060.
• Youth dependency ratio (<20:20-65) is projected to be roughly flat.
Dependency ratios
Source: First Report of the Pension Commission and ONS

13. NIESR
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• Using earlier estimated breakpoints to adjust for the expansion of higher education,
and using changes in the SPA to adjust for later retirement, the dependency ratio
rises only slightly.
(Roughly) Adjusted Dependency Ratios
Gender Equalisation of SPA
SPA = 66
SPA = 67
SPA = 68
Increases in HE Participation
Source: First Report of the Pension Commission and ONS

14. NIESR
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• Government Net Worth includes Funded and Unfunded Public Sector Pension
Liabilities, Tangibles Assets and Net Financial Liabilities.
• Further expenditure on old-age related benefits (mostly state pension) has
increased over time.
Public Sector Debt Burden
Source: Historical Blue Books, ONS and PS Finance Statisics

15. NIESR
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• Consumption in 2010, due to the recession, was significantly lower for all
generations except the very old.
• Consumption had still not recovered in 2015 except for the over 60s.
Private Consumption by age and
year
Source: Family Expenditure Survey (FES) and Living costs and food survey (LCFS), multiple years.

16. NIESR
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• Time effects are as for labour income, declines during recessions.
• Significant cohort effects, with higher consumption for the Baby Boomers and
slightly less high for Generation X.
Time and Cohort Effects

17. NIESR
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• In every year and at every age the resources, income, must equal the uses, consumption.
Calculating the GWA
0
0.5
1
0 10 20 30 40 50 60 70 80 90
Proportion
of
average
labour
income
ages
30-49
Age
UK consumption by age: 2012
Private Other
PublicOther
Ownedhousing
Publichealth
Publiceducation
Housingrentals
-0.5
0
0.5
1
0 10 20 30 40 50 60 70 80 90
Proportion
of
average
labour
income
ages
30-49
Age
Financing consumption: UK 2012
Labour income
Private transfers
Asset-based
reallocations
(savings, asset
income)
Publictransfers
201
5
201
5

18. NIESR
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How the present value of resources
and uses change over the generations
80
+
Assets
Public transfers
received
Private transfers
received
Public
consumption
Private
consumption
Public transfers
made
Private
transfers made
Net bequests
made
Assets
Public transfers
received
Private transfers
received
Human capital
Public
consumption
Private
consumption
Public transfers
made
Private
transfers made
Net bequests
made Assets
Public transfers
received
Private transfers
received
Net bequests
received
Human capital
Public
consumption
Private
consumption
Public transfers
made
Private
transfers made
50-59 20-29
The old have more
resources, assets +
pensions, than they need to
support consumption.
They are net bequestors
The middle-aged rely to a
greater extent on human
capital, but resources still
exceed uses.
They are net bequestors
The young have almost
no assets, large human
capital and uses exceed
resources.
They are net bequestees
Human Capital

19. NIESR
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• Estimate that of the £11.8tn held in assets, £4.2tn (~40%) to be bequeathed
• £2.5tn of this will be needed to support current living generations, £1.7tn to be bequeathed to
the unborn.
Bequest Flows down the generations in 2015
Net Besquestors Net Bequestees
90+ (Pre-1925)
80-89 (1926-1935)
70-79 (1936-1945)
60-69 (1946-1955)
50-59 (1956-1965)
40-49 (1966-1975)
30-39 (1976-1985)
20-29 (1986-1992
10-19 (1996-2005)
0-9 (2006-2015)
Unborn
-2000 -1500 -1000 -500 0 500 1000 1500 2000

20. NIESR
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• Public transfers predominantly flow up the generations.
• Currently deficit of present value of net transfers to living is £0.9tn; this is left to unborn
• Gov. Net Worth (in 2012) inc. unfunded govt occupational pensions was £1.9tn
• Projected deficit of present value of net transfers to unborn is £0.4tn.
• Public sector is not sustainable, with a total deficit of £3.5tn
Public Transfers in 2015: Flows up the generations
Transfers Made Transfer Received
90+ (Pre-1925)
80-89 (1926-1935)
70-79 (1936-1945)
60-69 (1946-1955)
50-59 (1956-1965)
40-49 (1966-1975)
30-39 (1976-1985)
20-29 (1986-1992
10-19 (1996-2005)
0-9 (2006-2015)
Unborn
-6000 -4000 -2000 0 2000 4000 6000

21. NIESR
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• Due to the wealth boom and increased bequests, the private sector has
become sustainable.
• With rising debt and unfunded pension liabilities, the fiscal gap has doubled
since 2005.
Gaps as ratio of Total Future Consumption

22. NIESR
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• Private sector is now in sustainable. However public sector policy is unsustainable
and so aggregate UK consumption plans are unsustainable too.
• A rebalancing between the private and public sectors is required. This rebalancing
needs to be done so as to be as ‘generationally’ fair as possible.
• This will require the older generations to take more of the ‘pain’.
Conclusions

24. Professor Jane Falkingham
University of Southampton
Connecting GenerationsThought LeaderTalk
11 January 2023
Wealth booms and debt burdens:
UK Generational Wealth Accounts
response

25. Wealth booms and debt burdens:
UK Generational Wealth Accounts
Three thoughts
• Changing patterns of work - gender matters
• ‘Lifetime GWA’ - do we need to take account of changing life course?
• How would the picture change if we account for in-kind private transfers?
25

26. 26
0
10
20
30
40
50
60
70
80
90
100
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74
Participation
rate
%
Age group
Cohort labour force participation rates: males
1862-66 cohort
1872-76 cohort
1882-86 cohort
1892-96 cohort
1902-06 cohort
1912-16 cohort
1922-26 cohort
1932-36 cohort
1942-46 cohort
1952-56 cohort
1962-66 cohort
1972-76 cohort
Source: P. Johnson and A. Zaidi (2004) Work over the life course Discussion Paper No. 18,
ESRC SAGE Research Group, London School of Economics, London.
Updated using 2011 census results by Falkingham

27. 27
Source: P. Johnson and A. Zaidi (2004) Work over the life course Discussion Paper No. 18,
ESRC SAGE Research Group, London School of Economics, London.
Updated using 2011 census results by Falkingham
0
20
40
60
80
100
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74
Participation
rate
%
Age groups
Cohort labour force participation rates: females
1862-66 cohort
1872-76 cohort
1882-86 cohort
1892-96 cohort
1902-06 cohort
1912-16 cohort
1922-26 cohort
1932-36 cohort
1942-46 cohort
1952-56 cohort
1962-66 cohort
1972-76 cohort

28. Age at which there is a 1% and 10% probability of dying, 1951-2011
Source: author’s own analysis based on UK life tables (ONS, 2012, 2021)
Longer lives:
rethinking the meaning of age

29. Longer lives:
rethinking the meaning of age
1% chance of dying 10% chance of dying
Men 1951 50 75
Men 2011 62 84
Men 2021 65 87
Women 1951 56 78
Women 2011 67 87
Women 2021 69 88
For men, 65 is the new 50; and 87 is the new 75!
Source: Author’s own analysis, 2021 based on latest mortality projections

30. Other shifts in the life course
Later marriages
A fifth of men and a quarter of women born in 1970 had not married by age 50
Source: ONS (20201 Marriage Statistics

31. Increasing chances of divorce
Source: ONS (2021) Divorce Statistics

32. Increasing age at motherhood
22
23
24
25
26
27
28
29
1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Age
year
Age at first birth: in 2015 = 28.6 years
Source: ONS (2021) Birth Statistics

33. Family change: Increasing childlessness
but also still significant proportions with 3+ births
Cohort 0 1 2 3 4+
1945 10 14 43 21 12
1950 14 13 44 20 10
1955 16 13 41 19 11
1960 19 12 38 20 11
1965 20 13 38 19 10
1970 17 18 37 17 10
Number of children at age 45
Source: ONS (2020) Birth Statistics

34. Intra family transfers of care
• 2011 census, 6. million people were providing unpaid care
• Estimated to have increased to > 10 million in 2020 (CarersUK, 2022)
• Informal care valued at £57 billion in 2017 (x3 the amount spent on formal care)
Average daily minutes of adult care provided by those aged 8 or over by age
group
Source: UK Harmonised Time Use Survey (HETUS), 2000 and 2015