Does Gen Z Have it Tougher than Previous Generations? Examining the Financial Challenges Facing Young Britons Today

Every generation has faced its unique financial hurdles, but data increasingly shows that today’s Gen Z cohort in the UK may indeed have it tougher than their predecessors. A confluence of economic challenges — stagnant wage growth, spiralling housing costs, job instability, and a rising cost-of-living crisis—has eroded financial independence for many young adults, with far-reaching implications for the economy and social dynamics.

The Financial Hurdles: Housing Affordability Crisis

For Gen Z, housing is one of the most formidable obstacles to financial autonomy. Over the past two decades, house prices have surged by roughly 60%, outpacing wage growth by an extraordinary margin. According to the Office for National Statistics (ONS), the average UK house price is nearly £287,000 as of mid-2024, a stark contrast to the £136,000 average in 2003. This disparity has left many young adults reliant on the so-called "Bank of Mum and Dad" to get onto the housing ladder. The Resolution Foundation reports that 57% of first-time buyers now receive financial assistance from family, an 11-year high.

The impact on homeownership rates is telling. The percentage of under-25 homeowners has plummeted from 24% in 2004 to just 10% in 2023. Meanwhile, Gen Zers who cannot buy are also facing unprecedented rent inflation, with rental prices up 9.2% year-on-year as of 2023—the highest increase since records began in 2015. The result? Gen Z is spending nearly half their monthly income on rent, making savings or investments a far-fetched reality for many.

Wage Stagnation and Job Insecurity

The labour market has also done little to support Gen Z’s financial independence. Real wage growth has been stagnant over the past decade, and recent gains are largely offset by inflation. Although the minimum wage is set to rise by 16-18% in 2024, benefiting younger workers, the increase does not fully compensate for years of anaemic wage growth. Further exacerbating the issue, Gen Z disproportionately works in the gig economy, characterised by lower wages and less stability.

The mental health toll of this financial insecurity cannot be ignored. New benefit claims for mental disorders among 16- to 27-year-olds have more than doubled in the three years ending June 2024. Surveys reveal that two-thirds of adults believe that Gen Z faces worse mental health challenges than previous generations, with economic hardship cited as a key driver.

Social and Lifestyle Shifts

Financial strain is also reshaping social behaviour. More than a quarter of Gen Z adults report spending nothing on non-essentials, and over two-thirds have turned down social plans due to financial limitations. This generation is, in effect, missing out on experiences that once defined young adulthood, from travel to nightlife, as disposable income dwindles. Data from Phoenix Group shows that Gen Zers are twice as likely to be teetotal as their predecessors, partly due to cost constraints and partly in reaction to the economic pressures they face.

Moreover, traditional life milestones are now delayed. The average age of first-time home buyers has risen to 34 years, marriage rates continue to fall, and family formation is postponed. This shift, combined with rising costs and limited job security, has long-term implications for wealth inequality and societal stability. A later start on wealth accumulation could translate into a widening wealth gap across generations, raising the spectre of increased intergenerational financial dependence.

MY OUTLOOK

In my opinion, the economic outlook for Gen Z remains precarious, with a few policy-driven solutions but no comprehensive relief in sight. Rising interest rates may cool housing prices eventually, but without substantial wage growth or housing policy reform, homeownership will remain a distant dream for many. Further, the over-reliance on the Bank of Mum and Dad introduces new risks: as wealth disparities grow, those without family support may face an even steeper climb to financial stability.

Addressing these issues requires a multifaceted approach: government intervention to stabilise the housing market, policies promoting higher wages, and greater regulatory support for gig economy workers. Only through targeted policy shifts can we hope to improve the economic standing of this generation and prevent a future where financial independence remains a privilege for a select few rather than a right for all.

In summary, Gen Z's financial struggles highlight systemic economic issues that affect us all. Their experience serves as a wake-up call for policymakers to address the interwoven challenges of housing, employment, and mental health that increasingly define our economy. If left unaddressed, these pressures could reshape society in ways that may further entrench inequality and hinder economic mobility for future generations.