‘Downward escalator’ for youth living beyond their means: more than half lack £100 of financial resilience
Comment: Charlotte Binstead of the Smart Data Foundry laments poor outcomes for young people
Youth unemployment across the UK has hit 16.1 per cent – the highest level in more than a decade.
Former health secretary Alan Milburn, leading the government’s review into youth economic inactivity, warned of young people trapped on a “downward escalator” of poor health, poor education, and graduating “into the benefits system”.
Anonymous data aggregated from Scottish bank accounts, published in Smart Data Foundry’s (SDF) monthly Economic Wellbeing Explorer, reveals the impact of un- and under-employment on young people’s finances. In Scotland, 54% of 18-39 year-olds are now experiencing low emergency resilience (a balance of less than £100 on 2 or more occasions each month); half of young people in Scotland are barely making ends meet – and that has long-term consequences.
Full Scale of the Crisis
While headlines focus on unemployment rates, SDF’s latest update reveals economic fragility across the entire young adult population:
◆ 54 per cent of 18-39 year-olds are experiencing low emergency resilience (a balance of less than £100 on 2 or more occasions each month)
◆ 24 per cent are regularly overdrawn (using credit just to cover basic costs).
◆ In west central and eastern Scotland, it’s worse –56 per cent are struggling to make ends meet.
This means the majority of young adults in Scotland –whether employed, unemployed, or in education – are in economic distress. Having a job is no longer a reliable route to financial resilience.
The impact of low emergency resilience
The 54 per cent figure isn’t about frivolous spending. A typical 27-year-old in Glasgow earning £26,000 pays monthly rent of £750, council tax at £120, utilities £100, phone £50, transport £150, food £200. That accounts for £1,370 of £1,803 take-home pay, leaving £433 for everything else.
After accounting for things like a gym membership, car payments and other bills, it only takes some unexpected or one-off costs such as one car repair (£400), one replacement coat (£80), and one friend's wedding (£150), to tip young people over the edge – and potentially into debt . Multiply across a year - birthdays, Christmas, insurance - and building even a small financial buffer for emergencies becomes nearly impossible – never mind saving for the future.
The 24 per cent who are regularly overdrawn aren’t being irresponsible – it’s an inevitable gap between income and essential costs.
What It Means
More than half of young adults in Scotland are financially insecure. This situation is not sustainable on an individual basis, and it is certainly not sustainable as a society.
It means the majority of our young people cannot build emergency savings or save for home deposits. Many will delay or avoid having children. When economic shocks hit, young adults will be hit hardest and recover slowest.
Scotland’s overall unemployment rate of3.8 per cent looks manageable. Youth unemployment at 16.1 per cent looks serious. But combine that with 54 per cent of young adults living beyond their means, and a significant proportion of young people in Scotland are in acute economic distress –either without work, or in work where the pay doesn’t cover their living costs.
The Escalator Keeps Moving Down
As Alan Milburn noted, young people are usually “the first to be hit by an economic downturn, but then it bounces back”. The SDF banking data shows that it is increasingly hard to bounce back.The “downward escalator” is about an entire generation moving into financial fragility regardless of their work status. When the majority of young adults can’t make ends meet, it’s not a problem of individual financial management, it’s a systemic crisis.
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