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Under 45s hardest hit by recession

A new report from the ESRI says under 45s are most likely to be hit by unemployment, mortgage arr...
Newstalk
Newstalk

09.37 14 May 2013


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Under 45s hardest hit by reces...

Under 45s hardest hit by recession

Newstalk
Newstalk

09.37 14 May 2013


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A new report from the ESRI says under 45s are most likely to be hit by unemployment, mortgage arrears and negative equity.

The findings, which have been described as striking, show those over 45 have kept much of the gains of the boom time and have increased spending by more than 31 per cent in the last 7 years.

Younger and older households in the crisis

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'Younger and older households in the crisis', by Petra Gerlach-Kristen analyses how the financial crisis has affected younger and older households in Ireland. Using data from the Household Budget Survey, for which the Central Statistics Office has recently released the data collected in 2009/10, the Economic and Social Research Istitution has examined how household consumption has responded and shows that the financial crisis has affected younger households much more than older ones. The data show that unemployment, arrears and negative equity affect younger households more than older households, causing their consumption to decline rapidly.

For the purposes of research, the ESRI split the Irish population into two groups - households with a head aged 45 and up and households with a head aged 45 and under - each group conveniently representing about half of the Irish population.

Income rose for older people

Between 1994/95 and 2009/10 the income of over 45s households rose steadily - researchers say that's due, in part, to a rise in the average education level of older households.

But, over the same period, in sharp contrast to the increase in earning and expenditure of older households over the last two decades, there has been a large drop in income and consumption for the younger average household in the crisis. Between the 2004/05 survey and that of 2009/10, real disposable income decreased by 8 per cent, real consumption including housing by 20 per cent and excluding housing by 27 per cent.

The ESRI describes the decline in consumption by young households as large, both by international standards, and historically. The Institute also says it's surprised to find that consumption has declined by more than income.

Less money, more savings

Two explanations are provided for this - firstly that young households may not be able to access loans or have earlier savings that help them maintain consumption when income temporarily decreases.

Second, they may build up savings in anticipation of future problems in accessing credit - this is know as 'buffer-stock savings'. Banks have been shown to be reluctant to lend to households in arrears and those affected by unemployment.

Newstalk's Breakfast spoke to under-45s in Dublin about cutting back on luxuries, before report author Petra Gerlach explains her findings:


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