Family Cash Is Helping More People On To The Housing Ladder And Into Early Retirement, But Vital Family Care Still Carries An Economic Penalty

21st November 2024

Increasing transfers between generations - from housing young adults to financial gifts and inheritances, and caring for children, adults and elderly relatives - are having a profound, but unequally felt, impact on people's economic prospects. This is according to new research from the Resolution Foundation and CPC-Connecting Generations published on Thursday 20 November 2024.

The Intergenerational Audit 2024 - part of the ESRC-funded Connecting Generations research program - examines how the support that families give and receive throughout adulthood has changed over recent decades, and what this means for peoples' economic prospects.

The report notes that young adults are increasingly reliant on their parents for housing support. Since the turn of the century, the number of people aged 18-34 who still live with their parents has risen from one-in-four (26 per cent) to nearly two-in-five (39 per cent) in 2021-2022.

Living with parents can provide young adults with direct financial benefits, most obviously saving on rent. If all ‘boomerang children' today were to move to the private rented sector, their rental costs would add up to a total of £3 billion a month.

There are fears however, that living with parents impedes mobility and restricts young people's chances of finding work.

But while boomerang children are three times more likely to be unemployed than those living independently, which may explain why they live at home in the first place, the report finds that they are no less likely to change jobs and do not suffer any medium-term disadvantage. In fact, living at home with parents in London is associated with better job outcomes.

Parents also play an increasing role in the next stage of young people's lives - getting onto the housing ladder.

The total value of financial gifts has more than doubled over the past decade to reach a record £29 billion over a two year period in 2018-20 (up from £13.1 billion in 2008-10), with more than half of those receiving a gift being in their 20s or 30s. As a result, over one-in-three recent first-time buyers say they received help from friends or family.

The next life stage for many people is parenthood. Here, the rise of working mums - currently around seven-in-ten work, up from just four-in-ten in the early 1900s - has transformed families' economic circumstances.

While formal childcare has expanded to meet the childcare gap created by mothers moving into work, grandparents also play a crucial role. In total, grandparents provided an estimated 766 million hours of childcare to their grandchildren in 2022-23 – equivalent to £3.5 billion in terms of the cost of nursery care.

Family transfers can also determine the timing of the next stage of people's working lives – when to retire.

The report finds that inheritances – which have also more than doubled over the past decade (from £83 billion in 2008-10 to £189 billion in 2018-20) – are being used by people to pay off their mortgage or to retire early. People who received an inheritance of £50,000 or more were four percentage points more likely to retire early, when compared with those that did not receive an inheritance.

While most family transfers flow down the generations from old to young, a key upward transfer – caring for adults and elderly relatives – has also grown over time. Carers UK estimate that unpaid care provision is currently worth £162 billion per year.

The share of people caring for an adult relative for at least five hours a week has increased from 6 per cent in the early 1990s to 9 per cent by 2021-22. While middle-aged adults still provide most care for adults overall, younger adults are also stepping up: millennials are 30 per cent more likely to provide at least five hours of care a week than previous generations did at similar ages.

The Foundation says that this care is vital and can be hugely rewarding for those involved. But unfortunately it carries a labour market penalty – a working-age person is 37 per cent more likely to leave employment in the period they become a carer compared to those without adult caring responsibilities. Addressing this deficit in the value of care is vital if the Government wants to hit its 80 per cent employment target.

Finally, the report notes that the unequal distribution of these intergenerational transfers of cash and care raises huge challenges for families and wider society.

For example, the fact that wealthy families are seven times more likely to give financial gifts than the least wealthy families, or twice as likely to leave an inheritance, leaves young people without wealthy parents at a double economic disadvantage.

Molly Broome, Economist at the Resolution Foundation, said "As Britain gets older and wealthier, transfers between generations are playing a greater role in shaping peoples’ economic prospects. Families today play a bigger role in helping young people onto the housing ladder, helping older workers off the jobs ladder and into retirement, and supporting relatives when they’re ill.

"These family transfers are hugely important and can be very rewarding. But they are not shared equally across society. Those who aren’t lucky enough to have wealthy parents often struggle to secure a home of their own or enjoy early retirement.

"In recent decades, expanded childcare provision has boosted parental employment. But the same expansion has not been seen for adult social care, which has limited employment opportunities for caregivers. Looking ahead, policy makers should ensure that adult care is valued as highly as childcare."

Key findings
The proportion of younger adults (under-35s) living with their parents has risen from one-in-four (26 per cent) at the turn of the century to nearly two-in-five (39 per cent) in 2021-2022.

15 per cent of under-35s living with their parents are unemployed (against 5 per cent for other under-35s), and 33 per cent of those in work are low paid (against 16 per cent for others). This raises concerns that young people who live at home may become ‘trapped’ in areas with limited opportunities.

However, our analysis suggests otherwise. While the ‘live-at-homers’ start out as a relatively disadvantaged group, there tend to catch up over time. After five years, young adults who began by living at home are just as likely to be employed as their peers, and no more likely to be low paid.

Mothers are working more than in the past – especially those with young children. In 1992, only four-in-ten mums with a child under five worked; by 2022 it was seven-in-ten.

But motherhood still routinely disrupts careers. The proportion of mothers of under-fives whose employment status is shaped by having children (whether through economic inactivity or part-time working due to family commitments or simply being on parental leave) is around 30 per cent. For fathers, the comparable proportion is 3 per cent.

While formal childcare has expanded to meet the childcare gap created by more mothers moving into work, grandparents also play a crucial role. In total, grandparents provided an estimated 766 million hours of childcare to their grandchildren in 2022-23. If this support had replaced nursery care, its value would amount to approximately £3.5 billion.

Support flows up the generations as well, particularly in the context of rising demand for adult care in an ageing UK. Yet, resources haven’t expanded to meet growing need: age-adjusted local authority spending on adult social care was 7 per cent lower in 2022-23 than in 2009-10, while residential care costs have surged 30 per cent in real terms over the past nine years.

Informal care, often provided by relatives, is filling the gap. While middle-aged adults still provide the most care for adults overall, younger adults are also stepping up: millennials are 30 per cent more likely to provide at least five hours of care a week than previous generations did at similar ages.

Care intensity is rising: the share of carers providing over 20 hours a week nearly doubled from 15 per cent in 1991 to 28 per cent in 2021-22. This can limit labour market participation, with carers facing a 70 per cent higher likelihood of leaving employment if their responsibilities intensify.

Our final intergenerational flow – inheritances – has become increasingly significant. Across the 2010s, the number of adults receiving an inheritance over a two-year period rose from 1.7 million in 2008-10 to 2.1 million in 2018-20.

Recipients of inheritances are often in their 50s and 60s, and this can have significant implications for labour market decisions. Among the non-retired over-50s, those who received an inheritance of £50,000 or more were 4 percentage points more likely to retire early than those who did not receive an inheritance. This suggests that more frequent large inheritances may act as a headwind against high employment.

Read the full Intergenerational Audit 2024 HERE
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