Wealth gap and housing issues risk civil unrest

Poor ranking: Commuters on the London Underground. The Millennials are the first generation who can expect to be poorer than their parents. That’s because housing is expensive relative to incomes, inflation is at a 30 year high, and real wages are falling. — AFP

LONDON: Britain is the second most unsustainable of 36 major economies, with tensions from high housing and childcare costs coupled with wealth inequalities undermining social mobility and threatening to provoke civil unrest.

That is the conclusion of a new metric designed by L’Atelier BNP Paribas, a research division of the French bank.

It aims to measure the success of nations in delivering wealth, moving beyond the blunt estimate of aggregate output captured by gross domestic product. Only Latvia faired worse than the UK.

John Egan, chief executive officer of L’Atelier BNP Paribas, said the UK ranked so poorly due to its high cost of accommodation, which includes rents, mortgages and associated taxes, and limited support for childcare.

In London, more than half of net income is spent on housing on average compared with 25% in Berlin.

That “puts pressure on households and limits social mobility,” Egan said. Germany placed sixth in the index.

With economic gains concentrated among a relatively small group and others struggling with basic living expenses, the UK “is failing to provide an economy able to support the core promise of equitably distributed, merit based social mobility that is integral to a healthy capitalist democracy in the medium to long term,” the report said.

Despite being the fifth largest economy ion the world with solid headline gross domestic product (GDP) growth, the UK is at risk of “social unrest, protest and extremism,” the report said.

It noted that Millennials – those aged between 26 and 40 – are the first generation who can expect to be poorer than their parents.

That’s because housing is expensive relative to incomes, inflation is at a 30 year high, and real wages are falling.

The United States, the world’s largest economy, fared little better than the UK ranking 31 out of 36.

Weaker economies, such as Italy, ranked higher due mainly to their lower cost of housing. Italy ranked ninth, and France 15th. Luxembourg is the most sustainable economy.“Many economies are experiencing GDP per capita growth that is detached from cost of living and income,” Egan said.

“Upward mobility is limited, almost exclusively, to those who own assets. New asset-owning classes have been created that see the wealthiest in society becoming richer whilst producing less real value in society. The world has changed and so it’s vital that the ways we view and measure our economies change.”

He said that the GDP figures “disguise a deeper economic failure.

The economy is failing to deliver equitable opportunity.”

L’Atelier BNP Paribas used data from the Organisation for Economic Cooperation and Development and national governments to construct its index. — Bloomberg