Living on own or with partner only Living with parents Living with others All Percentage of group in 2005–06 to 2007–08 60% 26% 14% 100% Percentage of group in 2010–11 to 2012–13 59% 28% 13% 100% Income levels, 2010–11 to 2012–13
Median household BHC income (p.w.) £459 £510 £488 £478
Median benefit unit BHC income (p.w.) £459 £281 £337 £390
Income changes between 2005–06 to 2007–08 and 2010–11 to 2012–13
Median household BHC income –11.7% –7.8% –18.7% –11.6%
Median benefit unit BHC income –11.7% –17.3% –22.4% –12.5% Note: ‘Parents’ here include biological parents, step-parents, foster parents and parents-in-law.
Source: Authors’ calculations using Family Resources Survey, various years.
110 All classifications of individuals by household composition in this section are based only on the other adult members of their household. Of those classified as living on their own or with a partner, 44% have a dependent child (see Table C.1 in Appendix C).
In this section, we take a closer look at incomes and living standards within young adults’ households. To do this, we split them into three groups: those who live with no adults other than (if applicable) a cohabiting partner; those who live with parents; and those who live with non-parents (for example, friends). To ensure sufficient sample sizes within each group, we analyse pooled three-year sets of HBAI data throughout this section, rather than single years. Table C.1 in Appendix C outlines some
characteristics of each of these groups, which we refer to where relevant.
Table 5.2 documents the median household income and median ‘benefit unit’ income of each group (measuring incomes BHC). The term ‘benefit unit’ income refers to the combined income of an individual and (where applicable) their cohabiting partner.111
For those who live on their own or with no adults other than their partner, the two measures of median income are by definition identical (at £459 per week).
The table highlights the potential importance of understanding the contribution of other household members to the household income of young adults. Those who live with parents have the highest household incomes, and yet the lowest benefit unit incomes. Their living standards according to the official measure, then, are very
sensitive to the incomes of their parents; and there might be far more cause for concern about their long-term prospects than the headline household-level income measures would suggest. The same conclusions apply on an after-housing-costs basis (see Table C.2 in Appendix C).
Young adults who live with non-parents besides partners (for example, friends) also have substantially higher median household incomes as a result, although the
difference is smaller: those other household members raise median household income by about 45% (comparing household and benefit unit incomes), whereas parents who live with young adults raise their median household income by about 80%. Overall, median household income for people aged 22–30 is more than one-fifth higher than median benefit unit income.
It is also important to account for other household members when interpreting trends in young adults’ incomes since the recession. The bottom of Table 5.2 shows the changes in median household and benefit unit income for the same three groups between 2005–06 to 2007–08 (‘pre-recession’) and 2010–11 to 2012–13 (‘post- recession’). For those who live with no adults besides their partner, the changes in the two measures are by definition identical, and median income fell by just under 12%. Living with parents has acted to substantially moderate the fall in household income for those concerned. Median household income among the group fell by about 8% over the period, whereas their median benefit unit income fell by about 17%. The difference between the reductions in these two measures of income for the group is statistically significant. The implication is that, for young adults living with parents, their parents’ incomes have not fallen by as much as their own, so the percentage fall in household 111 Benefit units also include any dependent children of the adults within them, and we equivalise benefit unit incomes based on the composition of benefit units in an analogous way to how household incomes are equivalised (see Appendix A).
income as a whole is smaller. Those who live with adults besides their parents or partner have also seen a relatively large fall in median benefit unit income, of about 22%; but the other adults in those households appear to have played a smaller role in ‘diluting’ the ultimate change in household income. Again, qualitatively the same conclusions apply on an after-housing-costs basis (see Table C.2 in Appendix C).
It is noticeable that benefit unit incomes have fallen by more among young adults living with parents than among those living with no adults besides their partner (and indeed the same is true for those living with adult non-parents). A possible contributing factor is that individuals whose incomes have been hit particularly hard have responded by choosing to live with parents, when they would not otherwise have done so. Research from the US indicates that, when economic conditions deteriorate, some young adults do use the possibility of living with parents as an insurance mechanism against shocks to their own incomes.112 Some suggestive evidence that this may have been happening
in the UK comes from the fact that the proportion of 22- to 30-year-olds living with parents has increased by 7% (2 percentage points) from 26% pre-recession to 28% post-recession (as shown at the top of Table 5.2). This matches closely with the same estimates from the LFS, which suggests a rise from 25% to 27%. Because the sample size is much larger in the LFS, the estimates are statistically very precise and this change is statistically significant.