Britain’s current young generation earned £8,000 less during their 20s than their predecessors and are at risk of being the first cadre of workers in modern times to see their lifetime earnings fall, according to new research by the Resolution Foundation. The report looked at how three separate generations had fared: the baby boomers born in the late 1940s to early 1960s, their children in Generation X and millennials.
Millennials, who are aged between 15 and 35, fared significantly worse than their parents in Generation X during their first years of employment. The study found that the deep recession of 2008-9 and the subsequent slow recovery was only partly responsible for the pay penalty suffered by millennials, with earnings for young people being squeezed even before the start of the financial crisis.
Looking at the pay of a typical 25-year-old the report found that older millennials, who are now in their early to mid-30s and therefore turned 25 before the financial crisis hit, were the first workers to earn less than those born five years before them. Younger millennials who entered work during or after the financial crisis will have had their pay squeezed even harder and could have their prospects permanently blighted as a result.
Even in an optimistic scenario, in which the future pay of millennials improved rapidly after a slow start and followed the same path as the baby boomers, the lifetime earnings of current young people would be around £890,000. This would limit their generational pay progress to just 7% over generation X – a third of the size of the pay progress that generation X are set to enjoy over the baby boomers.
But in a more pessimistic scenario, in which the future pay of millennials instead followed the path of generation X, lifetime earnings would be cut to £825,000. This would make the millennials the first ever generation to face a generational pay penalty by earning less than their predecessors over the course of their working lives.
It warned that the impact of earning less coincided with a bleaker outlook for home ownership, with baby boomers 50% more likely to be paying a mortgage on their own property by the time they were 30. Meanwhile, the shift towards renting and higher rents meant that at 30 millennials had paid £44,000 more on rent than baby boomers.