The Institute for Fiscal Studies said wealth had grown rapidly compared with earnings from work since the 2008 financial crisis, driven by a surge in house prices and financial assets – such as stocks and shares – at a time of flatlining progress for average wages. The IFS found wealth levels growing at much faster rates than income meant it was now harder for working families to enter the ranks of the rich in Britain through hard work alone.
Robert Joyce, the deputy director of the IFS, said: “A generation of Britons has ridden a wave of growing asset prices, pushing up the value of their houses and investments. Meanwhile, more than a decade of stagnant earnings has held back younger generations for whom earning their own economic success has become increasingly difficult." He added, “The fact that we can no longer be sure that the young will grow up with living standards that match their predecessors is a remarkable social change.”
It said the amount of time it would take to earn enough to move from the middle wealth bracket to the top had increased by almost six years compared with a decade ago. In 2008, it took 10 years’ worth of typical full-time gross earnings to move from the middle to the top wealth bracket. By 2018, this had increased to almost 16 years.
"...it is wealth that is increasingly at the heart of the most pressing economic inequalities today,” the report said. Average wage growth has stalled over the past decade, with typical pay worth less today than in 2007 after inflation is taken into account.
The economics thinktank said the rapid increases for those who already owned wealth had coincided with a long-term stagnation in earnings. This meant younger adults in particular could “no longer expect to see greatly improving living standards as they age” compared with the faster pay rises and access to cheaper housing enjoyed by their parents’ generation.
The IFS said only 36% of those born in the 1980s owned their own home by the age of 30, compared with 55% for those born in the 1970s and over 60% of those born in the 1950s and 1960s. Inherited wealth was becoming more important for the lifetime economic resources of younger generations.