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Millennials 'earned £8k less in their 20s' than generation before

Published 18/07/2016

Millennials are facing pressures on their finances
Millennials are facing pressures on their finances

Millennials could become the first generation to earn less than their predecessors, analysis by a think-tank has found.

The Research Foundation found that under-35s have been hit hardest by the recent pay squeeze and earned £8,000 less during their 20s than a typical person in the previous generation - known as generation X.

The finding comes just days after new Prime Minister Theresa May warned of a "growing divide between a more prosperous older generation and a struggling younger generation".

The report, which comes as the thank-tank launches its Intergenerational Commission, warns that a post-Brexit downturn could depress millennials' wages further.

The Intergenerational Commission report states that while some of the pay squeeze is down to millennials entering the job market as the recession hit, it also found generational pay progress had actually stopped before the 2007/08 financial crash.

If the future pay of millennials follows the path of generation X, would reduce their lifetime earnings to around £825,000 - making them the first ever generation to earn less than their predecessors over the course of their working lives.

Even if their wages followed a more optimistic path and improved rapidly like their baby boomer parents, their lifetime earnings would be around £890,000.

This would be just 7% more than generation X and a third of the size of the pay progress that generation X are set to enjoy over the baby boomers.

The Foundation is launching an Intergenerational Commission to explore growing inequality between generations.

It is calling for the repairing the fraying social contract between generations should be at the heart of the new Prime Minister's task of unifying the country in the aftermath of the referendum.

David Willetts, executive chairman of the Resolution Foundation, said: "This is about taking seriously the social contract between the generations that underpins our society and state, and recognising that everyone is worried about the future of younger generations.

"In the real world there is no such thing as generational war - instead there are parents, grandparents, families and communities all sharing the same hopes for younger generations."

Torsten Bell, director of the Resolution Foundation, said: "Generational inequality risks becoming a new inequality for our times, and nowhere is that clearer than on pay.

"We've taken it for granted that each generation will do much better than the last - earning more and enjoying a higher standard of living. But that approach risks looking complacent given the realities of recent years and prospects for the future.

"Far from earning more, millennials have earned £8,000 less during their 20s than the generation before them. The financial crisis has played a role in holding millennials back, but the problem goes deeper than that.

"Even on optimistic scenarios they look likely to see much lower generational pay progress than we have become used to, and there is even a risk that they earn less over their lifetimes than older generations, putting generational pay progress into reverse."

A spokeswoman for the Department of Work and Pensions said: "This Government is determined to build a Britain that works for everyone, not just the privileged few.

"We will ensure that as our economy grows the benefits are enjoyed by everyone in the country and not just those at the top.

"That means building our skills base, developing a proper industrial strategy and improving education so that we help everyone - no matter what their age, social status or background - to reach their full potential.

"By creating three million apprenticeships by 2020 and working to halve the disability employment gap, we are helping more people of all ages and abilities get into in work - and stay there."

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