Britons aged between 15 and 35 are at risk of being the first modern generation to earn less than their predecessors over the course of their working lives, according to a recent report.
Think tank the Resolution Foundation analysed living standards of different generations and offered fresh evidence of a “growing divide between a more prosperous older generation and a struggling younger generation” - something raised by Prime Minister Theresa May in her leadership speech last Monday.
David Willetts, executive chair of the Resolution Foundation and chair of the Intergenerational Commission said: “Fairness between the generations is something public policy has ignored for too long. But it is rising up the agenda with the Prime Minister, politicians of all parties, business leaders and others rightly identifying it as a growing challenge.”
The foundation’s report showed that millennials have been hit hardest by the recent pay squeeze. As a result a typical millennial has earned less during their 20s than a typical person in the previous generation – generation X.
Torsten Bell, director of the Resolution Foundation, said: “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 in 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.”
Poor start could leave permanent scar
Looking at the pay of a typical 25 year old the report finds that older millennials, who are now in their early to mid 30s and therefore turned 25 before the financial crisis hit, are the first workers to earn less than those born five years before them. The Foundation adds that younger millennials who entered work into the pay squeeze will have had their pay hit even harder.
The report warns that having experienced a poor start to their careers lifetime earnings could be ‘permanently scarred’. Current economic uncertainty could put further downward pressure on their future pay.
The Resolution Foundation has set up an ‘Intergenerational Commission’ to provide a comprehensive analysis of the challenges facing different generations and to make recommendations for action.
But while there are inequalities between different generations, there is no ‘generational war’, says David Willetts: “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.”