Millennials are earning no more in real terms than the generation before them did at the same age, according to an analysis of labour market data.
The Resolution Foundation think tank’s intergenerational audit found that millennials – those born in the 1980s and 90s – in many advanced economies were hit hard in their pay and home ownership aspirations by the global financial crisis of 2008.
But 15 years on, while the living standards of millennials in the US have bounced back, UK millennials – particularly graduates – have struggled to close the gap with earlier generations, ending decades of generational progress on living standards where each cohort enjoyed higher disposable incomes than their predecessors.
By the mid-2010s, the incomes of those born in the early 1980s in Britain were 5% lower than those born 10 years earlier at the same age.
Real-terms pay
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Today, people born in the late 1980s and early 1990s are still earning no more than those born in the 1970s did at the same age, with people now in their early 30s having experienced over two decades of lost progress on pay.
Sophie Hale, principal economist at the Resolution Foundation, said: “Millennials today no longer enjoy higher disposable incomes than previous generations, and are far less likely to be homeowners. Instead, they are forced to live in high-cost, and often low-security private rented accommodation that further impedes their living standards.
“The lack of progress made by millennials in the UK shows how important it is to restart meaningful growth in the UK, but also to ensure that policy decisions recognise the need for the country to work for younger generations – breaking the established trend of income and wealth growth disproportionately benefiting older generations.”
The report found that disposable incomes of US millennials in their early 30s are now 21% higher than their predecessors had at the same age in 2007. In contrast, UK millennials of the same age actually have lower incomes than earlier cohorts had before the financial crisis.
The researchers provide two reasons for this. First, overall income growth was higher in the US. Between 2007 and 2021, median household incomes in the US grew by 17% compared to just 2% in the UK. Second, young people in the US aged 21-40 have enjoyed higher-than-average income growth since 2007, whereas the opposite is true in the UK.
Young graduates in the UK have fared worse than non-graduates since the financial crisis. The typical weekly pay of graduates aged 30-34 has fallen by 16% between 2007 and 2023, while the typical weekly pay of non-graduates is down by 6%.
Many believe this is caused by an oversupply of graduates caused by the increase in educational attainment among younger generations in the UK. In 2022, 58% of 25-34-year-olds had some form of tertiary education, up from a quarter in 1997.
But the report’s authors say that more attention should be given to the lack of demand for graduate workers. In London, 22% of graduates aged 25-34 work in ‘non-graduate’ occupations, but this share rises to around half of graduates in Scotland, Wales and the North East.
These disparities are reflected in the pay outcomes of graduates in different regions of the UK, where graduate wages in 2023 outside the South East are 17-31% lower than in the capital.
The report adds that the introduction of the national living wage in 2016, and the policy to increase it relative to median pay over time, has disproportionately benefited non-graduates and compressed the wage distribution. For example, the share of low-paid employees aged 25-35 with qualifications at GCSE or below has fallen from around 38% in 2014 to 28% in 2023.
On the surface, say the researchers, a decline in graduate pay relative to non-graduate pay might seem positive, but the lack of any real-terms wage growth since 2007 reflects the UK’s inability to create highly-skilled jobs and is a symptom of “low productivity and economic decline”.
The research finds that UK millennials’ economic woes are not just confined to pay and disposable income. Home ownership rates have also collapsed, although this fall pre-dates the financial crisis and has affected Generation X too.
Between 1986 and 2021, home ownership rates for households aged 30-34 had fallen by over 20 percentage points in the UK, compared to just 3 percentage points in the US. In contrast, home ownership rates among those aged 75-79 increased by almost 50 percentage points in the UK, compared to just 5 percentage points in the US.
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