A new study lays bare the “unprecedented” squeeze on young people’s incomes and living standards over the past decade in the UK.
The Resolution Foundation’s first “intergenerational audit" spells out the stark challenges facing millennials in the UK, compared to both previous generations of young people and older baby boomers.
The think tank says it should be a wake-up call to policymakers, urging them to focus on how income growth can be “rebooted for younger generations.”
Steep decline in wages
The think tank says the past decade has seen wages take an unprecedented battering as Britain’s economy endured the financial crisis and its aftermath.
The foundation’s report published on Thursday says younger workers have been hit particularly hard, with real hourly pay for workers in their 20s dropping a staggering 9.2% between 2009 and 2014.
The share of 18-29-year-olds working in lower-paid jobs has soared from under 30% in the early 1990s to almost 40% today. It has remained flat across older age groups.
Stuck in temporary and part-time work
The number of young people working part-time or in a temporary job through necessity rather than choice has remained stubbornly flat over the past few years.
Meanwhile the number of workers in older age groups trapped in such work has continued to drop as employment rates have picked up to record levels in the UK.
Graduates in low-paid jobs
Young people leaving university at the height of the financial crisis were far more likely to go into low-paid work than before and after the crash.
Britain saw a 30% rise in graduates in lower-paid work when the crisis began, and the rate remained high for seven more years as the British economy struggled to recover.
“This matters because time spent in low-paying occupations reduces someone’s future earnings prospects, not just because pay progression and training are weaker in these occupations but also because moving to higher-paying occupations is relatively rare,” the think tank notes.
Stark rise in housing costs
People born in the early 1940s had to fork out around 10% of their incomes for housing costs when they were young workers.
For people born generations later in the early 1980s, housing costs had more than doubled as a proportion of income to 24%.
“Housing costs for today’s 20-somethings are a result of increases in ongoing housing costs across tenures since the 1980s, and a shift towards the highest-cost private-rented sector,” according to the study.
Lower home ownership
Home ownership rates have been falling for young adults since the late 1980s.
Six in 10 families with breadwinners born in the early 1950s owned their own homes by the age of 33.
For earners born in the early 1980s, the number is around 33% lower at just four in 10 families.
The report highlights high house prices and “the associated deposit barrier” as the key challenges for younger would-be buyers.
Children in rented homes
The study says more members of ‘Generation X’ are becoming parents while living in the typically more insecure private rental sector than in the past, rather than as homeowners or social housing tenants.
The share of children starting school while living in privately rented homes has soared from 10% in 2003 to 25% today.
Living with parents
The share of people in their late 20s living with their parents has also increased, reflecting rising housing costs and the squeeze on wages.
It has increased from 24% in 2007 to 32% in 2018.
Today we publish our inaugural Intergenerational audit - an in-depth examination of the big intergenerational living standards challenges facing Britain today , supported by @NuffieldFound -https://t.co/XnGJwP7WsM Here's a rundown from RF Research Director @lauracgardiner pic.twitter.com/SL4sb6lLSf— ResolutionFoundation (@resfoundation) June 20, 2019
Higher taxes, lower benefits
The average 30-45-year-old will be around £385 worse off by 2024 because of tax and benefit changes introduced since the Conservatives returned to power in 2015.
By contrast the average household “headed” by an over-65 will see a £100 gain to their finances as austerity cuts take a heavier toll on the younger generation.
Less money for going out
Millennials are now forced to spend a far larger share of their income on essentials like bills and education, leaving them with 7% less disposable income in real terms.
People aged 18-29 and even 30-49 today now use a smaller share of their non-housing spending for recreation, culture, restaurants and hotels than those aged 65 plus.