The 20th century growth story that has seen each generation enjoy higher incomes than the one before them has ground to a halt in nearly all advanced economies in the 21st century.
However, the UK stands out for having experienced a ‘boom and bust’ cycle where strong income and housing gains for post-war generations have failed to materialise for millennials. This is according to a report published recently by the Resolution Foundation.
The report looks at household living standard changes for different generations across eight high-income countries. It finds that the global financial crisis has had a profound effect in halting generational income progress. Across the countries featured in the report, millennials in their early 30s have household incomes 4 per cent lower than members of Generation X at the same age. In comparison, the incomes of Generation X in their early 30s were 30 per cent higher than the baby boomer generation before them.
However, while this overall story of stalled progress is common throughout advanced countries, the report also highlights a number of UK-specific challenges.
The UK stands out as having previously enjoyed a long ‘boom’ in generation-on-generation progress on household incomes that has since gone ‘bust’ for millennials. When in their early 30s, generation X (born 1966-80) were 54 per cent better off than the baby boomers (1946-65) were at the same age, this pace of growth hasn’t materialised for millennials (1980-2000); the incomes of those in this generation who’ve already reached their early 30s are just 6 per cent higher than generation X’s at the same age.
The UK also stands out for combining a sharp slowdown in income progress with a major generational reversal on housing. Home ownership rates, compared at ages 45-49, surged by 29 percentage points between the greatest generation (born 1911-25) and the baby boomers.
This generation-on-generation progress has been all but wiped out for millennials whose home ownership rate in their late 20s, at 33 per cent, is half that for the baby boomers at the same age (60 per cent).
The study also found a generational pay divide in Britain. UK millennials have paid for the financial crisis through their pay packets, rather than with their jobs. The scale of the pay squeeze for those aged under 30 is a 13 per cent fall in real terms. The UK pay squeeze for the under 30s was twice as big as the squeeze faced by those in their 50s – a bigger age divide than in any other country.
Daniel Tomlinson, Policy Analyst at the Resolution Foundation, said: “It’s no secret that the financial crisis hit the vast majority of advanced economies hard, holding back millennial income progress in counties around the world.
“But only Spain echoes the UK experience – a ‘boom and bust’ income cycle where significant generation-on-generation gains for older generations have come to a stop for younger people. The UK also stands out for combining this lack of income progress with major declines in home ownership for today’s millennials.
“Britain may have avoided the shocking levels of youth unemployment seen in Southern Europe, but it’s still a long way off providing the progress for young families that they and their parents had come to expect.”