Millennials are earning up to £8,000 less in their twenties, but also spending £44,000 more on rent by the time they reach 30 compared to previous generations, experts say.
The Resolution Foundation, a UK thinktank, recently published their findings, saying that Generation Y, defined as those born between 1980 and 2000, would be the first generation to buck the trend by earning less than their parents.
According to their data, if wages for millennials follow the same path as Generation X, their average career earnings will only amount to about £825,000.
The foundation added that even if millennials’ wages were to rapidly rise at a rate similar to their parents’ generation, their lifetime earnings would, at best, be about £890,000.
It added that the data was fresh evidence of Prime Minister Teresa May’s assertion of a “growing divide between a more prosperous older generation and a struggling younger generation”.
Millennials earned £8k less than gen X during 20s. Risk that generational pay progress could turn into pay penalty pic.twitter.com/WvkikMyEOl
— ResolutionFoundation (@resfoundation) July 18, 2016
While researchers acknowledge that some of the wealth gap was down to the 2008 recession, which saw many having a sluggish start to their careers, the report found that wages had actually stopped increasing for new workers even before the financial crisis hit.
Brexit, in particular, will likely have a significant effect on earning power for fresh graduates, as a post-Brexit recession could further reduce how much under-35s earn.
The Resolution Foundation’s director, Torsten Bell, 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.
“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.”
Millennials will be the first generation to earn less than their parents https://t.co/NFhajzb4DJ pic.twitter.com/N5KmpbEWDZ
— World Economic Forum (@wef) July 29, 2016
The thinktank’s findings also showed that millennials will have spent £44,000 more on rent by the time they reach 30 compared to the baby boomers due to factors such as declining rates in home ownership and rising costs in the private rented sector.
Around 60 percent of Generation X was able to own their own home by the age of 30, which has since fallen to 42 percent among today’s millennial generation.
Millennials also spend almost twice as much on rent as genXers did at the same age, and this extra spending has reduced young people’s living standards, making it harder to save for a deposit for a house, said the foundation.
Here’s housing version. Means Millennials have spent £44k more on rent in their 20s than Boomers #Intergenerational pic.twitter.com/MEWikFfgwb
— ResolutionFoundation (@resfoundation) July 18, 2016
Laura Gardiner, a senior policy analyst at the thinktank, said: “The nation’s housing crisis is perhaps the most visible example of growing inequality between generations. The struggle to get on the housing ladder has left many of today’s millennials renting, at a time when it has become more expensive to do so.
“Britain’s continuing failure to build enough homes means that unless we change course the struggle of young people to own their home is only going to get worse.”
In an effort to bridge the intergenerational gap, the thinktank launched the flagship Intergenerational Commission to examine the widening inequality between generations.
Image via Wikimedia Commons
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