Millennials – that is, the generation of people currently aged between 15 and 35 – are earning on average £8,000 a year less by the time they reach the age of 27 than their parents did at the same age, according to a recent study by the Resolution Foundation. Prime Minister Theresa May used the findings to talk of a growing gulf between a “more prosperous older generation and a struggling younger generation”, says Larry Elliott in The Guardian.
Older millennials, those in their early to mid-30s, have already earned the unhappy distinction of being the first workers to have pocketed less in income – on average – than those born just five years before, members of so-called “Generation X”. Yet younger millennials will see their pay squeezed even harder, say the authors of the report, partly due to the impact of the financial crisis and assumptions about Britain’s Brexit vote denting long-term growth.
Even under the best-case scenario, in which pay rates pick up the older millennials get, their life-time earnings would amount to £890,000. This is less than the 7% increase that Generation X enjoyed over its parents, the baby boomers – those born between the late 1940s and early 1960s.
In a pessimistic scenario, where pay rates follow a similar pattern to that experienced by Generation X, life-time earnings would be cut to £825,000. As if that wasn’t bad enough, high rents mean millennials are paying £44,000 more to keep a roof over their heads than their parents did by the age of 30.
This is all very well, but hang on a minute, says Tim Worstall on the Adam Smith Institute blog. More young people are going to university than in the past, where students tend to do low-paid odd-jobs. Based on the one fact that cumulative earnings are falling, the report argues that the entire welfare structure should be changed. “Perhaps it should be, but the solution to this problem is to have fewer people going to university. Which isn’t, we think, quite what they meant to argue.”