Children born in 1980s become first generation to be worse off than predecessors
Children born in the 1980s - so called generation Y - are the first since the second world war to be worse off than their predecessors, the first study of its kind has revealed.
The Institute for Fiscal Studies (IFS) says they are not only suffering over their pay but also on average have 20 per cent less wealth - primarily through home ownership - than those born in the 1970s.
It is the first time since the War that the rise in earnings through each generation has ground to a halt, according to the data which the IFS says allows such comparisons to be made for the first time.
The IFS warns that there is little hope they will catch up with their predecessors any time soon as high house prices continue to limit their chances of getting onto the property ladder.
However, the IFS points to two “silver linings” in its otherwise gloomy prognosis: first that more in generation Y are saving into pensions in their 30s than previous generations and second that many can expect a decent inheritance from their “baby boom” parents.
“The key implication is that since the War each generation has been getting better off than the one that came before it. That has just stopped,” said Jonathan Cribb, senior research economist at the IFS and who is himself aged 30.
“The real challenge for this generation is not in getting a job but getting a well-paid job. And the really big challenge is getting on the housing ladder. That is just another world from 25 years ago particularly in southern England.
“The economic prospects for this generation look more worrying when you think about them accumulating enough money for retirement, saving for a house or just facing high housing costs in the rental sector.”
The data, from multiple sources tracking income and wealth, shows that since the 1930s each generation has seen their median household income rise, based on 2017/18 prices.
Those born in the 1930s had an annual income of just under £11,000 at age 30, rising to £13,000 for those born in the 1940s, £16,000 for those born in the 1950s, almost £21,500 for those born in the 1960s and rising sharply to £28,831 for those born in the 1970s.
For those born in the early 1980s, however, it falls to £27,884 at age 30. “Digging into the data more deeply, this trend is broadly the result of lower pay for those in employment dragging down average incomes,” said Mr Cribb.
Those born in the 1980s are also 20 per cent, or £11,000 less wealthy than those born in the 1970s. This derives from lower home ownership with only 40 per cent of the 1980s’ children owning one, compared with 55 per cent of those born in the 1970s, and 60 per cent of those born in the 1960s.
Because of automatic pension enrolment, 80 per cent of those born in the 1980s are, however, already saving into pensions in their early 30s compared with only 50 per cent of the 1970s’ children.
“The other silver lining for wealth of the younger generation is that much of the wealth accumulated by those born in the 1950s and 1960s could be passed down to younger generations,” said Mr Cribb.
However, it is people with wealthier parents – who are on average wealthier themselves – who are most likely to expect to receive a significant inheritance later in life.”
“This is a source of wealth that those with poorer parents will typically not get to enjoy. This highlights how an interest in inequality across the generations should not make us forget the inequalities that exist within the generations.”
