Millennials are still bearing the ‘economic scars’ of the 2008 financial crisis and are struggling to catch up with the living standards of older groups while their new research shows from the Resolution Foundation has found.
The research compares the fortunes of millennials – born between 1981 and 2000 – with their predecessors, including Generation X, born between 1966 and 1980.
The research showed that millennials have made progress on employment in the labour market, but pay progression remains close to zero. In fact, younger millennials, born in the late 1980s, earned on average 8 per cent less at age 30 than members of generation X, born 10 years prior, at the same age.
Graduate pay, in particular, has underperformed since the financial crisis. The typical weekly pay of graduates aged 30-34 has fallen by 16 per cent between 2007 and 2023, while the typical weekly of non-graduates is down by 6 per cent.
Policy changes made by successive governments have acted as a drag on incomes in the UK. The personal tax and benefit changes implemented since 2010 have left non-pensioners more than £2,200 a year worse off on average, while pensioners are less than £200 a year worse off.
Home ownership rates among younger cohorts have fallen sharply in the UK. Between 1986 and 2021, home ownership rates for households headed by 30-34-year-olds had fallen by over 20 percentage points in the UK, compared to just 3 percentage points in the US.
Whilst home ownership rates among those in their early thirties have started to improve in recent years in both the UK and the US. Looking ahead, millennials are expected to become a generation of home owners (where 50 per cent own their own home), but this looks set to take them more than five years longer than it did in their parents’ generation.
A new higher-interest environment provides some opportunities for younger generations, making it easier to build up larger defined contribution (DC) pension savings. Higher rates could boost DC pension pots of those born between 1991-95 by around £18,000 more in their at age 60. But the decline in the availability of generous defined benefit (DB) pension schemes means that future cohorts will retire with less pension wealth than the generations that came before them. Millennials born in the early 1980s could reach age 60 with around £45,000 less pension wealth than the youngest baby boomers (born between 1961-65).
It found that after the 2008 financial crisis and the ensuing recession, the long-running pattern that had seen young people earn more on average than their parents at the same stage of life had been broken.
Sophie Hale, Principal Economist at the Resolution Foundation said “Young people across advanced economies were hit by the financial crisis, putting a stop to decades of progress. Fifteen years on, this ‘crisis cohort’ are no longer young. And while many US millennials have bounced back, their counterparts in Britain are still wearing economic scars as they approach middle age.”