Younger generation the ‘new poor’

The pay gap between the over-50s and under-21s has ballooned by 50 per cent in the past decade and a half, at the same time as people in their 20s have seen rents rise by more than a third, according to a new report from the Intergenerational Foundation.

Key points

  • Although all generations have been affected by falling wages because of the recession, the youngest workers are being hardest hit. Wages have fallen by 19 per cent in real terms since 1997 for those aged 18-21, and have risen only 2 per cent (significantly below inflation) for workers aged 22-29. Those aged over 50, on the other hand, have enjoyed a 25 per cent increase.
  • As a result the so-called 'intergenerational pay gap' has widened by over 50 per cent. In 1997, workers in their fifties were earning 1.7 times as much as workers aged 18-21, but today’s equivalent figure is 2.6 times.
  • Consumption of essentials, such as housing, fuel, power, food and transport, now accounts for 45 per cent of annual household expenditure for those in their twenties – an increase of 7 per cent since 2001-02, more than for households in any other age group. Much of this increase is down to housing costs, with 'generation rent' having to cope with average rent increases of 35 per cent between 2001-02 and 2012.
  • The squeeze on incomes means younger generations are spending nearly 20 per cent less on clothing and footwear than they were in 2007, 15 per cent less on travel, 18 per cent less on alcohol and smoking, 12 per cent less on recreation and culture, and 10 per cent less on eating out or staying in hotels.

Angus Hanton of the Intergenerational Federation said: 'This double squeeze on wages and living costs provides yet further evidence that younger generations are lagging behind older generations both in terms of relative pay and the cost of living. The young are the new poor and policy-makers must do more to protect them'.

Source: David Kingman and Ashley Seager, Squeezed Youth: The Intergenerational Pay Gap and the Cost of Living Crisis, Intergenerational Foundation
Links: Report | Intergenerational Foundation press release | Guardian report

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Publication date: 
Feb 24 2014