Millennials in the UK 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 US counterparts have closed the gap, new research shows.
In its annual “intergenerational audit”, the Resolution Foundation compares the fortunes of millennials – born between 1981 and 2000 – with their predecessors, including Generation X, born between 1966 and 1980.
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.
“Millennials born in the late 1980s earned, on average, 8% less at age 30 than their counterparts from the Generation X cohort when they were the same age,” the report said.
Income progress graph
In the US, by contrast, while the crisis also made a significant dent in millennials’ earning power, strong recent income gains by younger workers have now helped them to catch up.
Sophie Hale, the thinktank’s principal economist, 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.”
US millennials in their early 30s in 2021 were earning 21% more in real terms than people in the same age group were in 2007. In the UK, however, incomes were still 1% lower for this group than for 30-34-year-olds 15 years earlier.
Income progress for British and US millennials
Explaining the divergence, the report’s authors pointed to long-term wage stagnation in the UK, which has been particularly bad for young graduates – due, they argue, to the UK economy’s inability to create enough skilled jobs.
“The typical weekly pay of graduates aged 30-34 has fallen by 16% between 2007 and 2023, while the typical weekly pay of non-graduates is down by only 6%,” they wrote.
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Sky-high housing costs in the UK have also meant many millennials have struggled to afford their own home at the same age as their parents or grandparents.
The Resolution Foundation found that there had been some catch-up in recent years, but that millennials still remain a long way behind. “Around the turn of the millennium, 67% of households aged 30-34 were homeowners, but by 2021 this figure was still 20 percentage points lower, at 47%,” the report said.
In the US, home ownership rates have fallen by much less – 56% of 30 to 34-year-olds owned their own home two decades ago, and in 2021 it was 50%.
Hale said the low home ownership rates in the UK meant that many millennials were “forced to live in high-cost, and often low-security private rented accommodation that further impedes their living standards”.
Home ownership graph
Darren Jones, shadow chief secretary to the Treasury, said: “This report paints a stark picture of an economy that no longer works for working people.
“13 years of the Conservatives have left an entire generation falling behind their international counterparts and no better off than their parents’ generation.”
Ben Twomey, chief executive of the campaign group Generation Rent, said the last 10 years had been a “lost decade” for housing in the UK.
“Policies like help to buy have only helped existing homeowners by increasing house prices. Most young adults continue to shell out excessive rents that make it harder to save for the future, while those lucky enough to have bought could only do so by taking on large debts and are now facing crushing increases in mortgage payments,” he said.
Twomey added: “At least now there is action to make life better for renters through the renters reform bill, but it needs to go further to give those of us locked out of home ownership the chance of a long-term home.”
The tough economic conditions endured by millennials may help to explain the fact that they appear not to have followed their forebears in moving to the political right as they have aged. A recent YouGov poll suggested that just 12% of 25-49-year-olds intend to vote Conservative at the next general election.
The Centre for Policy Studies, a rightwing thinktank, has published a new collection of essays titled “Justice for the Young” that call for policies to help close the “generation gap”, including cheaper childcare and reform of student loans.
Its director, Robert Colvile, said that “the divide between young and old is becoming Britain’s defining characteristic, not just politically, but economically too”.
