Over ten years later, the financial crisis is still having a negative impact on how much millennial’s are being paid.
The Resolution Foundation’s latest Earnings Outlook report shows that out of all age groups, the financial crisis continues to hit millenials the hardest. Average earnings for workers in their 30s are still 7% below what they were before the crisis. Between 2009 and 2014, millennials’ wages fell by 11% and while they have recovered a bit in the years since, they still have struggled to keep up with inflation.
Yet for those over 50, wages have recovered well over the past decade to actually exceed what they were before the crisis. Similarly, those just entering the workforce today have also seen wages rising.
People in their 30s are now earning roughly £2,100 less than they were in 2018. Paul Johnson, director of the IFS, expressed concern that these losses have not yet been made up for and that millennials continue to face low wage growth.
Resolution Foundation commented on their findings: “This risks making it even harder to cope with the income with pressures they are likely to be facing in their 30s—including raising children.”
Dan Tomlinson, Resolution Foundation policy analyst, has spoken on the need for pay growth to return in order for young people to be able to plan for their future, get onto the property ladder and raise a family.
Despite an “across the board fall in inflation-linked pay” in 2017, it looks likely that earning growth will continue recovering. Tomlinson explained: “It is set to strengthen in early 2019 towards 1.5%, as inflation eases and nominal pay growth remains above 3%. This would represent the strongest inflation-adjusted pay growth since the EU referendum, though still well below the pre-crisis average of 2.1%.”
While forecasts indicate that everyone’s wages will increase throughout 2019, wage growth for millenials will still trail behind that of older and younger people in the workforce.
Nye Cominetti, an analyst at the Resolution Foundation, explained that workers who switch jobs end up earning more than those who remain with the same employer year after year. “For workers of all ages looking for a stronger pay growth, the outlook does offer clear evidence-based advice—ditch your current employer and enjoy a 4% ‘disloyalty bonus’.”
To put this into perspective, on average, those who stayed with their employer “saw real pay growth of only 0.5%, compared with 4.5% for those who moved”. Part of the problem here is that people in their mid-thirties and forties are reluctant to change employers, with only 0.7% doing so voluntarily in 2018.
Cominetti is hesitant in predicting the future of wage growth, saying: “Whether this recovery continues to build momentum in 2019 will depend in large part of what happens with Brexit.”