Thirtysomethings Are Still Feeling The Financial Crisis Scars In Their Pay Packets
3rd February 2019
Workers in their 30s are still feeling the scars of the post-crisis pay squeeze in their pay packets, with typical pay for this age group still 7 per cent below its pre-crisis peak, according to new analysis published today (Sunday) in the Resolution Foundation's latest Earnings Outlook.
The Earnings Outlook shows that, following the unwelcome return of a pay squeeze in 2017, earnings growth started to recover in early 2018. It is set to strengthen in early 2019 towards 1.5 per cent, as inflation eases and nominal pay growth remains above 3 per cent. This would represent the strongest pay growth since the EU referendum, though still well below the pre-crisis average (2.1 per cent).
Taking a long view on wages, the Outlook shows that the scale and lasting impact of Britain’s pay crisis over the last decade varies considerably by age.
Those who were young workers in their 20s during the financial crisis were by far the worst affected by the initial crisis real pay squeeze - falling 11 per cent from peak to trough – and there are worrying signs that this has had lasting ‘scarring’ effects on their earnings. While there are now signs of strengthening pay for those in their 20s today, their predecessors are still feeling the effect of the financial crisis, with the pay of workers today in their 30s now furthest from pre-crisis levels.
While the pay of workers aged 50 and over is above pre-crisis levels, typical pay levels for all workers remains 3 per cent lower than pre-crisis levels, and typical pay for workers in their 30s is still 7 per cent down compared to a decade ago.
The Foundation says that this latest data adds to the evidence that many of those who entered the labour market during the crisis have seen their pay packets permanently scarred. This risks making it even harder to cope with the income pressures they are likely to be facing in their 30s – including raising children.
For workers of all ages looking for stronger pay growth, the Outlook does offer clear evidence-based advice – ditch your current employer and enjoy a 4 per cent ‘disloyalty bonus’. It finds that people staying in the same job last year enjoyed real pay growth of just 0.5 per cent, compared to 4.5 per cent for people that changed job.
However, people in their 30s and 40s tend to move jobs around half as frequently as people in their 20s – just 0.7 per cent of workers in their 30s and 40s voluntarily moved jobs last year. The Foundation says that for these pay-squeezed millennials, now might be the time to finally make a reality of their long-held stereotype, and start job-hopping.
Nye Cominetti, Economic Analyst at the Resolution Foundation, said:"Britain has experienced a truly horrendous decade for pay, but an increasingly tight labour market is finally starting to deliver a pay recovery. Whether this recovery continues to build momentum in 2019 will depend in large part on what happens with Brexit.
“But there remains a lot of ground to make up before we return to pre-crisis pay levels – especially for those workers unlucky enough to enter the labour market during the financial crisis. Workers in their 30s today are still earning 7 per cent less than thirtysomethings did on the eve of the crisis.
“This scarring effect on the wages of today’s thritysomethings is particularly concerning at a time when many are facing the increased income pressures of bringing up children or aspiring to own their own home."