Baby boomers worse off than those starting work in 1990s

BusinessThose who joined the workforce in 1975 have suffered the biggest wage falls during the financial crisis

The postwar baby boomers are often depicted as the lucky ones, benefiting from the huge gains in house prices and generous pension deals that are unlikely to be seen again.

But a study of UK wages over the past four decades shows that later generations have been better paid, with those starting work in the 1990s earning more than those starting out in the 1970s, when taking inflation into account.

Workers aged 21 in 1995 were paid an average of 40% more in real terms in their first 18 years employment than those aged 21 in 1975, the Office for National Statistics (ONS) found.

The difference in pay means that people beginning their career in 1975 would have to work up to four years longer than those starting work in 1985 to accumulate the same earnings, and up to six years longer than those starting in 1995.

“On average, individuals who were 21 in 1975 have fared worse in terms of average pay over their career to 2013 than those who were 21 in 1985 and 1995,” the ONS said.

The trend can partly be explained by statutory wage freezes in the late 1970s and the series of recessions that have hit the older group but not those who started their careers in the 1990s. A broad shift in the UK economy between 1975 and 1995 away from manufacturing and towards higher paid financial services jobs is also likely to have had an impact.

All three groups have suffered a fall in real pay since 2009, as inflation outpaced wage growth during the financial crisis, driving living standards lower. But again, those starting out on their career path in 1975 have been hardest hit.

Average pay for workers starting work almost 40 years ago fell by 12% to £11.03 per hour in 2013 from a peak of £12.54 per hour in 2009. The equivalent fall for those who started 20 years ago was a smaller 10%, to £12.72 last year from £14.11 in 2009.

“Some of the decline for the 1975 group may be explained by people in their late 50s beginning to consider retirement, with the highest earners often retiring early. This would bring down average pay before any consideration is taken of the wider economic conditions,” the ONS said.

The study shows the introduction of the national minimum wage by the Labour government in 1998 has cut the gap between the best and worst paid. In 1998 Britain’s highest paid workers earned 13 times more than the lowest paid. By 2013 that had fallen to 11 times.

Between 1975 and 1998, real pay growth for the highest 1% of earners was 138%, more than double the rate of growth among the lowest paid which was 63%. But between 1998 and 2013, real pay grew 21% for the top earners, and 49% for the bottom 1%.

Frances O’Grady, TUC general secretary, said more needed to be done for the poorest members of society. “The last 40 years show a picture of growing wage inequality. The more you earn, the faster your pay goes up, while the less you earn the slower it goes up. The minimum wage has bucked this trend for the very poorest, but we need to go further.

“A short-term fall in inequality from the financial crisis hitting top earners is not the lasting change we need. Now the economy is growing again, the priority must be a pay rise for Britain’s workers. It’s time to build on the minimum wage and bring in living wages to end the injustice of in-work poverty.”

The ONS said the pay gap between men and women under 30 had “decreased dramatically” since 1975. In 2013, the difference in pay was close to zero between the sexes up to age 30. But the gap starts to widen after 30 and by age 49 men were paid an average of 45% more than women last year.

An earlier study by the Institute for Fiscal Studies showed that although they enjoyed higher incomes during early adulthood than their predecessors, children of the 1960s and 1970s spent the extra cash. They were also less likely to own a home than the postwar baby boomers before them, and likely to have smaller private pension pots.




Share this story

There are 0 comments

Leave a comment

Want to express your opinion?
Leave a reply!

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.