This is the Resolution Foundation’s fourth report for the Intergenerational Commission, which over the course of 2017 will examine issues of intergenerational fairness and make recommendations to strengthen the intergenerational social contract. This paper, building on previous work on the earnings of different generations, examines household income. Specifically, it looks both at changes in income and changes in inequalities between and within different generations.
- The average incomes of each generation have consistently been higher than those of previous generations when they were the same age. But this crucial progress has so far not held true for millennials, whose incomes after housing costs are no higher than generation X before them.
- Looking beyond averages, we find that higher income baby boomers saw much more generational progress than lower income boomers. This was driven by economy-wide changes in inequality. For this reason, as well as the unequal impact of higher housing costs, generation X has experienced the highest level of inequality of any generation to date.
- The overtaking of typical working-age incomes by those of pensioners is a remarkable shift. And the changing make-up of the poorest fifth of society has been even starker, with pensioners now disproportionately unlikely to be in poverty.
- Although typical pensioner incomes have grown rapidly, individual pensioners may not have experienced rising incomes each year as they have grown older. Instead, pensioner income growth is driven by successive cohorts of ever-richer pensioners replacing previous ones.
- In addition, the characteristics of the pensioner population have changed. Almost 1 in 5 pensioner families now have one or more person in employment – a figure which rose significantly in the 2000s and, together with increased home ownership, helped to increase average pensioner living standards.
- Employment income has been an important component of pensioner income growth – particularly for younger and richer pensioners – but growth in private pension incomes and public benefits have nonetheless been the most important factors and to varying degrees have helped deliver growth for all age and income groups of pensioners.
- Future reports for the Intergenerational Commission will look in more detail at the policies and economic changes that have helped shift the age profile of UK incomes and at how the intergenerational contract might be strengthened and the prospects of all generations improved.