It’s not all doom and gloom – pay packets of Gen Z outstrip their millennial predecessors

New analysis published later this week by the Resolution Foundation will show that the early careers of Gen Z have got off to a better start than their millennial predecessors, though there are warning signs flashing for the latest generation to enter the workplace.

Millennials – those born between the early 1980s and mid-1990s – are the first generation not to have enjoyed higher disposable incomes than previous generations.

This breakdown of generational progress – first highlighted by Resolution Foundation President David Willetts in his 2010 book The Pinch – has been driven in part by the careers of many millennials kicking off around the time of the great financial crisis and the long stagnation in real wage growth that has taken place ever since.

There has been widespread concern that this stagnation will have continued for Gen Z – those born from the late 1990s onwards. However, Resolution analysis of newly available data for these younger age cohorts suggest that they’re experiencing a mini rebound in pay packets.

The research will show that real weekly pay at age 24 those born in the late 1990s was 12 per cent higher than for cohorts born in the late 1980s.

In fact, at age 24, those born in the early 2000s are earning more than any other age cohort going back to those born in the 1950s.

However, the Foundation cautions that this surprise positive pay rebound for Gen Z workers is under threat on two fronts.

First, real wages are on the brink of falling again later this year as the war in the Middle East has led to higher prices and weaker economic growth in Britain. Indeed, real wage growth in the private sector have been falling since last October.

Second, the number of 16-24 year olds not in employment, education or training (NEET) hit the grim milestone of one million earlier this year – the first time the number of NEETs has reached six figures since 2012. For a significant share of younger members of Gen Z, their careers have not got off the ground at all.

Britain’s NEETs crisis presents a huge, long-term challenge for Gen Z, says the Foundation, and tackling it should be a top priority for the Government.

Reducing the number of NEETs will enable more Gen Z workers to start their careers and hopefully enjoy the kind of pay rebound that their slightly older peers have enjoyed.

Charlie McCurdy, Senior Economist of the Resolution Foundation, said:

“The living standards stagnation of the millennial generation has been well documented over the past decade. Many have speculated that the breakdown of generational progress has continued for Gen Z too.

“But with the oldest members of Gen Z now several years into their working lives, the good news is that they’ve enjoyed a mini pay rebound. By age 25, Gen Z workers were earning more than anyone born since the 1950s were at that age.

“But this good news story for Gen Z is already threat. For a start, the higher prices and weaker economic growth resulting from war in the Middle East are threatening a fresh squeeze on pay packets. Even more worryingly, a million 16-24 year olds are currently not in employment, education or training.

“Getting to grips with Britain’s NEETs crisis is crucial for getting the careers of more Gen Z workers off the ground, and ensuring that they too can outperform their millennial predecessors when it comes to wages and wider living standards.”