Incomes of young still 7 per cent below 2007 levels says Institute for Fiscal Studies

By stark contrast, the median incomes of those aged 31-59 are now back to where they were in 2007 – while the incomes of those aged over 60 are more than 10 per cent higher

22-30 year olds have been disproportionately hit by the recession (sturti/Getty)

The incomes of people in their 20s are still 7 per cent lower than they were almost a decade ago, according to a new analysis from the Institute for Fiscal Studies which underlines the uneven social distribution of economic pain across the generations in the wake of the UK’s Great Recession.

The analysis also showed that the share of all incomes going to the most privileged 1 per cent of the population in 2014-15 was still close to the record high recorded in 2009-10.

The IFS found the median inflation-adjusted household income of people aged between 22 and 30, measured before housing costs, in 2014-15 was still 7 per cent below its level in 2007-08. The level was unchanged from a year earlier.

By stark contrast, the median incomes of those aged 31-59 rose again in 2014-15 and are now back to where they were in 2007, while the incomes of those aged over 60 are more than 10 per cent higher.

Suffer the children

IFS

The incomes of people in their 20s have taken such a battering due to a slide in wages for that age group as employers have slashed entry-level pay and clamped down on annual rises.

Average wages for all workers are still below financial crisis levels according to Office for National Statistics data.

But separate figures from the Resolution Foundation yesterday showed that average real hourly pay for those aged between 22 and 29 are down 12 per cent on 2008 levels.

By contrast average pay for those in their 40s is only 8 per cent lower and 6.6 per cent just weaker for those in their 50s.

Harder on the young

Resolution Foundation

In a manifestation of what campaigners are increasingly talking about as a “generational war”, Government welfare policy since the crisis has compounded the division arising from work place remuneration.

The incomes of those aged 60 and over have been bolstered by the Coalition’s “triple lock” on state pension growth while working age tax credit increases have been curbed.

Median incomes in 2014-15 were around £473 a week according to the IFS, citing official data, which is up 3.4 per cent on the previous year and now almost 1 per cent higher than the previous peak in 2009-10.

The means the Conservatives and the Liberal Democrats actually went into the 2015 general election having presided over an increase in average incomes.

But the IFS stressed that the picture was still one of extreme weakness by historical standards.

“It is still highly unusual to see no growth in working-age incomes over a seven-year period” it said.

The IFS projections suggest the total income share of the top 1 per cent in 2014-15 has stabilised at 7.9 per cent, having risen steadily to 8.7 per cent in 2009-10 from just 3 per cent in the late 1970s.

But the IFS stressed this figure had been distorted by people shifting their reported incomes when the 50p tax rate was raised and then cut in the wake of the financial crisis and that “remains unclear” whether the stabilisation would last or the top income share would keep growing.

Stabilisation or pause?

IFS

The absolute poverty rate, merasured after housing costs, in 2014-15 fell to 20.3 per cent (equivalent to 12.9 million individuals) down from 21.6 per cent the year before and lower than a recent peak of 22.1 per cent in 2013-14. Poverty among pensioners has fallen most sharply in recent years, declining to 13 per cent, due to pensions rising faster than working age benefits.

The relative poverty rate, defined as those living on 60 per cent of median incomes or less, was unchanged in 2014-15 at 21.3 per cent.