Working hard is no longer enough for young people to improve their quality of live as they age amid rising wealth inequality, a think tank has warned.
Wealth has been growing much faster than income since 2008, according to the Institute for Fiscal Studies (IFS), driven by a surge in house prices and financial assets. At the same time, real wages struggled to make any progress, meaning that most will not grow rich through work alone.
Robert Joyce, the deputy director of the IFS, said: “A generation of Britons has ridden a wave of growing asset prices, pushing up the value of their houses and investments. Meanwhile, more than a decade of stagnant earnings has held back younger generations for whom earning their own economic success has become increasingly difficult.
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“The fact that we can no longer be sure that the young will grow up with living standards that match [those of] their predecessors is a remarkable social change.”
In 2008, it took 10 years’ worth of typical full-time gross earnings to move from the middle to the top wealth bracket. By 2018, this had increased to almost 16 years.
The younger generation is also struggling to get on the housing ladder, with the IFS report saying that only roughly a third (36%) of those born in the 1980s were homeowners by age 30, compared to 55% of those born in the 1970s and over 60% of those born in the 1950s and 1960s.
Half of middle-income adults in paid work are renting.
The IFS said that the amount of time it would take to double a worker’s income is only increasing.
Typical income for those born in the 1940s and 1950s approximately doubled, in real terms, between their late 20s and early 50s. Those born in the 1960s saw a rise of around a half from age 25 to 50; on current trends, those born in the 1970s will see a rise of less than a quarter over 25 years.
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Mike Brewer, IFS research fellow and chief economist of the Resolution Foundation, said: "The rise in household wealth relative to income is likely to make the UK a less socially mobile country, and to impede the narrowing of other longstanding economic inequalities, such as between ethnic groups. Closing large wealth gaps materially when incomes are stagnant is extremely difficult."
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