A new analysis by the Resolution Foundation has found that Generation Z workers in the United Kingdom are earning significantly more than millennials did at the same age. The report, released on Tuesday, shows that typical hourly pay for 22-year-olds in 2024 was £12.71, compared to £11.65 for 22-year-olds in 2010, when adjusted for inflation. This represents a 9% increase in real terms.
Key Findings of the Report
The Resolution Foundation's study attributes the earnings boost to a combination of factors, including a tight labor market post-pandemic, successive increases in the national minimum wage, and a higher proportion of Gen Z workers in higher-paying sectors like technology and professional services. The report also notes that the gender pay gap among young workers has narrowed, with young women now earning slightly more than young men on average.
However, the analysis highlights that while Gen Z is earning more at the start of their careers, they face higher housing costs and student debt burdens compared to previous generations. The typical rent for under-25s has risen by 20% in real terms since 2010, and student loan repayments have increased due to higher tuition fees.
Implications for Economic Policy
According to the Resolution Foundation, the findings suggest that policies aimed at boosting wages, such as minimum wage increases and full employment, can have a tangible impact on young people's earnings. However, the foundation warns that without addressing housing affordability and education costs, the overall financial well-being of Gen Z may still lag behind that of previous generations at the same life stage.
Nye Cominetti, senior economist at the Resolution Foundation, said: “Generation Z are often portrayed as a struggling cohort, but our analysis shows that in the world of work, they are actually doing better than millennials did at the same age. Higher minimum wages and a strong labor market have boosted their pay packets. However, these gains are being offset by soaring housing costs and student debt, meaning that the overall financial position of Gen Z is more precarious than the earnings data alone suggests.”
Comparisons with Previous Generations
The report also compares Gen Z with Generation X and baby boomers at the same age. While Gen Z's hourly pay is higher than millennials', it remains below that of Generation X and baby boomers when they were in their early 20s, after adjusting for inflation. For example, typical hourly pay for 22-year-olds in 1994 (Gen X) was £13.20 in today's money, and in 1978 (baby boomers) it was £14.50.
The Resolution Foundation notes that the long-term trend of declining real wages for young workers appears to have reversed for Gen Z, but the improvement is modest and uneven across different groups. Young workers without a degree have seen smaller wage gains than those with higher education.
Policy Recommendations
To sustain and build on these gains, the Resolution Foundation recommends that the government continue to prioritize full employment and consider further increases to the minimum wage in line with median earnings. Additionally, the foundation calls for policies to reduce housing costs, such as increasing social housing supply and reforming the private rental sector, as well as measures to ease the burden of student debt.
The report concludes that while Gen Z's earnings story is more positive than often assumed, policymakers must address the broader cost-of-living challenges that young people face to ensure their financial security in the long term.
