1. . A new generational contract . .May 2018

2. Pay has fallen back, with millennials hit the hardest…
Median real weekly employee pay (CPIH-adjusted to 2017 prices), by age and cohort: UK,
Prior to the post-crisis pay squeeze, all generations alive today - other than the millennials - had experienced large gains when compared to their predecessors.
In early 2018, average real pay was still £15 a week below pre-crisis levels – 10 years after the crisis.
Pay is projected to take nearly two decades to return to its pre-recession peak.
Notes: See notes to Figure 2 in: L Gardiner & P Gregg, Study, Work, Progress, Repeat? How and why pay and progression outcomes have differed across cohorts, Resolution Foundation, February 2017
Source: RF analysis of ONS, Labour Force Survey; ONS, Annual Survey of Hours and Earnings; ONS, New Earnings Survey Panel Dataset

3. …and it’s not all down to the financial crisis
Change in median real weekly employee pay (CPIH-adjusted to 2017 prices) compared to the preceding cohort at age 25, by cohort: UK,
Generational pay progress had been declining for young adults since long before the recession
Each of the three generation X cohorts achieved lower gains than those enjoyed by the youngest baby boomer cohort
the oldest millennial cohort have experienced almost no gain relative to those born five years earlier
This means the drivers are at least partly structural, reflecting far deeper shifts in our labour market.
Notes: See notes to Figure 2 in: L Gardiner & P Gregg, Study, Work, Progress, Repeat? How and why pay and progression outcomes have differed across cohorts, Resolution Foundation, February 2017
Source: RF analysis of ONS, Annual Survey of Hours and Earnings; ONS, New Earnings Survey Panel Dataset

4. Human capital accumulation has slowed…
Highest qualification held at age 25-28, by cohort: UK,
Millennials are the most educated generation to date
But the large cohort-on-cohort gains in degree attainment experienced by generation X have not been replicated for the millennials
the 37 per cent increase recorded between the and cohorts dwindled to a 7 per cent improvement between the and cohorts
Other routes for cohort-on-cohort human capital progress have not picked up the slack
the proportion of adults with qualifications at Level 2 or below (equivalent to GCSE grades A*-C) is falling at a slower rate than for gen x
Importantly, unemployment is 50 per cent higher among millennials (in their late-20s) with no qualifications above GCSE level, than it was for gen X’ers
Source: RF analysis of ONS, Labour Force Survey

5. …self-employment has grown for young people without degrees…
Self-employment as a share of all employment, by age and educational attainment: UK
The proportion of degree-holding older workers who were self-employed has fallen since
But the proportion of younger non-degree holders working in this way increased sharply.
Younger non-degree holders are more likely to be in low-skilled and insecure self-employment - in contrast to those seeking to work more flexibly or boost earnings e.g. older workers on the run-in to retirement.
Part of a trend towards ‘atypical’ forms of working which transfer risk from the employer onto the worker - as a result of weakened employment rights and reduced certainty of income relative to traditional full-time employees with permanent contracts
ZHC & agency work also most concentrated among young people – although overall they are a minority of the workforce
Notes: Data are smoothed using a three-year rolling average over the age range.
Source: RF analysis of ONS, Labour Force Survey

6. …millennials are more likely to work part time…
Proportion of those in employment working part time, by age, sex and generation: UK,
Increases concentrated among men - partly a rebalancing of gender roles
but this is far from the full story – reflected in peoples attitudes – 17 per cent of yo in part-time world would like a full-time role
Notes: Data are smoothed using a three-year rolling average over the age range.
Source: RF analysis of ONS, Labour Force Survey

7. …young adults are increasingly working in lower-paid sectors…
Change in employment composition of year olds, by occupation and cohort: UK,
Size of bubble denotes share of total employment for cohort
Share of year olds in professional jobs has grown at a slower rate for younger (millennial) cohort
Share in lower skilled/lower-paying occupations and sectors has grown faster – e.g in caring & leisure, sales, elementary
Notes: See notes to Figure 6 in: S Clarke & C D’Arcy, The kids aren’t alright: A new approach to tackle the challenges faced by young people in the UK labour market, Resolution Foundation, February 2018
Source: RF analysis of ONS, Labour Force Survey

8. …and they are moving jobs less frequently
Proportion voluntarily moving from one job to another each year, by age and generation: UK,
Millennials are so far per cent less likely to move jobs voluntarily than members of generation X at the same age
Partly due to crisis – but also likely to be in response to the additional labour market risk that they shoulder
Implications for pay progress - in 2016 the typical pay rise for someone who remained in their job was just 1.7 per cent, whereas job changers received a typical pay rise of 7.8 per cent.
Also moving from region to region for jobs less – this offers an even bigger potential pay increase
But looking up – as worst effects of crisis worn off younger millennials moving more and slight uptick in j2j moves for older millennials
Notes: Data are smoothed using a three-year rolling average over the age range.
Source: RF analysis of ONS, Labour Force Survey

9. Housing

10. There have been huge generational declines in home ownership…
Home ownership rates, by age and generation: UK:
Millennials are half as likely to own a home at the age of 30 as baby boomers were.
This is largely due to increased barriers to entry caused by higher house prices, low earnings growth and tighter credit availability post-crisis.
In the 1980s it would have taken a typical household in their late-20s around three years to save for an average-sized deposit - it would now take 19 years.
Notes: See notes to Figure 3 in: A Corlett & L Judge, Home Affront: Housing across the generations, Resolution Foundation, September 2017
Source: RF analysis of ONS, Family Expenditure Survey; ONS, Labour Force Survey

11. …meaning more and more people are renting in the private sector…
Rates of private renting, by age and generation: UK,
Coupled with huge declines in the availability of social housing, this means that more and more people are renting in the private sector where security is a major issue– with millennials hit the hardest (again)
Millennials are four times more likely to be renting privately than Baby boomers were
Notes: See notes to Figure 10 in: A Corlett & L Judge, Home Affront: Housing across the generations, Resolution Foundation, September 2017
Source: RF analysis of ONS, Family Expenditure Survey; ONS, Labour Force Survey

12. …at older ages
Proportion of households with children in owner occupation and in the private rented sector: England
But more importantly, they are renting at older ages
This important because private renting is the most insecure tenure – this is ok for young people just starting out, but as we grow, this can become less desirable e.g. if we decide to have children…
There are now record numbers raising children in the PRS
The child-raising years are when security of tenure is needed the most!
Source: RF analysis of MHCLG, English Housing Survey

13. And they are paying more for the ‘privilege’
Proportion of net income spent on housing costs, by generation: GB,
Housing costs have been taking up a growing share of incomes for each generation throughout the 20th century.
Millennials are spending an average of almost a quarter of their incomes on housing – with many spending much more
The pre-war silent generation spent on average 8 per cent at a similar age.
Note: This analysis refers to households, not families as in our analysis of tenure. See notes to Figure 20 in: A Corlett & L Judge, Home Affront: Housing across the generations, Resolution Foundation, September 2017
Source: RF analysis of IFS, Households Below Average Income; DWP, Family Resources Survey

14. Pensions

15. The success of ‘auto-enrolment’ is cause for optimism…
Occupational pension scheme membership among male private sector employees, by age and cohort: GB,
a surge in membership of DC schemes means that overall pension coverage at age 35 has increased above preceding cohorts among the oldest male millennials
Cohort-on-cohort improvements for women have been even more rapid – They were historically less likely to be in DB schemes outside of the public sector and are most likely to be newly saving via auto-enrolment
This has offset declines in DB membership outside the private sector
Source: RF analysis of ONS, Annual Survey of Hours and Earnings

16. …and under favourable conditions, pension outcomes can be replicated…
Average real individual annual income at retirement (earnings-adjusted to 2017 prices), by sex, birth cohort and income component: GB,
Younger millennials could achieve similar pension outcomes to younger baby boomers
Notes: See notes to Figure 4.4 in: The Resolution Foundation, A new generational contract: The final report of the Intergenerational Commission, May 2018 Source: RF analysis of ISER, British Household Panel Survey; ISER, Understanding Society; ONS, Annual Survey of Hours and Earnings; ONS, New Earnings Survey Panel Dataset; RF lifetime model; Pensions Policy Institute dynamic model

17. … but low investment returns could deplete retirement incomes
Average real individual annual income at retirement (earnings-adjusted to 2017 prices), by sex, birth cohort, income component and investment returns scenario: GB,
Issue of risk again!
Individuals carry greater levels of risk under DC provision
Also risk of longer retirement period or greater periods in ill health will be borne by the individual
Notes: See notes to Figure 4.4 in: The Resolution Foundation, A new generational contract: The final report of the Intergenerational Commission, May 2018 Source: RF analysis of ISER, British Household Panel Survey; ISER, Understanding Society; ONS, Annual Survey of Hours and Earnings; ONS, New Earnings Survey Panel Dataset; RF lifetime model; Pensions Policy Institute dynamic model

18. The big picture

19. Generational income progress has stalled, and the young were hit the hardest…
Median real household annual net income after housing costs (CPI-AHC-adjusted to 2017 prices), by generation: GB,
Notes: Incomes are equivalised to account for differences in household size. See notes to Figure 2 in: A Corlett, As time goes by: Shifting incomes and inequality between and within generations, Resolution Foundation, February 2017
Source: RF analysis of IFS, Households Below Average Income; DWP, Family Resources Survey

20. Britain’s wealth boom is only benefiting those born before the 1960s
Median real family total net wealth per adult (CPIH-adjusted to 2017 prices), by cohort: GB,
Notes: Excludes physical wealth.
Source: RF analysis of ONS, Wealth and Assets Survey

21. Changes to the benefit system have added to problems
Mean change in annual net family income from tax and benefit policy changes implemented during the current parliament, by age:
Benefit reductions concentrated among working age people
Notes: Income is measured before housing costs, and expressed in cash terms. See notes to Figure 1 in: G Bangham, D Finch & T Phillips, A welfare generation: Lifetime welfare transfers between generations, Resolution Foundation, February 2018
Source: RF analysis using the IPPR tax-benefit model

22. Intra-generational income inequality remains an issue…
Percentiles of real net household annual income after housing costs (CPI-AHC-adjusted to 2017 prices), by generation: GB,
Notes: ‘p25’ refers to incomes at the 25th percentile within each age group; ‘p75’ refers to incomes at the 75th percentile within each age group. Incomes are equivalised to account for differences in household size. See notes to Figure 4 in: A Corlett, As time goes by: Shifting incomes and inequality between and within generations, Resolution Foundation, February 2017
Source: RF analysis of IFS, Households Below Average Income; DWP, Family Resources Survey

23. …and wealth gaps within cohorts are rising
Percentiles of real family total net wealth per adult (CPIH-adjusted to 2017 prices), by cohort: GB,
Notes: Excludes physical wealth. ‘p25’ refers to incomes at the 25th percentile within each age group; ‘p50’ refers to incomes at the 50th percentile (the median) within each age group; ‘p75’ refers to incomes at the 75th percentile within each age group.
Source: RF analysis of ONS, Wealth and Assets Survey

24. So what do we propose?

25. Reducing jobs market risks and restarting progression
A £1 billion ‘Better Jobs Deal’
Avoiding lasting damage from the crisis
Boost employment security via the right to a regular contract for those doing regular hours on a zero-hours contract; extended statutory rights for the self-employed; and minimum notice periods for shifts.
Introduce a £1 billion ‘Better Jobs Deal’ that offers practical support and funding for younger workers most affected by the financial crisis to take up opportunities to move jobs or train to progress; and £1.5 billion to tackle persistent under-funding of technical education routes. Both should be funded by cancelling 1p of the forthcoming corporation tax cut.
Making work more secure
A right to regular hours for those on zero-hours contracts; minimum notice periods for shifts
£1.5 billion for technical education, funded by cancelling 1p of 2020 corporation tax cut
Restarting skills progress

26. Providing immediate security while addressing our housing crisis
Indeterminate tenancies and stable rents
Reducing insecurity
Make indeterminate tenancies the sole form of private rental contract, with light-touch rent stabilisation limiting rent increases to inflation for three-year periods and disputes settled by a new housing tribunal.#
Replace council tax with a progressive property tax with surcharges on second and empty properties; halve stamp duty rates to encourage moving; and offer a time-limited capital gains tax cut to incentivise owners of additional properties to sell to first-time buyers.
Pilot community land auctions so local authorities can bring more land forward for house building, underpinned by stronger compulsory purchase powers; and introduce a £1.7 billion building precept allowing local authorities to raise funds for house building in their area.
A progressive property tax to replace council tax; halve stamp duty; and a time-limited capital gains tax cut for sales to first-time buyers
Rebalancing demand
Community land auctions; and a £1.7 billion building precept
Increasing supply

27. Reducing risks around younger generations’ pensions
Auto-enrolment for low earners and
the self-employed
Increasing saving
Flatten pensions tax reliefs
Require firms contracting for self-employed labour to make pension contributions; lower the earnings threshold above which employees get auto-enrolled; and provide greater incentives to save among low- and middle-earners by averaging the rate of pensions tax relief and exempting employee pension contributions from National Insurance.
Develop a legislative framework for ‘collective defined contribution’ pensions that better share investment risk; and reforming pension freedoms to include the default option of a guaranteed income product purchased at the age of 80.
A legislative framework for new ‘collective defined contribution’ pensions to better share risk
Sharing risk
A default track to a guaranteed later life income

28. Boosting security today and preparing for tomorrow’s challenges
Abolish inheritance tax and replacing it with a lifetime receipts tax
A tax system fit for the 21st century
Abolish inheritance tax and replacing it with a lifetime receipts tax that is levied on recipients with fewer exemptions, a lower tax-free allowance and lower tax rates; with the extra revenues supporting a £10,000 ‘citizen’s inheritance’ – a restricted-use asset endowment to all young adults to support skills, entrepreneurship, housing and pension saving.
A £10,000 ‘citizen’s inheritance’
Restoring the idea of asset accumulation

29. . A new generational contract . .May 2018