The graph below from Bank of England rate-setter Martin Weale graphically displays how the economic downturn has hit young workers hardest. Indeed, the older you are, the less likely you are to have seen your real wages decline.
The likeliest explanation is the disproportionately high level of youth unemployment (currently 22.2 per cent or 1.04 million), which has depressed wages for those in work.
In his speech, Weale also explained why the fall in real wages had lead to a similarly sharp fall in consumption among the young:
Young people have not had much opportunity to build up wealth, so their consumption will depend mainly on expectations of future labour income. Old people, close to or after retirement will, by contrast, expect to finance most of their subsequent consumption out of accrued wealth (including pension rights and entitlements to state pensions and other benefits) and will not find themselves nearly so much affected by adverse movements in either wage rates or employment opportunities.
Hat-tip: Duncan Weldon.
Content from our partners
Related
