Pay gap widens with one in three young UK workers on low pay

http://www.theguardian.com/society/2014/aug/30/low-pay-workers-one-in-three

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The proportion of workers aged 21 to 30 who are now classed as low paid has more than tripled over the past four decades, according to new research that helps to explain why many young people are locked out of the housing market.

Analysis to be released next month by the independent thinktank the Resolution Foundation will show that among this age group almost three in 10 (29%) are now low paid – equating to almost 1.5 million young workers.

In 1975, the proportion earning low pay was less than one in 10 (8%).

Over the same period, however, the proportion of low-paid older workers – those aged 51 to 60 – has dropped sharply, highlighting a pronounced divide between the generations.

Among this older age group, the proportion of those on low pay has declined steadily since the mid-1990s. Just 16% of 51- to 60-year-olds (about 750,000 people) are now low paid, compared with the 29% of younger workers.

The report comes amid growing concern that Britain's economic recovery is not translating into wage growth and higher living standards for large sections of society.

Low pay is defined as earning less than two-thirds of the hourly median wage – which currently stands at £11.56. A low-paid person therefore earns less than £7.71 an hour. The fortunes of the two age groups have diverged sharply since 2002, when the proportion in low pay was 21% in both groups.

Matthew Whittaker, chief economist at the Resolution Foundation, said the trend towards a low-wage economy for the young threw up big policy challenges.

"While this long-term trend suggests a structural shift in our labour market, the reasons for it are not clear. It's likely that the increasing share of young people entering higher education has had some effect because it delays the age at which they start to move up the earnings ladder, but even if that was true, it could only account for part of this deep and long-term trend.

"What's beyond dispute is that many young workers are finding the labour market tougher than they've ever done and this poses a challenge for all political parties.

"We know that younger workers have been hit hardest in recent years – this shows that it's part of an even longer-term trend."

The share of young people buying homes fell to one of its lowest levels in June this year because of a combination of high prices relative to incomes and shortage of supply.

Just 3% of buyers in June were aged between 18 and 30, while 48% were aged 31 to 40, according to a report by the National Association of Estate Agents. The trend has meant that more young people have been forced into rented accommodation as they try to save for a deposit.

The Organisation for Economic Co-operation and Development is among bodies to have warned that millions more young people across Europe, both in work and unemployed, will struggle to fulfil their ambitions, including that of buying their own home, because of low pay.

Median wages among workers in their 20s have tumbled since the peak of the recession in 2009. Average (median) hourly pay (including overtime) for all workers aged between 22 and 29 is £9.83, compared with £12.56 in 2009 (at today's prices).

The steady rise in the share of younger workers who are low paid will be revealed in the Resolution Foundation's publication Low Pay Britain, to be published next month.