Income through the ages

How tax and benefit changes mean recent generations earn more in their youth

BABY boomers have had it harder than you might think - and millenials have had it easier.

That’s according to new analysis from the Office for National Statistics which compared the effects of taxes and benefits on household income over generations.

The report found that more recent

generations have had relatively faster income growth in their 20s compared to older generations.

However they have also seen the rate of growth stagnate once in their late 20s and early 30s, as wages and salaries have fared worse than historical trends.

The research linked the growth in disposable income to the fact that younger people from more recent generations have tended to receive more net benefits than previous generations did at similar ages.

It means that the millennial generation are doing better than people might believe.

For example, those aged 18-24 today receive £4,795 more in benefits than they pay in tax.

In the 50s, those aged 18-24 years old actually paid £2,535 more in tax than they received in benefits.

This reflects increased government spending in real terms over the mid1990s, 2000s and early 2010s on things like schools, the NHS and cash benefits.

The figures also show that people tend to pay more in taxes than they receive in benefits until they reach their mid-60s.

However older people today also pay more into the system than they did previously, reflecting the fact that some can work later on life, therefore contributing more in tax.

The research only focused on income - ignoring large drivers of generational inequality such as wealth and property.

It also didn’t include factors such as student debt.

Separate research has shown that wealth and property are big drivers of inequality between the generations.

A recent report by the House of Lords on tackling Generational Inequality found: “If no action is taken now, over the coming decades some young people could grow to resent older people for having the property security that they lack and having benefited from a lifetime of well-paid secure employment of which younger generations can only dream.”

A separate report by the Resolution Foundation found that property values rising relative to income “creates the prospect of a Britain in which inheritance from family may have more of an impact on your lifetime living standards than how much you earn, with implications for intragenerational inequality”.