Young workers now being paid over a fifth less than older peers, research shows

04 June 2018 The generational pay gap – the difference in wages between younger and older workers – has grown to over 20%, new research has revealed.

4 Jun 2018| News

04 June 2018

The generational pay gap – the difference in wages between younger and older workers – has grown to over 20%, new research has revealed.

In its new report, Stuck at the Start, the TUC found that wage stagnation is having a disproportionate effect on younger workers, in part due to their increased vulnerability to insecure work and their lack of opportunity for skills development.

While in 1998, under-30s were paid 14.5% less (£1.51 an hour in 2017 prices) than over-30s, they now receive 21.9% less (£2.81 an hour). As many as 23% of younger workers said they struggled to afford basic living costs, 55% would be forced to rely on credit cards or borrowed money if they were landed with an unexpected £500 bill, and a fifth of all young workers (rising to 27% of young parents) had skipped a meal in the last year because of a shortage of money.

Energy costs were also an issue for young workers, with 22% saying they had gone without heating when it was cold. Similarly, many feel their lives are being held back by their money worries, with over a fifth putting off having a family and over a quarter too insecure about their finances to switch careers.

The TUC identified several reasons for the increased pressure on younger adults, including that most of them are stuck in low-paying jobs that they are overqualified for. Only 31% of the 21-30 year-olds surveyed for the study felt that their current job made the most of their skills, experiences and qualifications. Those working part-time felt even more underutilised, with only 16% saying they were in a role that matched their skills.

Further, a huge proportion of young workers have not been given opportunity to progress in their careers, with 17% not offered training. The lack of skills development was most pronounced among the lowest paid (26% of those earning less than £20,000 a year received no training) and those in insecure work (37% of people on zero-hour contracts and 34% of people on part-time contracts had no opportunity for training).

Indeed, insecure work was a particular worry for younger people. Over a fifth had worked on a zero-hours contract in the last five years, rising to 32% among those earning less than £20,000. Within that time, 28% of all young workers had been asked to work with less than 24 hours’ notice (42% among the lowest paid workers), and 14% had had shifts cancelled with less than 24 hours’ notice (22% among the lowest paid).

Overall, over a third of young workers were not optimistic about their career prospects, and among the lowest paid this rose to 53%.

How we can solve the problem

The TUC noted that young workers are in dire need of better pay, improved conditions, training, and equal rights from day one. The Institute of Employment Rights recommends, in its Manifesto for Labour Law, a number of reforms that would provide the changes young workers need, and has received support from 14 major unions, as well as left-wing parties including the Green Party, SNP and Labour.

Pay and conditions

On providing fair pay and conditions, we recommend that the National Minimum Wage and National Living Wage are replaced by the Real Living Wage – calculated according to actual living costs. Further, sectoral collective bargaining should be reinstated in order that trade unions and employers’ associations can negotiate fair wages and conditions at an industrial level. Every worker in that sector – whether or not they are a union member or a full-time employee – would then receive the minimum pay and conditions described in the collective agreement.

Training and productivity

We also note the necessity of providing better training to workers and recommend that a strategy for training, apprenticeships and productivity should be agreed bilaterally by employers and unions in order that business needs and workers’ needs are met, with a view to both business growth and skills development. Further, a National Economic Forum should be established, at which key stakeholders from across society – including workers and employers – are able to scrutinise the impact of policy on the interests they represent, while also creating long-term strategies for national skills development and economic productivity.

Insecure work

We agree with the TUC that all workers should have equal rights from day one. We propose that this is achieved by scrapping the three-tier system of employment status and replacing it with one universal status of ‘worker’ that covers all people in employment. All workers would be eligible for the full suite of rights from day one.

Zero-hours contracts should be replaced by defined hours contracts, which provide flexible workers with a guaranteed minimum number of hours per week or month, and prescribe a permitted percentage of hours during which a worker can be placed ‘on call’.

These are just some of the recommendations in our Manifesto. Click here to find out more