Young Aussies’ incomes are going backwards, a new study has shown, and the coronavirus pandemic is only going to make things worse.
A new report from the Productivity Commission has shown a higher retirement age and lower starting wages had led to a “lost decade” of wage growth, which experts predict will only worsen as the nation moves through the COVID-19 pandemic.
The report found parents, in an attempt to soften the blow, were transferring more money than ever to their children, who were living out of home, while many young people chose to continue living at home for longer to save money.
“Young people have experienced a ‘lost decade’ of income growth. This means they entered the COVID-19 crisis already on lower wages and usually with limited savings,” commissioner Catherine de Fontenay said.
Ms de Fontenay said the new research showed income increases had not slowed for those over 35, who were in many cases already in work before firms, reeling from the global financial crisis, began to offer lower wages and more part time roles to new employees, creating a large divide in income.
“It turns out that the ‘low wage growth’ story is essentially a story about people under 35,” she said. “If we look at average wage growth for those over 35, it hasn’t slowed.”
The report analysis suggests wage growth for those aged 20 to 34 was flat from 2008 to 2018, while those 35 and older continued to experience growth in their income.
This flatline was experienced by the majority of all workers under 35, in most cases regardless of education level, industry or occupation.
Adding to the issue is the fact younger people are not moving up the job ladder as fast as the generations before them, resulting in long-term negative impacts on their wages and future occupation choices.
Many young people turned to the bank of mum and dad for support as they struggled to break into their careers.
Research shows cash transfers from parents to their children “grew substantially” over the 2008-18 period, and many more decided to continue living with their parents for financial reasons.
According to the report, the money saved in rent, utilities and food equates to about a third of the average income for those aged 20 to 24.
This is not the case for lower-income families though, who transfer less and are less able to have their children continue to live at home.
As Australia begins to bounce back from the coronavirus pandemic, which saw record levels of government spending and brought in lockdown rules that forced many businesses to shut, things are expected to worsen for the under-35 cohort.
While the labour market was left weakened by the 2007 GFC, workers who had lost their jobs were able to find part-time work in industries with a “high absorptive capacity”, such as retail, hospitality and tourism, which helped stave off widespread unemployment.
But many of these industries are the ones worst affected by the pandemic, and their ability to recover is unknown.
“Evidence from the first three months of the crisis suggests that the workers in these sectors were primarily young, and on low wages,” the report reads.
“The COVID-19 recovery period may not see strong growth in those sectors, and therefore unemployment among the young could remain high for some time.”