Most people growing up in advanced economies globally since World War II have led lives that were financially better off than their parents.
“Yet this overwhelmingly positive income trend has ended,” says the authors of a new McKinsey Global Institute report, “Poorer than their parents? Flat or falling incomes in advanced economies.”
The report finds that between 2005 and 2014, real incomes in those same advanced economies were flat or fell for 65 to 70 percent of households, or more than 540 million people. This compared with less than 2 percent, or fewer than ten million people, who experienced flat or falling real incomes between 1993 and 2005.
“And while government transfers and lower tax rates mitigated some of the impact, up to a quarter of all households still saw disposable income stall or fall in that decade,” the authors state.
Today’s Millennials are at risk of ending up poorer than their parents. Most population segments experienced flat or falling incomes in the 2002–12 decade — but young, less-educated workers were hardest hit, the report says.
The report largely blames the trend of falling or flat income on the financial crisis of eight years ago.
“The deep recession and slow recovery after the 2008 financial crisis were primary causes of this phenomenon, but labor-market shifts such as the falling wage share of GDP and long-term demographic trends of aging and shrinking household size also played a role,” the report says.