Gen Z is out-earning millennials, shows data; but has inflation already closed the gap?

A new report from a British economic think tanks has found that Generation Z workers are out-earning their millennial counterparts at the same stage of life. But economists and analysts warn that higher nominal wages do not automatically translate into greater financial freedom, and that for a significant share of young people, the economic picture remains deeply troubling.

The Resolution Foundation, a leading UK think tank focused on living standards, has found that real weekly pay for those born in the late 1990s was 12% higher at age 24 than it was for cohorts born in the late 1980s. More strikingly, those born in the early 2000s are earning more at 24 than any generation on record going back to the 1950s.

Charlie McCurdy, senior economist at the Resolution Foundation, said: "The living standards stagnation of the millennial generation has been well documented over the past decade. Many have speculated that the breakdown of generational progress has continued for Gen Z too. But with the oldest members of Gen Z now several years into their working lives, the good news is that they've enjoyed a mini pay rebound."

Millennials, typically defined as those born between the early 1980s and mid-1990s, entered the workforce during or shortly after the 2008 financial crisis — a catastrophic moment of timing that set off more than a decade of wage stagnation. They became the first generation in modern history not to enjoy higher disposable incomes than their predecessors.

Gen Z, by contrast, have benefited from a tighter post-pandemic labour market and a series of significant increases to the National Living Wage, the report states.

The lowest-paid workers — those in the bottom tenth of earners — saw their real pay rise by 36% between 2012 and 2025, driven largely by minimum wage escalation since 2016, according to the think tank report.

The gains are not confined to the very bottom of the income ladder. Workers aged 22 to 29 on median earnings saw their hourly pay grow by 15% over the same period, compared to just 4% for those in their 30s and 11% for the wider workforce, the think tank report states.

That disparity reflects a structural shift in how British employers are pricing entry-level and early-career labour — one that has moved disproportionately in favour of younger workers in recent years.

To understand why wages alone do not tell the full story, it is necessary to understand the very different inflationary environments each generation has navigated.

Millennials entered the workforce during or around the 2008 financial crisis — a period defined not by high inflation but by prolonged economic stagnation and near-zero interest rates. The damage for millennials was done through suppressed wages and a housing market that quietly but relentlessly outpaced their earnings.

Gen Z's economic entry point has been starkly different. The post-pandemic period brought the sharpest inflationary surge in four decades. UK inflation peaked at over 11% in late 2022, driven by a combination of supply chain disruption, energy price shocks and surging demand as economies reopened.

Food prices, rents, transport costs and energy bills all rose sharply and simultaneously — hitting renters and early-career workers hardest, since they had no fixed mortgage to shield them from the price surge and no existing assets to offset it.

Research cited by Fortune found that Gen Z may have been left psychologically scarred by this inflationary environment, with Bloomberg analysis showing that 16 to 24-year-olds were among the most likely age groups to have raised their long-term inflation expectations.

Dayo Abinusawa, founder of London's Awa Business School and a former lecturer at Cambridge University's Judge Business School, told Bloomberg the ongoing battle with inflation "would have had a serious impact on the mindset of Gen Z workers."

The contrast is telling. Millennials were shaped by a decade of low prices and low wages. Gen Z inherited higher wages — but in a world where the cost of everything had already reset to a higher level.