How fast do earnings grow as you age, and when do they stop?
October 17, 2023
People tend to earn more as they get older. In this article we explore how long and fast this occurs, does it stop, and why?
We looked at 2023 ONS data on the wages earned by different age groups. Looking at median earnings, we see that earnings grow until ages 40-49.
The graph below details said data, showing the median wage grows by about £6200 per age bracket on average until ages 40-49. After this peak at ages 40-49, wages decline by £4700 per bracket.
Unsurprisingly, the fastest growth occurs after the 18-21 bracket. This may be due to workers still in education who take part-time jobs, or workers who must accept low wages to start their career.
Workers may increase their wages through their life as they develop their skills and collect more education and training, which allows them to command higher salaries. They may also develop their self-confidence, such as when pursuing new jobs/negotiating higher pay.
Lower quartile earners, for whom earnings decrease after 30-39, see their wages plateau and decline sooner in life, whereas for the higher quartiles, earnings decrease later at ages 40-49. An explanation may be that – in general – lower quartile roles often have a lower ceiling to maximise one’s skills and role-specific value; higher quartile roles may have a relatively longer trajectory to deepen one’s skills/responsibilities and therefore earnings.
Lower quartile earnings also have a larger fall proportionally than the rest. From peak to 60+, lower quartile earnings fall by £7.6k. Median and upper quartile earnings face larger absolute peak-to-60+ falls of £9.3k and £12.6k respectively. Though smaller in absolute terms, the lower quartile fall of £7.6k from a peak of £19.2k represents a fall of 40%, whereas for the median and upper quartile, this is only 31% and 28% respectively. This is likely to be unwelcome news in light of the ongoing cost-of-living crisis.
For those in sight of the end of their working days, they may see their paycheque shrink as they rearrange or conclude their career. Data from the ONS show that amongst employees over the age of 65, 63% are part-time, in contrast from 25% for the total workforce. Many workers may seek to reduce their career burdens as they transition into retirement, or they may work in wholly different jobs from those they held earlier in their career.
Whilst one source of the decline in wages is simply due to the voluntary withdrawal from the workforce, employers should be cognizant of ageism as another source. The Centre for Aging Better (2020) reports that one-in-three in the UK have experienced age discrimination. The Equality and Human Rights Commission (2018) found that ageism is more experienced than any other characteristic in the UK. A 2021 UK survey by Ciphr found the most reported workplace discrimination characteristic is age. A 2007 and a 2012 study sent out CVs which were identical except for age, finding that the younger ‘applicant’ received significantly more positive responses; the latter finding the 25-year-old received over twice that of the 51-year-old.
Those hiring may bias against hiring older workers in the belief (which can be conscious or unconscious) that they will be less capable, less amenable, less reliable, etc., than the younger candidates. They may also bias against them if they believe they can cut costs by having a younger force which commands a cheaper wage.
More people are now working past their retirement age. Over a quarter of 65-69s are employed, up 7% since 2011, and over the same period the rate for over-80s has nearly doubled. +65s acquiring employment would seem at first to contradict discrimination. But the current state of inflation, stagnating wages, and sluggish economic growth questions whether more income or precarity is the key driver, and if they are bargaining from a position of precarity, further questions are raised on the economic well-being of these workers. Indeed, suggestive of this is the ONS (2022) finding that older unemployed people who wish to return to work were less likely to own a house or have cash for an emergency than those who do not wish to return to work.
Much progress has been made towards tolerance in the workplace, yet unconscious bias remains an issue. Terms such as: “over-the-hill”, “past-prime”, “grey tsunami”, and “demographic time bomb” build a stereotype of older employees as a burden, which might affect the way employers and fellow employees perceive older colleagues and how older colleagues look at themselves.
So, employers – as well as individual employees – have a responsibility to look both outward and inward. Firms can take actions including: educating employees on ageism; encouraging positive language; using blind recruitment processes; enabling staff support each other by providing social opportunities; providing soft and hard skills training to combat low self-esteem; examining records to detect age discrimination in hiring, pay, and promotions; and making channels for staff to safely report concerns over discrimination.
For citations on the sources quoted above, to discuss this article further, or how MM&K can build a compensation strategy that brings the most for both your organisation and your employees, then please do not hesitate to contact James Sharp.