Alan Milburn says Britain is on verge of being permanently divided between haves and have-nots as young miss out on recovery • Economy looks bleak for British workers losing out to technology

Britain is on the verge of becoming permanently divided between tribes of haves and have-nots as the young increasingly miss out on the opportunities enjoyed by their parents’ generation, the government’s social mobility tsar claim.

The under-30s in particular are being priced out of owning their own homes, paid lower wages and left with diminishing job prospects, despite a strong economic recovery being enjoyed by some.

Those without the benefits of wealthy parents are condemned to languish on “the wrong side of the divide that is opening up in British society”, according to Alan Milburn, the former Labour cabinet minister who chairs the government’s Commission on Social Mobility.

In an illustration of how the less affluent young have been abandoned, Milburn notes that even the Saturday job has become a thing of the past. The proportion of 16- to 17-year-olds in full-time education who also work has fallen from 37% to 18% in a decade.

Milburn spoke out in an interview with the Observer as tens of thousands of people, including public sector workers such as teachers and nurses opposed to a below-inflation 1% pay offer from the government, protested in London, Glasgow and Belfast about pay and austerity on Saturday.

The TUC, which organised the protests under the slogan “Britain Needs a Pay Rise”, said that between 80,000 and 90,000 people took part in the London march.

Speaking on the eve of the publication of his final annual report on social mobility to ministers before the general election, Milburn demanded urgent action by the state and a change in direction by businesses.

He said that only a radical change would save a generation of Britons buffeted by an economic downturn and condemned by a fundamental change in the labour market that left them without hope of better lives.

In a strikingly downbeat intervention, Milburn said: “It is depressing. The current generation of young people are educated better and for longer than any previous one. But young people are losing out on jobs, earnings and housing.

“This recession has been particularly hard on young people. The ratio of youth to adult unemployment rates was just over two to one in 1996, compared to just under three to one today. On any definition we are nowhere near the chancellor’s objective of “full employment” for young people. Young people are the losers in the recovery to date.”

The median pay of a 22- to 29-year-old, £9.73 an hour, was more than 10% lower today than it was in 2006, according to Milburn. The pay of 18- to 21-year-olds, £6.73, is 8.8% lower. Both are at the same wage level as they were in 1998.

The proportion of 18- to 24-year-olds in work fell from 65% at the start of 2007 to 56% at the end of 2012 and has only now recovered to 60.8%, despite some consistent economic growth in the last two years.

Milburn is expected to be damning in his report about the failure of all political parties to protect the young from the consequences of global changes, and that helping the young into meaningful careers and off benefits should be made a priority.

Milburn said that he believed there had been a failure to provide many young people with the skills that could allow them to escape a life of poor pay.

He said: “Youth unemployment is still higher than before the recession and by the time of the next election around half a million young people will still be without work, enough to fill Wembley stadium five times over.

“Urgent action is needed to prevent this generation of young people faring worse than their parents’ generation. Social mobility relies on young people having better opportunities to progress. Investment in the skills and employment of young people today is money saved in social security and the costs of poverty tomorrow.”

After taking into account reductions in hours of work, which have decreased in the recession, the Institute for Fiscal Studies has highlighted that for those aged between 22 and 30, median earnings are 15% lower than before the recession, driven by a combination of lower hourly pay and fewer hours of work. This decrease is roughly twice the size as earnings decreases for the 30-59 age group.