Economically speaking, young people have had it tough over the past few years – what with university tuition fees tripling, house prices soaring and the cost of travel continuing to rise.
Then a pandemic came along.
Over recent months, experts have speculated about the economic impact coronavirus will have on the world – from the impending UK recession to the wide-scale job losses.
But how will the pandemic impact younger generations in the UK, who have been struggling to stay afloat the past few years as it is?
Edward Cartwright, a professor of economics at De Montfort University in Leicester, tells Metro.co.uk that young people should be ready for some negative economic consequences.
‘When the pandemic hit there was hope that we could essentially “pause” the economy and “go back to normal” when the pandemic passed – but that hope has long gone,’ Edward tells Metro.co.uk.
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He explains that younger generations should brace themselves for long-term issues.
Edward adds: ‘Consumer confidence, business confidence, investment, employment, international trade are all taking a hit and that means there will be no short-term recovery.
‘On top of that we have a large increase in government debt which will inevitably put pressure on the government to reduce spending or increase taxes. So, the effects of the pandemic are likely to be felt for at least 10 years, in terms of employment and income.’
However, while it might seem all doom and gloom there are some positives which could come out of it, too.
An economic collapse could create a once-in-a-generation opportunity for young people to buy house prices.
One thing is certain – young people will be significantly affected by the economic fallout of this devastating pandemic
House prices could fall
Just the very mention of ‘house prices’ is enough to send shivers down the spine of anyone under the age of 35.
Research earlier this year found house prices for millennials are 14 times higher than they were for baby boomers in the late 1970s.
So, for anyone hoping that – after years of depressing headlines explaining how youngsters will be renting into their 40s – a fall in house prices could be on the cards, you’re in luck.
Richard Stone, chief executive of retail stockbroker the Share Centre, explains: ‘A sharp rise in unemployment is likely to be accompanied by an increase in supply into the housing market as many may be forced to sell their homes to relocate to reduce outgoings, lower their mortgage or move into rented accommodation. House prices will likely fall as a consequence.’
But he does stress that a fall in prices may be a superficial win, as there are still mortgages and deposits to consider.
He adds: ‘A house price decline in the current circumstances may not be much of a help as the affordability of those properties will depend on having the income and savings (deposit) to support the purchase – something which will be challenged if unemployment is higher among this group.’
This is something backed up Harjoat Bhamra, an associate professor of finance at Imperial College Business School.
She says: ‘From a housing perspective, the economic fallout from Covid-19 is unlikely to benefit younger people unless they already have enough savings for a deposit.’
Of course, a fall in house prices will also be bad news for those who already own a house.
Unemployment for graduates
Graduation is a milestone life event – a day filled with an enormous amount of pride, hope and optimism about the future.
But 2020 graduates are entering a new era – one of immense economic uncertainty.
Professor Harjoat Bhamra tells Metro.co.uk: ‘Younger people entering the job market are likely to have a tougher time than in the previous few years.
‘Entering the job market during a recession tends to have long term negative effects on a person’s career trajectory.’
Edward adds that we are already starting to see this take place.
‘We can already see that the young have been disproportionally hit by the lockdown, primarily because they are in jobs that cannot be easily done from home.’ he says.
‘Going forward we will almost certainly see a reduction in training opportunities and apprenticeships.’
Edward explains that a particular fear is that the country will see an increase in casual labour (zero-hours contracts) and low earning self-employment.
This is exactly what happened after the 2008 financial crisis. The country saw a surge in self-employment – primarily led by the young (25 and under) and old (65 and over) and much of this was low paid work.
He continues: ‘We may well see a further increase in young people’s dependence on low paid and poor quality work.
‘It is really important, therefore, that we channel resources to young people in order to avoid a generation of people permanently economically scarred by the pandemic.’
Professor Harjoat Bhamra suggests an option for younger generations could be to pursue further education, if possible, to delay entering the job market during a recession.
So, for those who have always wanted to study, now could be the perfect time to do so.
A tightening of purse strings but low inflation
Be it nights out, ASOS deliveries or hungover Deliveroos, millennials and Generation Z like to spend money.
But with experts suggesting that a UK recession is imminent, spending habits are going to change.
Richard says: ‘The younger generations – millennials and Gen-Z – are more likely to be employed in the hospitality industry, more likely to be renting accommodation and committed to contract purchases such as mobiles, cars and entertainment.
‘As a consequence they are more likely to be facing a drop in, or loss of, income and have more difficulty in reducing their expenditure.’
But Richard adds that it’s not all bad news.
‘In my view it looks likely the UK will be facing a prolonged period of low inflation. Indeed, we may even see deflation for a brief time,’ he says.
Low inflation usually helps a country’s economy recover from depression or recession.
Richard adds: ‘The pandemic has created a demand shock – people have stopped spending because they have had to do so.
‘The result will be significant discounting in shops to try and clear stock which is now old, and offers to try and encourage consumers back.
‘This may help make those purchases more affordable for those still in employment or with savings.’
Newfound interest in savings and investing
Society at the moment is a culture of convenience – where money is easily spent if it means we get results quicker.
Just think about how often we use ‘next day’ delivery on clothes, get food delivered to our doors or use Amazon Prime for virtually every other need.
There seems to be a focus on instant spending rather than long-term saving. Some might argue this is because millennials and Gen Z-ers know they’re financially screwed in the long-term, anyway.
However, the pandemic has definitely made all of us think about our money a lot more – especially having some saved for a rainy day.
‘The importance of having a pot of savings to help withstand unforeseen shocks and risks has never been more evident,’ Richard says.
Young people could find a new interest in savings and investments, as a result of it.
‘The savings ratio was at a low level going into this crisis and perhaps on the other side of it savings and investments will increase and be seen as an essential activity rather than a pastime for a few.’
What does the economic forecast look like for younger generations?
The economic fallout of the pandemic could create a one-in-a-generation opportunity for millennials and Generation Z.
A drop in house prices post-pandemic could lead to young people (finally) getting on the property ladder.
While this is a definite positive, graduate unemployment and cuts on spending couple are likely to make the next few years incredibly tough.
What Comes Next?
After months of strict lockdown measures, isolation and anxiety – we’re beginning to look to the future.
What will life look like when we emerge into our new normal?
Can things ever be the same as they were?
Do we even want them to be the same?
What Comes Next is our series of in-depth features unpicking the possibilities for the future. Every day for two weeks, we will look at the future of work, dating, mental health, friendships, money, travel, and all the other elements that make up our existence.
Our lives have been turned upside down, but change doesn’t always have to be a bad thing.
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