It was said of the financial crisis that it was a once in a century event – and no doubt many of my generation hoped t it would be the only epoch-defining economic catastrophe we would live through.
Sadly, the coronavirus means we know have to experience another. Of course, it’s the elderly who now face the greatest risk from Covid-19, but in the longer term it’s the young who will be dealing with the repercussions of this crisis.
In fact, they are already paying a high price. While the lockdown measures are applied to every age group without discrimination, they hit the young disproportionately hard. Unable to go out, many are stuck in the expensive, cramped, gardenless flats they rent. And if they have the temerity to attempt to responsibly use public parks, they run the risk of being harangued by the police and castigated online.
It’s not just in their loss of liberty that the young are suffering, they’ve also taken a hit in terms of their work and paychecks. As Monday’s IFS report showed, because young people tend to work in sectors worst hit by the lockdown (such as retail and hospitality) they will be the group hardest hit. The statistics are stark – 30% of workers under 25 are employed in sectors that have shut down, compared to 13% of workers over 25.
But it’s the long-term consequences of the virus which will really hit who face paying for this crisis for many years to come. Even in the most optimistic scenarios where things get back to normal by autumn, the Government will have spent a vast amount of money, meaning a massive deficit. Nobody yet knows how big, but it is probably a question of hundreds rather than mere tens of billions.
It’s not just a sharp increase in public debt, and presumably higher taxes to pay it down. The economic calamity that the virus and lockdown are precipitating will have a knock-on impact, stunting wage growth, promotion opportunities, and employment stability, all of which will hurt those without established careers or financial assets the most.
Who knows what other long-term geopolitical ramifications the virus may have? A new Cold War between the USA and China looks likely, as does a return to protectionism. Both of those eventualities would make the world worse off, and it is again the young who will bear the largest cost should they occur.
So, the virus sharpens the issue of intergenerational fairness. This was already rather salient anyway – note the sharp divergence in voting patterns by age over the last decade.
My generation has in many ways been blessed to live in a time when innovations such as Uber, Deliveroo, and Amazon and a thousand other 21st century technological innovations exist. In other ways the scales have become heavily stacked against us. Not only did we enter the workforce during or just after the financial crisis and the great recession, but much of the economic system no longer seems to be delivering for us as it did for our parents.
The housing crisis means that many of us are forced to rent and share, when we would rather own. A decade of sclerotic productivity growth has caused wages to bump along, in real terms only now reaching pre-great recession levels. And the long term (and necessary) scaling back of generous pensions means we must work longer before we can retire. We may well live longer on average, but as things stand there is little chance that we will end up financially better off than our parents’ generation.
It is foolish to think that this is sustainable – that the young will just shrug their shoulders and accept that this is the way the system works – and nor should they. Today in the midst of this terrible virus the young are sacrificing much of their liberty and tomorrow they will carry most of the burden of paying for the current crisis in order to help protect the old and the vulnerable, and we are happy to do so. But the Government needs to make a policy offer to young people which will rebalance the scales in their favour.
Much has been said about solving the housing crisis, and the government has made the right noises about accepting the recommendations of the Building Better, Building Beautiful Commission. But there is room to go further – we need to get properly started on solving the housing crisis in the next few years, not over the next few decades. A Land Value Tax is one bold measure through which the Government could stop land banking and speed up house building.
But it is in going for growth that ministers need to be most radical. Persistent high growth is the best cure for intergenerational unfairness, in fact it’s as close as humanity has to a universal panacea for most issues. For example, if after 2021/22 (once coronavirus is sorted) we could raise GDP growth by 0.5% a year then within 14 years the economy would be 10% larger than currently forecast. This would feed through into much higher wages helping to rebalance the economic scales in favour of the young. Those who argue that what we need is a mass transfer of wealth from the rich old to the poor young are wrong, this isn’t a zero-sum game. We can rebalance the scales for the young while making everyone including the old better off, but only if we manage to boost growth.
Of course, it is very easy to say let’s just boost growth, but a much harder task to actually accomplish it. Many of the policies that will be necessary will either be initially costly like full expensing, or difficult like reforming the planning and tax systems. In ordinary times they would take many years to be completed. But these are extraordinary times, and as the lockdown and push for ventilators and medical equipment has shown, when there is political will the government can accomplish its aims very rapidly. We must hope some of this alacrity remains when the virus abates and we turn to solving the pressing issue of intergenerational fairness.
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