To assuage the loneliness of social distancing and remote working, I sent a few “how ya goings” last week to my closest friends, all in our early 20s.
I wasn’t prepared for the bleakness of their responses. Almost all have been stood down without pay indefinitely. Some are unsure how they will pay their rent next month, or if they should refuse. Group chats normally filled with jokes and memes have become group advice/therapy circles for those navigating Centrelink for the first time in their short working lives.
Every young person I know could relay a similar story of economic carnage. Given the greater proportion of young workers in customer-facing or entry-level roles, or on casual, apprentice/trainee or gig-based contracts, we have thus far been the group most impacted by business shutdowns and panicked layoffs.
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Recessions hurt almost everyone. Many elderly people, on top of hunkering down in fear of the virus, have watched their super accounts slashed. Many middle-aged people are wondering how to feed their kids without a regular pay cheque.
But amidst the chaos, it is worth reflecting on what the seismic shift wrought by the virus will mean for the next generation, whose working lives will begin amid the greatest economic calamity since the Great Depression.
Last August, The Atlantic writer Annie Lowrey wrote that “the next recession will destroy millennials”. Well, the next recession is here, and the signs indeed look ominous.
Youth out of work
Past recessions have disproportionately impacted young people’s careers. While many people are hurt by recessions, evidence shows that those who graduate from education into a post-recession economy face “significant earnings losses that take years and years to rebound”. It literally stunts your economic growth.
We witnessed this in the “recession we had to have”. Richard Denniss has written eloquently about the raw deal he and other young grads copped in the early 1990s, getting by on crappy casuals gigs and the dole as youth unemployment hit nearly 20%.
We saw this again on a global scale after the global financial crisis (GFC), with long stretches of high youth unemployment, growing waiting times for young people to get jobs in the fields they trained in, and stagnant entry-level wages. Indeed, as the labour market has continued to flounder, myself and many other young people copped the brunt of endemic illegal wage theft.
Now, economist Jeff Borland estimates that two groups of Aussies will be hit hardest in this economic downturn – those losing income due to shutdowns, and those losing income because others have cut back their spending.
“Workers in both at-risk groups are predominantly young”, he says. “More than half are under 35 years of age.”
A rich boomer landlord “recovery”
Not content with prolonging our ascendance up the job ladder, the way authorities typically respond to recessions also tends to delay young people achieving another life milestone — buying a home.
If the economy starts to go pear-shaped, the Reserve Bank drops interest rates. This is necessary, as making credit cheaper coaxes people to keep spending even if clouds are blackening overhead.
So once the chaos blows over, it soon becomes a good time for those with the means to invest (read: older, wealthier people) to do so. But invest in what? Businesses that provide well-paying jobs? Social goods that help the disadvantaged? Nope. In Australia, the government gives investors big incentives to pump far too much money into housing, creating a useless asset bubble.
Now more than ever, as health authorities plead with us to stay at home, we must see the folly of making home ownership immensely harder. We have created a two-tier housing class, with investors hoarding properties they don’t need, while the young and poor remain far too vulnerable to evictions and homelessness at the worst possible time.
A better way
A rich boomer’s investment property will not give my mates a job they can count on. We must not kick off another decade-long sham “recovery” of sluggish wages and booming assets. Only a sustained and fair stimulus, and structural changes that fairly distribute the recovery, will set our economy on a just course after its isolation period.
Before this crisis, I saw little political appetite in Canberra for such an agenda of intergenerational fairness. However, the Morrison government has shown remarkable pragmatism in shaking off its frugal tendencies and becoming “accidental socialists“. Perhaps, just as they saw reason on wage subsidies and raising Newstart, they might come around on investing in jobs for the next generation and curbing our nation’s unhealthy obsession with property.
We cannot let this virus become a terminal illness for our economy’s future, or the generation it will depend upon.