RUTH SUNDERLAND: Economy that emerges from Covid rubble will be very different – youngsters who come of age in Generation Pandemic will lead way
- Demographics will have a huge effect on the UK and other developed economies in the coming years
- The baby boomer stranglehold is being broken, slowly, perhaps, but the pandemic will speed up the process
- The pandemic is likely to accelerate the transfer of economic power from old to young, for one main reason: technology
Accepted wisdom is that, while the elderly are most vulnerable to the physical ravages of Covid-19, it is the young who are suffering financially.
It’s true that real damage is being caused by school and university closures and that many young people are having the crucial early years of their careers torpedoed.
One of the biggest challenges is to stop the pandemic putting a permanent blight on their prospects. But beyond the immediate gloom, lies a more optimistic future.
Valuable asset: : The pandemic is likely to accelerate the transfer of economic power from old to young, for one main reason – technology
In the short term, the generational conflict in evidence before the virus has become worse. Baby boomers had already hogged the best jobs, the most expensive homes – bought for peanuts back in the day – and the most lucrative pension plans.
Policy responses to the financial crisis a decade ago – in particular QE money-printing, which drove up the price of houses and other assets – pushed the dial further in favour of the prosperous middle-aged and old. Covid-19 has brought more of the same. Central banks have unleashed yet more QE and there has been a vast expansion of the national debt, which will fall mainly on the shoulders of younger generations.
So in the teeth of the worst economic crisis since the Second World War, millions of mature, middle-class Britons have actually become better off. As a country, we have accumulated a £100bn Covid money mountain because lockdown has curbed spending. Few ‘accidental savers’ are under 40.
Well-off boomers may not have set out to warp the economy to serve their own selfish ends, but it doesn’t take too much imagination to see how it might look that way.
It also makes it easier to see how some respected university economists can come up with ideas such as wealth taxes they believe – wrongly in my view – would help to address the unfairness.
And yet. Demographics will have a huge effect on the UK and other developed economies in the coming years.
The baby boomer stranglehold is being broken. Slowly, perhaps, but the pandemic will speed up the process.
In the US, despite having elected the oldest ever president, power is leaching from the oldies due to weight of numbers. More than half of the US population are millennials or younger. In the UK, the proportion of baby boomers born between 1946 and 1964 is around the same as millennials born between 1981 and 1996. Each group makes up around a fifth of the population.
The pandemic is likely to accelerate the transfer of economic power from old to young, for one main reason: technology.
The most valuable asset in the coming decades is unlikely to be housing, but digital capability – and on that measure, the young should be richer than their elders.
A report by the World Economic Forum on future jobs predicts that, whilst many people will be made redundant by robots, millions of new roles will be created.
The WEF sees strong demand for people skilled in data analysis, machine learning, artificial intelligence, robotics, fintech and risk management.
Whole new professions are likely to emerge, for example in green technology.
Young entrepreneurs do not need large amounts of capital or expensive premises to set up digital businesses, just inspiration and a laptop.
The future Microsofts and Amazons are germinating now, during the lockdown. The economy that emerges from the rubble left by Covid-19 will be very different – and it is the youngsters who come of age in Generation Pandemic that will lead the way.