The measures put in place to prevent the spread of COVID 19, including lockdowns, furlough and travel bans have caused both household income and spending to drop dramatically. This change to household earnings and spending behaviours have pushed many into financial difficulty, while other households have become more financially secure. Unfortunately, as with other financial crises, younger people tend to be one of the most heavily impacted. The UK’s Office of National Statistics (ONS) reports that 76% of young people aged 25 to 29 years-old were worried about the impact of COVID on their lives. In this article, we look at how COVID has financially impacted younger people and while there is some inevitable bad news, there are some silver linings too.
In the UK, and other countries, there are strong signs that the job market is recovering. For example, there are more job vacancies than before the pandemic. However, research shows that people who graduate from university during a recession can lead to lower wages over their lifetime. This is largely due to an initial earnings loss that can take several years to catch up.
On the plus side, central banks around the world have reaffirmed their commitment to low interest rates. As such, investment firms and pension funds are increasingly pouring money into startups, which is turbo-charging innovation and the move to a more digitised economy. Young people are most likely to work in startups, and so the increased funding to early-stage companies presents an opportunity for them to acquire new skills that might be of great value in the future.
Rents and home ownership
The move to remote working has had a large impact on the property market. Now that proximity to the office is no longer one of the main constraints on home choice, people are flocking to larger homes in the suburbs and countryside. This has driven up house prices in those areas making it even more challenging for young people to get a foot on the property market.
On the other hand, the demand for private rented accommodation has plummeted in major cities. For young people, who are the most likely segment of society to rent, this is welcome news as reduced demand for rental properties inevitably drives down rents. Furthermore, although it seems unlikely that remote working will become the “new normal” for everyone, it is undoubtedly here to stay in some shape or form. As demand for corporate office space drops as a result, more prime real estate in city centres may become available for residential development, which may, over the long term, make urban housing more affordable.
The pandemic has accelerated companies’ plans to adopt a more remote-friendly working culture. Many companies have chosen to downsize or give up their office footprint entirely and allow their employees to continue working remotely.
Yet, as a digital-first generation, young people are particularly well prepared to adapt to this working environment and may have an edge over their older peers. This could lead to faster promotions, a quicker accumulation of skills and more responsibility - all of which can lead to an increase in earnings. There are also direct financial benefits of working from home, such as reduced commute costs and not spending money on expensive lunches at work, which can really add up over time.
As COVID restrictions lift, the UK and other economies are starting to bounce back. Although young people will continue to feel the economic and financial impact of COVID keenly over the mid-term, not all that has happened over these past 18 months is negative. Remote working, changes in where people choose to live, and increasing investment in technology companies may have a genuinely positive impact on younger generations in the years to come.