Our liberties are being curbed to unprecedented levels thanks to the ongoing pandemic and lockdown. Amid the huge disruption and tragic costs, the fact that an overwhelming majority of people are willing to make enormous sacrifices to help those more vulnerable than themselves is truly uplifting. It dispels the myth that we now live in a more uncaring society.
However, it also highlights the issue of generational inequality. As a result of capitalism free trade, successive generations have seen their wages increase and have enjoyed a higher standard of living than their parents and grandparents before them.
The financial crisis and subsequent recession changed all that. Although technological advances continued to improve quality of life, wages remained stagnant and only recently surpassed their pre-crisis levels in real terms. It was millennials who got a raw deal as they entered a low-wage labour market.
Their plight was made even worse by soaring house prices, leaving many young people unable to afford to own their own home and forced to pay exorbitant rents. The result has been young people putting their lives on hold, finding themselves unable to afford to move to a new city to start a new job, get a flat with their partner, or any number of other things.
Now, the situation only looks to be getting worse for millennials and the generation that follows them. Many who have just started work will have seen their careers disrupted. Workers in the gig economy have seen their livelihoods threatened. Recent graduates and school leavers are about to enter an extremely uncertain labour market.
Then there are even younger people who have seen their education disrupted by school and university being cancelled. Add to this the fact that social distancing means that relationships are now more difficult and that we still face a crippling housing crisis. Frankly, young people look set to be getting a very bad deal.
As such, once the pandemic is over, the government should prioritise tackling intergenerational inequality.
The first step needs to be housing. Renting in a major city in the UK is incredibly expensive, so most young people end up spending a significant proportion of their income on rent. It also means that many people will never own their own home.
And the reason housing is so expensive in this country is due to the UK’s restrictive planning system – supply has been unable to keep up with demand. What’s more, stamp duty land tax gums up the housing market. All of this has made housing much more expensive, and it is younger people who are most adversely affected.
Thankfully, the solution to the housing crisis is very simple: we need to boost supply. The government should liberalise the planning system by relaxing the rules about what type of homes can be built and where. Crucially, it needs to abolish the misnamed “green belt” and replace it with something fit for the present day. We should, of course, ensure that health and safety regulations are kept and rigorously enforced, but other superfluous regulations should be abolished so that more homes can be built.
This, coupled with abolishing stamp duty, would increase supply and dramatically lower housing costs. That would make high quality and affordable housing far more accessible to young people, giving them more disposable income to spend on the things they want and need while also being in a position to put money away for a rainy day.
We also need to tackle low pay. Those on the left often call for increases to the minimum wage in order to address this issue. Although this can sometimes be effective, increasing the minimum wage can lead to decreases in employment opportunities and price increases, which would hit the most vulnerable the hardest.
A more effective solution would be to focus on increasing productivity, which is the most effective and least damaging way of increasing wages. Cutting taxes, improving transport infrastructure, and investing in education and training would all help with this.
Another possible solution would be to introduce a universal basic income. This would top up the wages of low earners while also ensuring that young people can afford to make ends meet while looking for work or retraining.
Covid-19 will one day be over and things will start to return to normal. Given that young people are likely to be the hardest hit by the lockdown in economic terms, we need to be bold in tackling intergenerational inequality by addressing the problems of expensive housing and low pay.
