Why Hong Kong’s youth can no longer expect to be richer than their parents
Major news outlets, inter-governmental agencies and scholars are drawing more attention to a threatening inter-generational injustice. Baby boomers are luxuriating in business class or above, while millennials are fighting for scarce seats at the back.
Baby boomers are defined as those born between 1946 and 1964. The X Generation came into the world between 1965 and 1979, and the Y Generation – the millennials – between 1980 and the mid-nineties.
These intervals vary a little among analyses, but the core argument is that baby boomers are doing relatively well, in no small measure at the expense of the millennials.
In 1957, Prime Minister Harold McMillan famously said the British people had never had it so good. But this was a time of relative austerity. Post-war rationing had just ended. The average living standards of child baby boomers were modest compared with what they enjoy today – in the twilight of their careers or in retirement.
Several factors have worked to their advantage, especially in industrialised economies. For many, higher education back then was free or much less costly. Today many millennials with tertiary education carry huge debts that take years to repay. The absence of inflation means that pensions are protected and debts do not erode. When taxes are cut, the wealthy, and therefore frequently older people, often benefit disproportionately.
Job markets discriminate deeply against young people. Baby boomers typically enjoy job security, health insurance and pensions. Today these are becoming privileges. Precisely because it is so difficult and costly to shed older people with job security, new or entry-level jobs are less secure and less available.
Contracts are short-term, devoid of security and any associated benefits. Youth unemployment is way above the average in many economies, well into double digits percentage-wise. Young people who do not inherit property are likely never to be able to afford any, or even to rent accommodation.
More and more young people live at home with parents, well into adulthood as stagnant incomes and rising house prices in relation to earnings have taken a toll. They delay marriage and live circumscribed social lives. The future looks bleaker to them than it did to their parents at the same age.
As a recent series of articles by The Economist points out, the absence of work, especially among the young, has a “scarring effect”. It batters self-esteem and fosters a sense of alienation and anger. Some would argue that this in no small measure is precisely what has propelled the electoral campaigns of Trump and Sanders in the United States.
The plight of the young in leading industrial economies has been surveyed by the Guardian newspaper. It reports that households with young breadwinners have seen their income fall below the average by anything between 2 per cent and 19 per cent, depending on the country. At the same time, households headed by a person over 65 have enjoyed increases above the average of between 5 per cent and 66 per cent.
These trends preceded the 2008 recession, and then became a lot worse. Children across the industrial world and in places like Hong Kong can no longer expect to be richer than their parents. If they do not inherit assets, they will have nothing to leave behind, except perhaps debts. Rising inequality has a distinct inter-generational dimension.
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Demographic trends aggravate a situation that is already generating dangerous age-based divides. In many economies, ever fewer people of working age support growing numbers of the aged. An added complication turns on evidence that inequality is negatively related to growth. Deteriorating incomes result in less expenditure on learning and skill creation, and if the young are getting poorer, the negative link is even more pronounced.
As with other kinds of discrimination, whether ethnic, gender-based or on other grounds, the curse has a cure. Action is difficult because of well-entrenched and in this case aged opposition. But remedial policies falling well short of anything revolutionary could make all the difference.
Patrick Low is a fellow at the University of Hong Kong’s Asia Global Institute