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The generation “done over” by coronavirus

Apr 29, 2020 • 15m 15s

Younger workers are bearing the brunt of the current economic downturn, just like they did during the GFC. Today, Mike Seccombe on how the pandemic is fuelling generational inequality.

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The generation “done over” by coronavirus

212 • Apr 29, 2020

The generation “done over” by coronavirus

RUBY:

From Schwartz Media, I’m Ruy Jones, this is 7am.

As details emerge of the government’s plan for economic recovery… it’s clear young people will suffer the brunt of the pandemic’s fallout.

Today: Mike Seccombe on how the pandemic is fuelling generational inequality.

Mike, it’s been 12 years since the global financial crisis - what can we say definitively about the impact of that time, here in Australia?

MIKE:

Well, the Rudd government saved Australia from the worst of the global financial crisis through massive and targeted stimulus.

Archival tape -- reporter:

The government of Australia is today launching an unprecedented $42 billion nation building and jobs plan. The prime minister says it's important for governments to act early, decisively and responsibly when it comes to this crisis.

MIKE:

They had a lot of help from the fact that Australia had a, you know, preexisting, pretty well-designed social safety net and a well-regulated labor market. And we also benefited from the Chinese government's stimulus, which kept our two way trade happening.

RUBY:

Mike Seccombe is The Saturday Paper’s national correspondent.

MIKE:

But the bottom line still is that at a time when the world economy experienced a huge shock. Australian incomes continued to grow and inequality actually decreased marginally over the succeeding few years. So you'd have to say it was pretty, pretty successful thing.

But that is not the same as saying that Australia escaped unscathed from the GFC. The standout there is that young people in particular experience something which economists call scarring.

Archival tape -- reporter:

While economists say they're starting to see signs of economic recovery, it's clear that young Australians are still feeling the effects of the global financial crisis.

Archival tape -- Australian:

Well it’s been quite tricky... it's quite demoralising, really. It'll take years for young Australians to recover from this slump.

MIKE:

I spoke to Professor Jeff Borland, who's a labor market economist at the University of Melbourne, and he says scarring is what happens when there's some kind of negative impact on a worker. Borland has analyzed the employment effects of the GFC which show those already established… bounce back reasonably quickly...

Archival tape -- Jeff Borland:

The GFC impacted to some extent on all age groups. people aged 25 to 54 experienced a small decline by far the largest impact was people aged 15 to 24.

MIKE:

While Australia was ranked in the bottom third of unemployment rates out of 34 OCD countries assessed it had the third highest youth share of total unemployment at 37 per cent, whereas the youth share of the population is only sixteen point four per cent. So it's more than, you know, more than twice as much as you would expect given their relative proportion of the population.

There was no V-shaped recovery for these people. It was more like an L. It went straight down and then it went flat and never bounced back.

RUBY:

And Mike, this generation of workers wasn’t exactly having an easy time before the GFC were they?

MIKE:

Well, even before the GFC, their lives were getting harder. Under the Howard government, inequality increased quite sharply as a result of various decisions that government made that gave preferential treatment to investment income over Labor income. So that meant that asset prices boomed, which massively benefited those who already had assets and it locked out those that didn't, particularly younger Australians. So, you know, we see homeownership rates were dramatically lower. Things like that.

And there was also a sort of a class element, I guess you would say, involved as well, which is that those unemployed people with the lowest levels of educational attainment suffered far worse.

RUBY:

Right, so there’s this perception that Australian emerged from the GFC in pretty good shape, but in reality younger people, who were already struggling economically, took a big hit. Has that trend continued or has there been some recovery for them?

MIKE:

The reality is that younger Australians have been doing it tough for a long time. Borland points out that since the GFC, slower rates of economic growth and the increasing employment of older Australians, you know, there's more older people staying in the workforce, which has tended to crowd or crowd out younger people coming in.

And there were also the ones most affected by changes in the labor market, you know, casualisation of the workforce, the gig economy, insecure employment generally has impacted their lives much more than more established workers.

RUBY:

So these are the effects of the last financial crisis more than a decade ago now. How would this group of workers, millennials, emerge out of our current economic crisis triggered by Covid-19?

MIKE:

Well, the early signs aren't good. Unfortunately for them, also, it doesn't look like the government is looking to the long term lessons to be learned from the GFC. So, you know, it doesn't take much reading between the lines to see the Morrison government's plan for the recovery from this economic catastrophe. I think you could call it that now is essentially the same as the recipe that it had before the crisis.

You know, in good times or bad, their prescription is essentially the same small government, lower taxes, trickle down theory. Those are the measures that are designed to help business, but not necessarily younger workers who tend to be impacted by this casualisation and insecurity.

So, you know, put it like this. The coronavirus might be novel, but the government's response is certainly not.

RUBY:

We’ll be back in a moment.

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RUBY:

Mike, we're talking about the government's economic response to Covid-19, not so much the short term stimulus, but their longer-term recovery plan. What do we know about what the government's thinking?

MIKE:

We learned a bit more about their thinking last Wednesday. Scott Morrison took to Twitter and tweeted about it. He said he'd just got off the phone from a call with Donald Trump. To quote him, he said, We had a very constructive discussion on our health responses to Covid-19 and the need to get our market-led and business-centered economies up and running again.

There was a second tweet which said that Australia and the United States would continue to, quote, align our efforts as we work towards recovery on the other side of the virus. So that doesn't seem to be a very good sign for anyone worried about inequality.

I mean, if we're looking at the American model, it's not a good place to be looking. And there've been a lot of other signals of where the government is intending to, you know, sort of go back to the status quo ideologically. Josh Frydenberg. The treasurer went on ABC radio the same day that Morrison was tweeting,

Archival tape -- reporter:

Treasurer, welcome back to breakfast.

Archival tape -- Josh Frydenberg:

Nice to be with you, Fran.

MIKE:

and he went on to spruik the case for tax cuts, for big business, for more deregulation and for changes to the industrial relations regime.

Archival tape -- Josh Frydenberg:

We're going to have a higher debt burden as a result of this crisis and the spending that we had to undertake. And the way to meet that high debt burden is not through higher taxes, but is through growing the economy.

MIKE:

He said that the government was standing by its commitment to lower the total tax, take the total share of GDP that goes to government to twenty-three point nine per cent, which is several percentage points lower than it is now.

Archival tape -- Josh Frydenberg:

But we will continue to retain an open mind as to how we can go forward to lower the tax burden overall.

MIKE:

It's an arbitrary figure that they've settled upon, but it takes us back to where things were in the Howard years.

Archival tape -- Josh Frydenberg:

… Which is an important speed hump to remind everyone that we need to keep taxes lower.

MIKE:

Frydenberg also recommitted to very large personal income tax cuts that have been legislated, that haven't yet been implemented, and those heavily favor high income earners. The other thing, of course, was the Frydenberg described our corporate tax rate as being uncompetitive LIHI compared with those in the US, Britain and Singapore.

Archival tape -- Josh Frydenberg:

We did what we could which was to reduce the company tax rate for small and medium-sized businesses. We tried, but unsuccessfully, to do it for larger sized businesses.

MIKE:

And it's quite true. Our corporate tax rate is higher, at least for big corporations. But all the three countries that he compared us with are just vastly more inequitable societies than our own.

RUBY:

So the government is clearly signalling that there will be a business as usual approach to the economy, once we get through the pandemic. What will that mean for young people?

MIKE:

Well, first of all, if we look at the figures that are starting to come out about the impacts of the sort of economic crisis that's followed on the disease crisis, the first figures that came out of the Australian Bureau of Statistics last week showed that younger Australians were far the hardest hit economically, just as they were during the GFC.

In just three weeks from March 14, which was when Australia recorded its 104 case of the virus, something like 6 per cent of Australian jobs disappeared.

For people under the age of 20. The number of jobs that disappeared was far higher -- 9.9 per cent. And that was double the rate for people in their 40s, 50s and 60s. So pretty clearly the burden is being born to a far greater extent by younger workers.

And the other thing I should say, of course, is that the ABS data related to the situation three weeks ago and as we know, the economic situation, if not the health situation, has got worse in those three weeks and are expected to get much worse yet. Economists are predicting that there will be a very deep recession coming out of this and we're only just seeing the start of it.

RUBY:

Right. So, again, we're seeing that young people are the hardest hit in an economic crisis. Mike what do those unemployment figures look like in reality? How will lives change as a result of the decisions that the government is making now?

MIKE:

Well, obviously it means a lot of people will be out of work. And obviously, a lot of them will be young people. But the thing is here that Morrison and the government keep telling us that they expect this to be a pretty short V-shaped recession, that, you know, economic activity will go sharply down and then we'll bounce sharply back once the worst of the virus is behind us. But a lot of economists think this is, you know, wildly optimistic. I spoke to Saul Eslake, who's, you know, one of the more respected independent economists around the place. And he put it to me like this. Some people won't get their jobs back. People will have run down their savings and want to rebuild them. There'll be higher debt servicing payments for some people who've taken mortgage holidays.

Archival tape -- Saul Eslake:

We'll likely see falls in property prices because an important source of demand, namely international migrants, will be gone. Possibly quite a long time.

MIKE:

And consumers will be reluctant to spend. Private businesses will, as a result, be hesitant about investment.

Archival tape -- Saul Eslake:

The history of previous recessions tells us that people who do lose their job during recessions can take a long time to get them back. And the longer you are out of work, the more likely it is that when you do find another job, it will be of lower status and with lower pay, it will be a long and slow recovery.

MIKE:

It will be a long and slow recovery. And there will be lingering unemployment.

RUBY:

So, less jobs, jobs of lower status, and lower pay? Is that the future for young Australians?

MIKE:

Well, I suspect it is. And from the tone of the government's comments, so far, it looks like that's what they're factoring in. But I should say, it doesn't have to be that way. Right. The story of the past couple of decades in Australia is one of young people essentially being done over. First of all, though, it done over by the Howard government, which are very deliberately redirected wealth upwards and towards older Australians. Then they were done over again by the economic circumstance of the GFC. And what has followed, which is a period of slow growth in the economy generally and in wages and in employment.

And now, of course, they're being done over again by the Coronavirus, which, you know, is doubly ironic because younger Australians are the ones least at risk from the disease itself, but they are the ones that stand to suffer most from the economic response. Older generations. And you know, I am myself, a boomer, right. Who got his university education for free and was able to buy into a, you know, non-overheated property market at a reasonably early age. You know, we have prospered at their expense. And I just think, you know, when the immediate health threat is passed, we should be responding with big policy changes that acknowledge the debt that we owe these people.

RUBY:

Mike, thanks so much for your time today.

MIKE:

Thank you.

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RUBY:

Also in the news…

Health Minister Greg Hunt announced yesterday that Australia had only reported 12 new cases of coronavirus in the previous 24 hours, and only one of those was a case of unknown community transmission.

Hunt said that it was “perhaps the most important figure” he had announced since the pandemic began.

The low rate of community transmission has led to a number of states announcing an easing of social distancing restrictions.

NSW became the latest state to wind back current regulations, with Premier Gladys Berejiklian saying that from Friday groups of two adults would be allowed to visit friends and family.

Victorian Premier Dan Andrews has so far stood firm on restrictions, saying that the state would test 100,000 residents over the next two weeks before deciding how to roll them back.

Woolworths and Coles have eased product limits on a range of essential items including toilet paper, rice, hand sanitiser and antibacterial wipes. Some restrictions still remain, but the retailers expect to remove them over the coming weeks.

And the federal government has rejected reports that data collected by its new Covid-19 tracing app could be accessed by US intelligence agencies.

According to the government there is “no application of US law in relation to this app”.

I’m Ruby Jones. This is 7am. See ya tomorrow.

As we learn more details about the economic fallout from the pandemic, it’s clear young people will bear the brunt of the downturn. Already younger workers are bearing a disproportionate burden of job losses. Today, Mike Seccombe on how the pandemic is fuelling generational inequality.

Guest: National Correspondent for The Saturday Paper Mike Seccombe.

Background reading:

The generation Covid-19 will scar in The Saturday Paper
The Saturday Paper
The Monthly

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7am is a daily show from The Monthly and The Saturday Paper. It’s produced by Ruby Schwartz, Atticus Bastow, and Michelle Macklem. Elle Marsh is our features and field producer, in a position supported by the Judith Neilson Institute for Journalism and Ideas. Brian Campeau mixes the show. Our editor is Osman Faruqi. Erik Jensen is our editor-in-chief. Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

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212: The generation “done over” by coronavirus