Wealth gap between baby boomers, millenials to widen due to Covid-19 fallout - demographer

A demographer says the economic fallout from Covid-19 will hit millennials the hardest, causing the wealth gap between them and the baby boomer generation to widen.

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Author Paul Spoonley says millennials will be hardest hit by Covid-19. Source: Q+A

Massey University professor and author Paul Spoonley told TVNZ1’s Q+A millennials were doubly hit by Covid-19 as they were already affected by the downturn following the 2008 Global Financial Crisis (GFC).

In his new book The New New Zealand, Professor Spoonley outlines how the country’s population patterns have changed. He argues that as the population ages and younger generations have fewer children, governments would need to consider new economic models and new ways of living.

He said millennials were at risk of labour market scarring.

“If you enter the labour market through an economic downturn, it’s not an easy fix. 

“Your experiences - your pay, your job prospects - simply don’t recover that quickly. So, you’re scarred through quite a bit of your working life.”

Professor Spoonley said that would mean boomers like himself would continue to have a head-start and be “relatively wealthy” in comparison to subsequent generations.

He said younger generations would be “hit quite badly” and would face “long periods of economic difficulties” while being impacted by high housing prices, student debt, and the fallout of the GFC and Covid-19. 

For example, when faced with low salaries in comparison to house prices, this can make millennials feel “excluded from wealth-creating opportunities that I [boomers] had”, he said.

New Zealand also needed to look at reducing its migration numbers to take into account high unemployment after the pandemic, Professor Spoonley said.

However, he acknowledged some sectors like IT and horticulture were reliant on migrant workers. He said Government policy needed to explore how some migration could be resumed post-Covid-19, and how Māori as tangata whenua would contribute to those discussions.

Professor Spoonley said politicians needed to start talking about the generation divide and integrate what demographers are predicting about an ageing population into their policies.

“We look backwards rather than forwards … Covid will see some adjustments, but we know what’s going to happen. We should be anticipating that.”

But, he said the short three-year terms of Government in New Zealand meant parties were more likely to prioritise short- and medium-term gains, rather than long-term ones.

He said parties were “afraid” and were “not prepared to antagonise” the politically-engaged bloc of boomer voters. 

“I think it’s reprehensible that no political party is talking about superannuation this election.”

Part of it is making sure younger people turn out to vote, he said.

“They [young people] need to have faith in the political system.”

According to Electoral Commission statistics for the 2017 election, the turnout for those aged 18-24 enrolled to vote was 69.3 per cent. Meanwhile, for all age groups over the age of 55 who were enrolled to vote, the turnout was more than 84 per cent.