FCA has published an Insight article on Coronavirus and intergenerational difference – the emerging picture. The article recognises that early data is beginning to reveal the pandemic’s effects on our financial lives and examines the intergenerational disparities in these effects, focusing on how the pandemic may affect each generation’s short and long-term financial needs.
For context, the generations are often categorised into four groups:
- Generation-Z (born since 2000)
- Millennials (born between 1981 and 2000)
- Generation-X (born between 1966 and 1980), and
- Baby Boomers (born between 1946 and 1965)
While the article acknowledges that it is too early to be definitive about the precise implications of the current crisis, it does examine how, so far, the data indicates that the crisis is delivering a particularly severe financial blow to younger earners. Many of these individuals are just starting out in careers and, as a generation, are facing the biggest brunt from loss of work and impaired future employment prospects. However, older workers have also been impacted disproportionately and some are now confronting real financial hardship and challenges ahead.
Perhaps most shockingly, the data analysed shows that Baby Boomers and Millennials are more than twice as likely as Generation Xers to have lost their jobs during the pandemic.
Further, the data shows that those in atypical employment – without fixed weekly hours – have been most affected by the crisis. Again, the article notes that both Millennials and Baby Boomers are somewhat more likely to be employed in this way (21% in each case, compared to 18% for Gen-X).
The same broad pattern can be seen among those without fixed hours – 44% of Millennials and 49% of Baby Boomers without fixed hours have either been furloughed (29% of Millennials and 32% of Baby Boomers), lost hours and pay (5% and 10% respectively), or lost their job (10% and 7%). By comparison, around a third of Gen-X employees have been affected in one of these ways.
The article then examines the data in an attempt, amongst other things, to gauge financial resilience across the generations. It considers the generational correlation between those who entered the crisis with poor financial resilience and those who have suffered job loss or a blow to earnings since. FCA found that 30% of Millennials who have suffered a loss of job and/or earnings since the crisis began already had low financial resilience heading into the pandemic compared to 17% of Gen-X and only 6% of Baby Boomers.
Younger people were also much more likely to be in debt – before the crisis about 1 in 7 Millennials were in arrears on one or more of their debts. Since the onset of the pandemic that figure has risen to 1 in 5.
Finally, the article turns to considering the impacts of the pandemic on the emerging Generation-Z, many of whom will enter the workforce during what could be the deepest global recession since World War II. An important factor in avoiding disruption to longer-term plans and welfare of the younger generation will be the ability to smooth consumption over time – here credit markets have a key role to play, the article suggests.
The article ends by reflecting on how policymakers and regulators are already highly alert to the need to understand and address intergenerational issues and to support markets to respond to these effectively. While it is too soon to say what the full impact of Covid-19 will be, there is the clear potential for the pandemic to exacerbate the patterns of difference between generations which have emerged to date.
Approaches to addressing these issues, it says, could include developing hybrid and flexible products to meet the evolving needs of the young, whilst also providing additional support in managing the higher degree of risk across generations and the specific risks that each cohort faces.