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Economy

Unemployment: The economic impact of coronavirus on millennials is brutal – Vox.com

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Here’s a brutal statistic: One poll found 52 percent of Americans under the age of 45 have either lost their job, been put on leave, or had their hours dramatically cut as a result of the coronavirus pandemic, compared to 26 percent of people over the age of 45.

In other words, millennials are going to bear the brunt of this economic crisis, just as they did in 2008. The Great Recession upended the economy as many millennials were entering the labor force for the first time. The pandemic and the resulting economic shock have hit as many are entering their 30s and could erase any gains they’ve made.

Annie Lowrey, an economics writer at the Atlantic and the author of Give People Money: How A Universal Basic Income Would End Poverty, Revolutionize Work, and Remake the World, argued in a recent piece that millennials are essentially “a lost generation,” having entered the labor force during the Great Recession in 2008 and now facing a second “once-in-a-lifetime downturn.”

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Millennials, Lowrey argues, have never really had any economic security, and this pandemic all but guarantees “that they will be the first generation in modern American history to end up poorer than their parents.”

I spoke to Lowrey about what makes the plight of millennials “unusually bad,” why this crisis is especially devastating for young workers, and if she thinks millennials have a chance to escape the financial precarity that has defined their lives so far.

A lightly edited transcript of our conversation follows.

Sean Illing

Every generation seems to get screwed economically, at least once or twice. What’s unique about the plight of millennials?

Annie Lowrey

You’re definitely right about that, and I’m not trying to hold a misery Olympics here. I don’t even think millennials are a historically screwed generation compared to all the generations that preceded us going back to time immemorial. But it’s also true that there’s a huge economic body of literature that shows that graduating into a recession, like millennials did in 2008 and 2009, is unusually bad.

Sean Illing

Unusually bad in what ways?

Annie Lowrey

The word they use in the economic literature is “hysteresis,” which basically just implies a scarring. So you get these scars in the labor market and it takes a very long time to heal. If you graduate into a recession, for example, it leads to high unemployment and large earnings losses at the time, which you would expect. And then, it leads to lower earnings trajectories for decades and even a lifetime, which is maybe more unexpected. It basically means that you don’t rebound in the way that other people rebound.

So all this means that millennials have not had the same wealth trajectory compared to previous generations. And you can see this when you compare their wealth at the same point in their life cycle with older generations — millennials are just doing worse. And that’s after a decade of economic growth.

I think there’s something really discomforting in that because it means some kind of stratification on the basis of age, but it also means that decades of economic advancement didn’t do anything for a whole generation of people.

Sean Illing

How much of this economic precarity for millennials is about bad timing, about the reality of entering the labor force during a massive recession, and how much of it is about the nature of capitalism today and the kind of world it has wrought?

Annie Lowrey

It’s a little of both, right? Some of it is just an accident of timing, but there’s also the reality that millennials were thrown into an economy that was structured to manufacture precarity for them. So obviously a big factor is the Great Recession, which just took money out of their pockets and made it a lot harder for them. The second is the cost of going to college. Millennials have racked up more than a half-trillion dollars of student loan debt. That has had the effect of depressing their take-home pay and it’s made it really hard for them to buy houses, start businesses, start families, have children, and so on.

Millennials have largely been shut out of the housing market, in part because of a massive housing crisis that they didn’t cause, and this happened at a time when the prices were going up. So you had this nice wealth effect that really benefited older generations, especially baby boomers, and millennials instead had to keep on renting. And there’s about an eight percentage point gap between where we would expect the millennials to be and where they are in terms of home ownership, so that’s another big thing.

There are just a hundred threads you could pull on here. The fact that jobs are precarious and a lot of millennials have been stuck in piecemeal or gig work with no real security is obviously a problem. There are significant racial dynamics at work, too. Millennials are a really diverse generation, but white millennials have done a lot better than black millennials in particular.

Sean Illing

So millennials were thrown off course by the Great Recession and now we’re facing another cataclysmic economic event with this pandemic. This crisis is hammering every demographic in different ways and at different levels. How will it impact millennials in particular?

Annie Lowrey

It’s a great question, and we just don’t have a lot of great data on what is happening with the economy right now. Our best data tends to be backward-facing, and it’s still not capturing everything that’s going on in the labor market in the economy right now. We’ll have a lot better sense in a couple months.

All that said, the data that do we have from things like polls and credit card processors is terrifying. It shows that millennials are experiencing something somewhat different than older generations. Data for Progress just came out with a report that suggests that more than half of people under the age of 45 have lost their job, been put on leave, or had their hours reduced. And that’s roughly twice the rate of people over the age of 45. And I think that that makes some sense because millennials are disproportionate holders of a lot of the jobs that we know have been wiped out in the most dramatic terms — things like restaurants and bars, health clubs, yoga studios, or retail.

Older generations are likely to see more wealth losses as a result of this because they’re the ones who hold the most wealth. Millennials aren’t really holding a lot of stocks. They don’t own a lot of houses, but boomers do. And so, because of the decline in asset values, those paper losses will be actually relatively restrained for millennials. But that’s not really a good thing. In terms of income losses, I think that this is not going to be good for anybody — and I would really stress that: This is just an awful situation for everyone — but in terms of income losses, at least for right now, it seems like it’s concentrated among young workers.

Sean Illing

There’s the debt trap, the home ownership problem, the affordability crisis, the lack of wealth accumulation, an unforgiving labor market — all the things that keep millennials on shaky economic ground. In these sorts of conversations, “neoliberalism” is the default boogeyman, the thing we blame for creating this precarious world we’ve inherited. What’s your origins story here? Who or what do you blame?

Annie Lowrey

I think that there is a lot of blame to go around here, but I would step back and just say that this is the system that we have elected. We choose this system of laws and economic structures. None of this is a given. There’s no “invisible hand” insisting that we have precarity all the time. We choose this. We choose these rates of inequality, this racial wealth gap, we elected it. We choose to not help parents out until their kid is 5 with public education. We could’ve chosen another system, another world, like other countries have.

All of these are solvable problems in terms of policy. In a lot of ways, this isn’t even hard stuff. We’ve just chosen not to do it. Explaining why we’ve done this is just way above my pay grade. I would say that race is a huge part of it. We’ve chosen not to have this system I think in no small part because we’ve elected to make sure that white people have security that black families don’t. And this is the result.

Sean Illing

I completely agree, but I just want to be clear right here because I know a lot of people will read this and say, “I didn’t choose this! I don’t want this,” and they’re obviously right. So I think we should be explicit about the “we” in your formulation.

Annie Lowrey

Absolutely. I’d say that these social programs I’m talking about, like universal pre-K for all Americans, are really pretty popular. But I think that we have a system of government that doesn’t reflect that popularity necessarily. So the “we” here is just us as a collective, and particularly the people with their hands on the levers of power.

But you’re obviously right, there have been people pushing back against this for decades. So it’s hard to say who wants this and who doesn’t. I think the key point is that this isn’t merely a market outcome. The world we have has been shaped by policies our government has chosen. That’s so important to remember.

Sean Illing

We’re still on the front end of this crisis and no one knows what’s coming, but what’s your best guess of what the economic order will look like on the other side of this pandemic?

Annie Lowrey

That’s the question, right? I wish I knew. I think that economists are currently concerned that we are going to face a terrible snowballing recession that comes from business failures and sickness and loss of insurance on the other side of this. And I just don’t know that we have any idea of how we’re going to rebound from that.

You have optimists who are saying that we could still have a V-shaped recovery because the economy was pretty good going in, and this was like a gargantuan hurricane that came in and will pass over us in time. But I think now there’s a lot more concern that so much economic damage is accumulating that you’re going to end up with a pretty nasty long recession.

One thing we know is that younger workers who were more fragile are already being more hard hit. Older folks will suffer greater wealth losses, but at least they had that wealth cushion. I’m really worried about the children of millennials who are living in these homes that have been shattered by this crisis. I’m concerned about the intergenerational effects of this. How many kids are going to be food insecure? How many kids are going to be out of school for months and months and in really unstable housing and economic situations?

We have this whole generation of workers that have never really had any security to begin with, and now they’re being decimated again. It’s just awful and we still don’t have a real understanding of how bad it will get.


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Economy

Yellen Sounds Alarm on China ‘Global Domination’ Industrial Push – Bloomberg

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US Treasury Secretary Janet Yellen slammed China’s use of subsidies to give its manufacturers in key new industries a competitive advantage, at the cost of distorting the global economy, and said she plans to press China on the issue in an upcoming visit.

“There is no country in the world that subsidizes its preferred, or priority, industries as heavily as China does,” Yellen said in an interview with MSNBC Wednesday — highlighting “massive” aid to electric-car, battery and solar producers. “China’s desire is to really have global domination of these industries.”

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Opinion: The future economy will suffer if Canada axes the carbon tax – The Globe and Mail

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Open this photo in gallery:

Poilievre holds a press conference regarding his “Axe the Tax” message from the roof a parking garage in St. John’s on Oct.27, 2023.Paul Daly/The Canadian Press

Kevin Yin is a contributing columnist for The Globe and Mail and an economics doctoral student at the University of California, Berkeley.

The carbon tax is the single most effective climate policy that Canada has. But the tax is also an important industrial strategy, one that bets correctly on the growing need for greener energy globally and the fact that upstart Canadian companies must rise to meet these needs.

That is why it is such a shame our leaders are sacrificing it for political gains.

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The fact that carbon taxes address a key market failure in the energy industry – polluters are not incentivized to consider the broader societal costs of their pollution – is so well understood by economists that an undergraduate could explain its merits. Experts agree on the effectiveness of the policy for reducing emissions almost as much as they agree on climate change itself.

It is not just that pollution is bad for us. That a patchwork of policies supporting clean industries is proliferating across the United States, China and the European Union means that Canada needs its own hospitable ecosystem for clean-energy companies to set up shop and eventually compete abroad. The earlier we nurture such industries, the more benefits our energy and adjacent sectors can reap down the line.

But with high fixed costs of entry and non-negligible technological hurdles, domestic clean energy is still at a significant disadvantage relative to fossil fuels.

A nuclear energy company considering a reactor project in Canada, for example, must contend with the fact that the upfront investments are enormous, and they may not pay off for years, while incumbent oil and gas firms benefit from low fixed costs, faster economies of scale and established technology.

The carbon tax cannot address these problems on its own, but it does help level the playing field by encouraging demand and capital to flow toward where we need it most. Comparable policies like green subsidies are also useful, but second-best; they weaken the government’s balance sheet and in certain cases can even make emissions worse.

Unfortunately, these arguments hold little sway for Pierre Poilievre’s Conservatives, who called for a vote of no-confidence on the dubious basis that the carbon tax is driving the cost-of-living crisis. Nor is it of much consequence to provincial leaders, who have fought the federal government hard on implementing the tax.

Not only is this attack a misleading characterization of the tax’s impact, it is also a deeply political gambit. Most expected the vote to fail. Yet by centering the next election on the carbon tax debate, Mr. Poilievre is hedging against the possibility of a new Liberal candidate, one who lacks the Trudeau baggage but still holds the line on the tax.

With the reality of inflation, a housing crisis and a general atmosphere of Trudeau-exhaustion, Mr. Poilievre has plenty of ammunition for an election campaign that does not leave our climate and our clean industries at risk. The temptation to do what is popular is ever-present in politics. Leadership is knowing when not to.

Nor are the Liberals innocent on this front. The Trudeau government deserves credit for pushing the tax through in the first place, and for structuring it as revenue-neutral. But the government’s attempt to woo Atlantic voters with the heating oil exemption has eroded its credibility and opened a vulnerable flank for Conservative attacks.

Thus, Canadian businesses are faced with the possibility of a Conservative government which has promised to eliminate the tax altogether. This kind of uncertainty is a treacherous environment for nascent companies and existing companies on the precipice of investing billions of dollars in clean tech and processes, under the expectation that demand for their fossil fuel counterparts are being kept at bay.

The tax alone is not enough; the government and opposition need to show the private sector that it can be consistent about this new policy regime long enough for these green investments to pay off. Otherwise, innovation in these much-needed technologies will remain stagnant in Canada, and markets for clean energy will be dominated by our more forward-thinking competitors.

A carbon tax is not a panacea for our climate woes, but it is central to any attempt to protect a rapidly warming planet and to develop the right businesses for that future. We can only hope that the next generation of Canadian leaders will have a little more vision.

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Business leaders say housing biggest risk to economy: KPMG survey – BNN Bloomberg

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Business leaders see the housing crisis as the biggest risk to the economy, a new survey from KPMG Canada shows.

It found 94 per cent of respondents agreed that high housing costs and a lack of supply are the top risk, and that housing should be a main focus in the upcoming federal budget. The survey questioned 534 businesses.

Housing issues are forcing businesses to boost pay to better attract talent and budget for higher labour costs, agreed 87 per cent of respondents. 

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“What we’re seeing in the survey is that the businesses are needing to pay more to enable their workers to absorb these higher costs of living,” said Caroline Charest, an economist and Montreal-based partner at KPMG.

The need to pay more not only directly affects business finances, but is also making it harder to tamp down the inflation that is keeping interest rates high, said Charest.

High housing costs and interest rates are straining households that are already struggling under high debt, she said.

“It leaves household balance sheets more vulnerable, in particular, in a period of economic slowdown. So it creates areas of vulnerability in the economy.”

Higher housing costs are themselves a big contributor to inflation, also making it harder to get the measure down to allow for lower rates ahead, she said. 

Businesses have been raising the alarm for some time. 

A report out last year from the Ontario Chamber of Commerce also emphasized how much the housing crisis is affecting how well businesses can attract talent. 

Almost 90 per cent of businesses want to see more public-private collaboration to help solve the crisis, the KPMG survey found.

“How can we work bringing all stakeholders, that being governments, not-for-profit organizations and the community and the private sector together, to find solutions to develop new models to deliver housing,” said Charest.

“That came out pretty strong from our survey of businesses.”

The federal government has been working to roll out more funding supports for other levels of government, and introduced measures like a GST rebate for rental housing construction, but it only has limited direct control on the file. 

Part of the federal funding has been to link funding to measures provinces and municipalities adopt that could help boost supply. 

The vast majority of respondents to the KPMG survey supported tax measures to make housing payments more affordable, such as making mortgage interest tax deductible, but also want to maintain the capital gains tax exemption for a primary residence.

The survey of companies was conducted in February using Sago’s Methodify online research platform. Respondents were business owners or executive-level decision makers.

About a third of the leaders are at companies with revenue over $500 million, about half have revenue between $100 million and $500 million, with the rest below. 

This report by The Canadian Press was first published March 27, 2024.

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