Gen Z’s early careers have been hampered by many challenges, from a once-in-a-generation pandemic and war on European soil to rising costs of living and recession fears that have led to widespread layoffs.
But according to new research, the economic context in which young people enter the workforce may have a far more profound impact on Gen Z than a squeeze on lifestyle.
In a new analysis of Bank of England data, Bloomberg established Inflation expectations are soaring among young people in the UK – a group that has historically had lower inflation expectations than their older peers who experienced rising costs in the 1970s and 1980s.
That could make monetary policymakers’ job trickier, as it could affect wage expectations and spending habits, ultimately pushing prices higher.
A recent Bank of England survey showed that two-thirds of Britons expect prices to rise next year. More than half told the central bank they did not believe inflation would fall anywhere near its 2% target within the next two to three years.
However, BloombergA more detailed analysis of the data suggests that young people in particular are bracing for inflation to continue. The publication’s findings show that inflation expectations among Britons aged 16 to 24 have risen faster than any other age group since the pandemic and Russia’s invasion of Ukraine.
This change is attributed to the fact that inflation is ingrained in the psyche of Generation Z, who experienced a cost-of-living crisis while growing up. Bloomberg Noticing is called the “experience effect.”
The news outlet’s analysis of the data shows that 16- to 24-year-olds are the second most likely age group to see inflation expected to rise, after those aged 55 to 64. This group is the younger generation of baby boomers.and the older Generation Inflation rate reaches 25%and entered the labor market in the 1980s, when the country was suffering Another cost-of-living crisis.
according to BloombergIn the UK, Millennials and younger Generation X have lower inflation expectations than Generation Z, having spent much of their working lives seeing inflation close to the Bank of England’s 2% target.
‘Psychological scars’
AS Dr. Dayo Abinusawa, founder of London awa business school Former lecturer at Cambridge University Judge Business School told wealth The ongoing fight against inflation will have a serious impact on the mindset of Generation Z workers (those 26 and younger) on Monday.
“Continued inflation will leave psychological scars on Gen Z due to increased uncertainty and anxiety,” he warned. “Young people are often affected by inflation as they are most likely to be working part-time or in low-income jobs. Salary job.”
Abinuze warned that the knock-on effects of the cost-of-living crisis on young people’s sense of hope would extend far beyond Gen Z.
“How can young people build a career or wealth if they don’t have jobs and prices for goods and services continue to rise?” he said. “A society in which young people have little hope for the future is unsustainable. Not only will Generation Z be left with psychological scars, but society as a whole will feel the effects of these traumas.”
“Inflation death cycle”
Paul Allison, an analyst at investment platform Finimize, explained that if demand for goods and services is growing, coupled with rising wages or strong economic growth, the idea that inflation will persist “will seep into people’s psyches.”
Although trying to cope with The country with the highest inflation rate among the world’s developed economiesalso unstable currency and political turmoil In the past few years, the British economy Proving more resilient than expected In recent months, with Wages are rising at a record pace and GDP growth faster than expected.
“When everyone expects prices to go up, they immediately buy at cheaper prices, further pushing up demand and prices,” he told reporters. wealth. “This sets off an inflationary death spiral that is difficult to break.”
However, he believes the inflation anxiety emerging among younger consumers is more a consequence of rising interest rates than the generation most experienced with spiraling costs.
“For young people, without years of frugality and savings, higher interest rates can prevent them from buying a home outright,” he said. “Older generations tend to have more assets than younger generations.”
Hetal Mehta, director of economic research at St. James’s Place, agreed that young people are more likely to be hit hard by inflation because they typically spend a higher proportion of their income on necessities. .
Rising and persistent inflation expectations will eventually start to feed into two key channels, she predicted.
“One is that wages are demanding higher as people try to maintain purchasing power. The other potential is that it can help drive spending,” she said. “Many companies will try to pass on at least some of the higher wages to customers – which clearly leads to a vicious cycle.”
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