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The world will no longer belong to the young: 18 – 39-year-olds were financially affected the worst from the Coronavirus

This story was written by Tali Heruti-Sover and originally published on Oct. 1, 2020 in The Marker in Israel. View the original Hebrew version of this story. An English translation of the story is below.

According to a study conducted by Prof. Michal Grinstein-Weiss at the beginning of the crisis, young people, generations Y and Z, suffer from high unemployment, have difficulty providing basic needs for themselves and their debts are large

By: Tali Heruti-Sover, The Marker

The main economic victims of the Corona crisis are young people from Generations Y and Z, aged 18-39; This age group has been affected much harder than Generation X (40-55 years old) or Baby Boomers (56-76 years old), according to a recent survey at the Social Policy Institute at Washington University in St. Louis, led by Prof. Michal Grinstein-Weiss, currently a guest lecturer at IDC. The survey included 2,500 Israelis, men and women of various ages, and is equivalent to a survey conducted in the United States.

“It’s a very worrying phenomenon,” says Grinstein-Weiss. “Unlike their parents, young people had less time to accumulate financial assets before the Corona, and they received less government support, which made them particularly vulnerable in such a severe and surprising economic crisis,” says Grinstein-Weiss. “The phenomenon is not unique to Israel. We see similar phenomena in our studies in the United States. Each generation faces economic challenges, but the Coronavirus uniquely threatens the lives, social well-being, and the economics of young populations around the world. Policymakers must be solution-oriented to ensure a long-term recovery for future generations.”

The survey, conducted in partnership with Mastercard’s Center for Inclusive Growth, examined three indicators of harm: the level of unemployment, the ability to provide for basic needs and the level of debt. According to the survey, the unemployment rate among young people aged 20-30 was twice as high in the first three months of the crisis – from March to the end of May – compared to the unemployment rate among those who are older than them, 31% vs 17%. “This figure has a clear impact on the other indicators,” says Grinstein-Weiss. “If this trend continues, it will be very difficult for them to return to the labor market even when the economy recovers.”

Regarding the second indicator, the survey shows that young people are three times more likely to be late paying rent and mortgage payments compared to older adults – 13.3% of the young people in the survey reported this compared to 4.7% in older ages. In addition, 24% of young people answered that they have difficulty dealing with household payments that are not a mortgage or rent, for example, water, electricity and property tax payments. Only 9.2% in the older age group answered this question in the affirmative.

26% of the young people who participated in the survey reported food insecurity created due to the corona pandemic, compared to 17% among the adults. “The data regarding adults is also disturbing, one in six fear food insecurity, but these findings are still low relative to young people – one in four,” says Grinstein-Weiss.

The third indicator in the survey examined an increase in the level of debt. According to the survey, 13% of young people reported that they were lagging in repaying loans they took from banks, which are not mortgages. Among older adults, 4.7% answered this question in the affirmative. The difficulty in repaying a debt is probably due in part to its size. Through those who took out non-mortgage bank loans, the median repayment required among Generation X is 50,000 NIS, for Baby Boomers 20,000 NIS, while the average median debt of young people aged 20-30 is 40,000 NIS.

The level of debt repayment also indicates difficulty. While Generation Y returns 2,500 NIS a month, Baby Boomers pay 2,000 NIS a month, and Generation X 2,250 NIS a month.

Another disturbing statistic is the withdrawal of a permit created due to the Corona crisis. Among young adults, 24% reported that their overdraft deepened following the corona. At this point, the survey shows that 40-56-year-olds increased their overdraft – 27% reported so. In contrast, only 16% of older people (56–76) reported an increase in overdraft due to the economic crisis caused by the Coronavirus. Similar data were also recorded on credit card debt.

The solution: professional training for everyone

At the same time, the support given by the state to citizens during the crisis was also examined (the benefit of 750 NIS that each citizen received was given after the survey). “The data showed that the most affected are the ones who received the least assistance,” says Grinstein-Weiss. “12% of young people reported that their application for benefits from the state provided for the crisis was denied, including unemployment and unpaid vacation benefits. In comparison to 7-10% of the adults.” She also mentions that the survey data was collected at the beginning of the crisis, therefore, it is not inconceivable that another survey, which is being conducted these days and in which the same questions are presented, will reveal a more difficult economic situation. “Young Israelis have gone through intifadas, the 2010 crisis, and now a pandemic. Unlike their parents, this is an economically fragile generation. This figure must stand up to the decision-makers in Israel. Without careful economic planning, the consequences can be particularly dire.”

Prof. Zvi Eckstein, head of the Aaron Institute at the IDC in Herzliya, who was involved in formulating the survey, is also concerned about the data. “History shows that in a big crisis, young people are hurt more – but this time they are hurt in a much larger scale,” he says. “Economic policy should pay close attention to the young group, and especially to those with a low level of education and small sources of income.”

The solution, he says, lies in running a government program that will provide professional training to anyone who is interested, with the goal of returning to the labor market as quickly as possible with a decent wage. “In a report submitted by the 2030 Committee to the Ministry of Labor & Social welfare and the Ministry of Finance, we recommended professional training assistance to people who are now entering the labor market, and not just to the unemployed,” says Eckstein. While strong populations can continue to study at the university and investment in their future, weak populations do not have this type of shelter. “