The Generation facing its first recession. How will they cope?

The generation facing its first recession. How will they cope?

They grew up in an era of never-ending house price rises and fully expected to shop until they dropped. But the members of Generation Y will soon be forced to face the realities of a harsher economic climate. Tracy McVeigh asks them what they expect of the future and how they plan to adapt to it

Tracy McVeigh
The Observer,
Sunday October 12 2008

They are young, confident, affluent and have no memory of tougher times. But Generation Y now faces its first recession and a future very different to the one it expected. Aged from 18 to 27 and mostly middle-class, these young people have grown up in owner-occupied homes with total acceptance of technology, global warming and homeland terrorism - and their love of shopping has made them dream consumers. But, sooner or later, their lives are going to change.
The average Generation Y-er does not know the difference between a credit card and a debit card, according to a Bank of Scotland survey, and, while two thirds know the price of an Apple iPod Mini (£179), three quarters have no idea what a pint of milk costs. One in eight thinks that 'in the red' means being embarrassed. They each have 800 illegally downloaded songs, and one in 20 spends more than £100 a month on mobile phone bills. Many never read newspapers and two thirds do not vote.
They like to shop and, whether its Topshop, Primark or TK Maxx designer labels, they are used to getting what they want in a high street catering to almost every income level.
If the credit crunch becomes a full-scale recession, no one will get a bigger shock to their aspirations than this pampered, techno-savvy generation.
'They will be at the sharp end because that age is always at the sharp end of social change. They are trying to enter the adult world anyway, struggling with expectations and views that aren't theirs,' said Jon Savage, a music writer and author of Teenage: The Creation of Youth. 'But my question is: what are they going to do if they can't shop? Our society has been based around consumerism for the past 15 years and these kids have racks of CDs and plasma TVs and comparatively unparalleled riches.'
At Birmingham University this weekend, The Observer gathered a group of first-year students - at the heart of Generation Y - to ask what the credit crunch meant to them. For many, the answer was 'not much'.
'The credit crunch doesn't really affect me,' said Lauren Ludlow, a 20-year-old studying art history, one of the non-career-based subjects that traditionally slip in popularity in economic downturns. 'I'm more concerned for my parents and I'm just hoping it'll all have sorted itself out in three or four years' time.'
Law student Jess Darley, 19, from Ipswich, added: 'I don't think it's been too over-hyped or anything, but young people don't really understand economics because we're not taught about it. I guess it probably does affect us, but it sort of feels irrelevant.'
Some are cushioned by 'helicopter' parents - hovering protectively over their offspring. Amy Perry, 18, from Telford, said: 'My mum does most of my food shopping for me. I guess it will get more expensive for her for a while, though.'
Few are fearful. They're just not that bothered. 'It doesn't mean much to me at all,' admitted Joe Griffiths, 19, from Southampton.
Perhaps they are right not to worry. According to Dr David Twigg, a business lecturer at the University of Sussex, today's group of students are far more prepared for a difficult job market.
'Anyone born after 1983 is not really used to considering anything other than wealth, but students are much more determined to build up a broad skill base; they'll work hard to get it and demand we provide the teaching,' he said. 'They will be successful no matter what; they are independent self-learners who are better equipped than any previous generation.'
And while recessions inevitably bring financial strain, they are also known to inspire creativity. 'The last big recession produced punk, which was great,' said Savage, but he added that it was not all positive. 'You had to have a lot of bravery to be part of that and the Seventies also produced political polarisation and extremism, perhaps an easier option.
'In the Thirties, the Great Depression brought that kind of increased regimentation by the state. When you're of Generation Y age, you are fairly open to becoming extremely obsessed with an idea, and you feel invulnerable and you don't have much idea of the consequences of your actions. It can be a dangerous mix.'
Few organisations in education and the arts were prepared to talk about the future other than to fret that funding drops in a recession. One west London art gallery owner told The Observer: 'This stuff about kids getting creative in a recession is rot. It's not the Seventies; they have seen Damien Hirst and Banksy make millions and that's what Generation Y want, the same as Generation X - money. If they can't get it in art, they'll go and be eco-bankers.'
Back in Birmingham, Paula, 19, (who didn't want to give her full name) said she was concerned about the impact of the credit crunch on her and her friends. 'The recession is having an influence that many of us fail to recognise. Food prices are increasing, while loans remain at the same rate. Student expenditure is on a constant rise and, if the recession continues, paying bank loans may mean a huge increase in interest. Many students have not even considered this; it needs to be more widely publicised.'
The Consumer Credit Counselling Service has long had concerns over students being unable to manage their finances. In the past two years, it has seen a 10-fold increase in calls from 18- to 21-year-olds to its helpline.
Others point to housing and warn that Generation Y will be one of the hardest hit. Adam Sampson, chief executive of the homeless charity Shelter, said lower prices wouldn't help because there would be fewer mortgages: 'These young people don't trust pensions any more and believe as much in house-as-security as their parents, who got us into this situation. But these kids have far less chance of getting on the ladder,' he said.
'We have 240,000 new households forming every year and no one is building houses for them. They haven't been building enough for 20 years and that's some backlog. The recession will make that worse, as builders won't get money from the banks to build. I'm afraid Generation Y will be at home with mum and dad and we'll see the hidden homeless issue - overcrowding - get worse.'
Charlotte Paul has two boys - Marcus, 14, and Charlie, 16 - and lives with her husband and his 22-year-old daughter in Yorkshire. 'My step-daughter was hoping to move into her own flat this year, but the mortgages weren't there, so she's squashed in here. It's been a shock to her because it's the first time in her life she has not been able to get something she wanted. She's just that age group; they've never been told, "No, you can't have",' said Mrs Paul. 'Now she wants to give up her job and go volunteering abroad for a year and she has no fear of coming back to no job. I envy her confidence.'
For her boys, Mrs Paul is thinking the previously unthinkable. 'We've an endowment policy we kept to pay out in time for Charlie's second year at university and for Marcus we'd downsize the house and get Charlie on to the housing ladder at the same time. That's gone to pot. 'Charlie doesn't like the idea of university. I went to university to duck out of the last recession - there were grants and it kept me off the dole. Maybe not going will help him duck the debt and get experience.' Then, Mrs Paul stopped herself: 'I can't believe I'm thinking like this.'
At business consultants Talent-smoothie, Simon Walker has spent a lot of time explaining the confident behaviour of Generation Y to perplexed employers. 'Will Generation Y behave differently now things aren't so rosy? Well, of course they will,' he said.
'They are very different from other generations and have only known very buoyant times. They demand things like flexible working and expect to get it. Past generations turned up on their first day in a suit and tie and did what they were told, but that's changed and you cannot reverse that. We were approached by a company that had 50 per cent of the workforce who were Generation Y and they were worried that their inexperience with a downturn would lead to absenteeism and extra stress. But we haven't found that yet at all - they adapt. But then, at the moment, people are not losing their jobs.'
When that happens, few believe things won't change, particularly on the high street.
Robert Clarke, of business analysts Retail Knowledge Bank, argued that the high-profile reporting of the crisis would soon have an impact. 'We're getting it hour by hour, and that brings problems in itself,' he said. 'Consumer confidence is hugely important and people who are getting ahead of themselves to preach doom and gloom are deeply irresponsible. A mindset will take us into recession faster than any bank collapse. Retail sales figures have not started falling yet. The likelihood is that the high street next year will look different for young people; there will be a few empty shops.'
However, according to Clarke, it is not all bad news: 'The optimism of Generation Y is correct, because the likelihood is that most people will continue to be employed and will continue to be able to clothe and feed themselves.
'Yes, there will be fewer Saturday jobs and part-time jobs in retailing, which will affect the 75 per cent of university students who have part-time jobs, but they won't have mortgages, rents will be cheaper and I think they will still have money in their pockets.'
Recession silver linings
Petrol prices are dropping and there are bargains to be had if you need to buy a car.
There is a boom in people growing their own vegetables and inner-city allotments are thriving.
Recession is a great time for live music, exciting new trends and it's cool to wear charity shop clothes.
Hollywood churns out great-quality feelgood movies.
We will all spend more time with our families - even the grown-up children will be hanging around the house.
Safe manufacturers have seen a 50 per cent rise in sales and bicycle shops are doing well too.
Some of the fat cats actually went down first.
People may use their cars less and shop less and more locally which is good for the environment.
We may all get a little less materialistic and a little more imaginative this Christmas.
Getting close to nature - people may spend more time enjoying walks in the country or camping holidays
People will tire of watching reality television, according to one study, because they will be dealing 'with enough reality' in everyday life