What if when you woke up on your 25th birthday, you were handed £10,000 (approximately CAD$17,000)? But, there’s a catch. The funds are only to be used for improving your skills, starting a business, saving to buy a house, or to contributing to your pension.
One U.K.-based think tank, the Resolution, believes such a plan could be the solution to the gaps between income and prosperity between today’s youth and previous generations. The plan would see millennials in the U.K. given a lump sum of money when they turn 25, to be used solely for the self-improvement endeavors listed above.
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According to the report, a “citizen inheritance” of £10,000 would double nearly two thirds of British millennials’ wealth in their late 20s, if they received it today. The think tank proposes that this plan, which would cost approximately £7 billion per year be implemented by the year 2030.
Canadian economist Eddy Ng with Dalhousie University thinks this plan might be just the ticket to not only stimulate the economy, but to let millennials invest in the kinds of entrepreneurial initiatives that will drive the economy of the future.
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“You technically stimulate the economy when you pump money into the economy,” said Ng. “You’ll create new economy jobs. We have a lot of old economy jobs that need to shift. When you put money in the hands of the younger generation, they’ll be able to invest in the creative economy.”
He notes however, that the requirements for such a payment should exceed simply reaching age 25, as some young people will inevitably inherit more from their parents than their counterparts. Furthermore, he adds that in order to receive such funding, there should be a careful selection process regarding what each individual would use it for.
“This is a good suggestion, but it has to be carefully crafted. When you do something like this, you can’t just hand it to everybody, because with any generation there is a fairly unequal distribution of wealth,” Ng explained.
Ng stated that tribunals reviewing such proposals would have to ask the question,”Which kinds of things would best stimulate the economy?”
The report suggests that a citizen inheritance could support additional education, training, and would potentially be sufficient to pay off a third of outstanding student loan debt for a typical graduate who began school in the U.K., in 2012 or later. It’s important to note that tuition payments in Canada and the United States can be significantly higher than in the U.K.
However, Sean Lyons, an economist specializing in the labour and spending trajectory of the millennial generation at the University of Guelph, said that a one-time payment of £10,000 will not be enough to cover the levels of debt facing young people today, and what’s more, does little to address the systemic problem of wage gaps in the modern economy.
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“The costs of education are not overcome by a one-time £10,000 payment. In my mind, the solutions for making outcomes better is obvious. We have to do something about tuition costs,” Lyons said.
He explained that a large factor contributing to the plight of young people today is that they’re forced to wade into the workplace and attempt to start their lives while straddling debts averaging about CAD$30,000. Instead of starting their lives at the age of 25, millennials are paying down their student loans. This problem however, isn’t so easily solved.
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“Universities are strapped. Their costs can’t go down. We have to have ways for people to fund their education that aren’t so punitive. Maybe even loan forgiveness for people that need it,” he added.
While tuition fees and cost of living have gone up, wages haven’t kept pace. The report states that millennials are earning the same starting salaries now as were being offered 15 years ago.
Lyons went on to explain however, that being young in today’s economy shouldn’t be compared to being young a few decades ago. “It’s a different thing today to be young, and it’s perilous to compare it to the same age of previous decades,” said Lyons.
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The post-war economy, he said, was expanding in a way that hasn’t been seen since the mid-to-late 20th century.
“Baby boomers came out of university, in their 20s, at a golden time in history. That had never been seen before and it may never be seen again,” he said.
“The whole, ‘when I was your age’ business, doesn’t cut it.”
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