The current consumption crisis will be important for the future jobs market recovery

Britain’s jobs crisis is concentrated in low-paying sectors like hospitality, retail, arts and leisure that have been hardest hit by lockdown and ongoing social distancing measures. In 2019, 32 per cent of 18-29-year-old employees worked in these sectors.

But those who tend to spend the greatest proportion of their disposable income on these more pleasurable aspects of consumption are older adults. The latest data from our Intergenerational Audit shows that, in the past few years before the pandemic, the proportion of non-housing consumption spending by those aged 65-74 that goes on luxuries such as restaurants, hotels, recreation and culture rose to reach 35 per cent. In contrast, 16-49-year-olds have cut their spending on non-essential items in recent years.

In general, someone’s decision to buy a good or a service is determined by two key factors: the willingness to buy and the ability to afford. Usually, we talk about this in relation to price, but in the coronavirus crisis, other factors may have a greater impact on the willingness to purchase. Buying a meal in a restaurant is no longer predominantly determined by financial cost, but by the willingness to expose oneself to a health threat – and one that is especially significant for older adults aged 45 and over.

And polls show that 70-year-olds and over are less comfortable than younger age groups to go outside, and have been less likely to do so during the pandemic.

For as long as the higher-than-normal risk to physical health from the virus is around – that is, until we have a vaccine – it is hard to see why this group of people would be willing or able to consume the way they did before the pandemic hit. This will have prolonged effects on the viability of sectors like hospitality and leisure where so many young people find their livelihoods, especially early on in their careers.

This brings to the fore the negative feedback mechanisms between the health effects of the virus and young people’s jobs market. As the second wave washes over us, we should expect stronger, not weaker feedback loops between health threat, consumption crunch and job loss.

With unemployment for 18-24-year-olds already set to rise somewhere between 11 and 17 per cent, there are important questions around how to support businesses, jobs and the young through this crisis. We know one thing: we can’t rely on consumption ticking back up to pre-coronavirus levels anytime soon.