The cost of living crisis has caused young people to be financially disadvantaged, with the ongoing situation set to deteriorate in the coming months.
March 9, 2023
The Cost of Living Crisis: Financial impact on young people
Data conducted by UK groups have shown that young people have been hugely affected by the crisis, forcing some to move back in with their parents to manage costs or limit spending.
The crisis is attributed to several causes – the War in Ukraine, the economic recovery from COVID-19, the increase in the market price of energy, and the fallout of Brexit.
All these issues have negatively impacted the economy which led to inflation reaching its highest rate since the 1981 recession, which happened due to a tight monetary policy to stabilise inflation. Subsequently, this led to higher interest rates and the appreciation of the Sterling.
As a result of the economy being affected, The Guardian reports how unemployment is projected to rise within the upcoming years. The result, according to reports from young people, is that students who are actively seeking jobs to pay for their tuition fees, bills, or to support their family will be disadvantaged.
The rise in unemployment has led to a fall in consumer spending (the goods and services spent by an individual/household) because people do not have the same disposable monthly income.
An example of this is how consumer spending directly impacts consumption in an economy. Consumption is one of the five components and the most significant contributor of aggregate demand (the planned total amount of goods and services in an economy produced). Because less money is flowing into the economy, it could lead to a recession (whereby GDP has fallen for two consecutive quarters).
Students in the UK have experienced the negative impact as the 2022 National Student Accommodation Survey found that four in five students who have energy bills are worried about the rising costs, while three in five have already noticed their bills increase due to the energy crisis. It also revealed that students had to cut back spending on socialising (54%), groceries (43%), travel (42%), and study materials (29%).
Another study showed that ‘young people are significantly more likely to have fallen behind on domestic bills and credit repayments in the last six months (31%) than those aged over 51 (3%)’.
The overall consumption of young people has taken a hit as it costs more to buy everyday essentials, heat up homes, and top up on car fuel. International students in the UK have also been impacted further as the cost of flights has risen. According to recent data, plane fares have risen by 44.1% in 2022, the largest recorded increase since January 1989. This is in light of the growing prices of aviation fuel, causing airline companies to increase their tickets to customers.
The increase in costs has already left millions struggling to cope, according to think-tank Resolution Foundation, which found ‘typical household disposable incomes for working-age families are on track to fall by three percent this financial year, and by four percent next year’.
Its research found that the two-year cost of living squeeze is ‘set to leave families £2,100 worse off’ and that the crisis, which is currently being driven by the higher cost of essentials like food and energy, is likely to still leave the average household incomes below the pre-pandemics level by 2028.
Lalitha Try, a researcher at the Resolution Foundation, described how Britain is only at the midpoint of a two-year income squeeze. “Low-income families have been hit hardest by soaring energy bills and food prices, and are most likely to have seen both their financial circumstances and their health deteriorate”, she said.
Dr Jennifer Dixon, chief executive of the Health Foundation, said: “The crisis is causing immediate damage to the nation’s health with higher food insecurity, people under strain as they fall behind with bills and increased prevalence of emotional distress.”
“The government must act now and craft an intelligent strategy targeting those at greatest risk to avoid hampering the nation’s prosperity in years to come.”
Overall, the cost of living crisis has been a worry for young people across the country which affected the way in which they spend.