Stephen Koukoulas, an economist and research fellow at Per Capita, has written a piece for The Guardian this morning, claiming that Millennials (aka Gen Y) are actually quite well off, and it’s poor old baby boomers who have been hard done by in Australia.
The piece is pretty light on relevant data and facts. It also includes some pretty weird sledges, including Koukoulas’ desire for young Australians to choke to death on “skinny soy lattes”, which FYI, are not a real drink (“skinny” is a slang term for skim milk and is an entirely separate product to soy milk).
Unfortunately for Koukoulas the issues with his piece don’t end at the mischaracterisation of milk.
Koukoulas’ piece is a disappointing contribution to the growing debate around the economic well being, or otherwise, of Gen Y because it isn’t really backed by any facts.
He kicks off by arguing:
“I would hazard a guess that when today’s Gen Y turn 50, 60 and 70, they will have a living standard that will exceed today’s Gen X and baby boomers”
Which is an interesting thought, but sadly he doesn’t back it up. He doesn’t even attempt to justify it, it’s just his gut feeling. In fact the article that’s hyperlinked in that sentence is a story about how Gen Y is being royally shafted by current economic policy settings that completely contradicts his assertion.
Koukoulas focuses on two main factors to compare how well off Gen Y is compared to previous generations: education and housing.
“Today, about 15% of young people get a university education. Sure they have to pay for it, but the trade-off between no tertiary education and a low-skilled job versus a small fee and wonderful career opportunities is one that is easily calculated.”
Basically he’s saying that because more of us have degrees we’re better off. It’s a very weird argument coming from an economist because “having a degree” is a pretty subjective metric in terms of quantifying someone’s level of economic security. For example, the value of an engineering degree during a construction and mining boom is significantly more than a media degree at a time of global media contraction. To argue that because more Millennials “have degrees” we’re all better off is lazy and simplistic.
Let’s look at some numbers. When student fees were first introduced in 1989 the cost of a law degree was about $8,000. These days it’s more than $40,000. Even accounting for inflation, the real cost of many degrees has more than doubled since fees were introduced. Koukoulas can call it a “small fee” but tens of thousands of dollars of debt is a genuine financial burden — particularly when you consider education was substantially cheaper and even free for previous generations.
A better way of actually measuring the prospects of people with degrees is to measure graduate unemployment. Last year graduate unemployment hit its highest rate ever recorded. A third of graduates struggle to find full time work after job hunting for four months. It’s an extraordinary figure and it shows the graduate job market is tougher now than it was during the 1992 recession.
Graduate incomes are also declining. Starting salaries for university graduates are currently the lowest ever recorded.
It’s odd that Koukoulas completely skates over the vocational education sector, which trains approximately twice as many Australians as universities do. The slow, steady destruction of TAFE has been well documented. Student numbers are collapsing while fees are being doubled and even tripled in some cases. In NSW alone 83,000 fewer students were enrolled in TAFE in 2015 compared to 2012. If you’re analysing the educational fortunes of Millennials, it’s very strange to just skip over the decay of TAFE.
Whether you’re looking at universities or TAFE, young people are paying more to study than ever before, entering a tougher job market than ever before and earning less money than ever before. It’s hard to align these facts with Koukoulas’ “gut feeling”.
The cherry on top is that Koukoulas wants Millennials to “thank” baby boomers for apparently “voting for more university places”. It’s not really clear what he’s talking about but my guess is he is referring to the policies introduced by the Labor government in 2012 to introduce “demand driven funding” that significantly expanded university access. Given the policy wasn’t taken to a referendum, and in fact the Gillard Labor government lost the next election in a landslide, I’m not sure how you can draw the conclusion that baby boomers specifically voted for this policy outcome.
On the other hand, we know that baby boomers have continuously voted for governments that have steadily increased fees and cut funding to both universities and TAFE over decades.
Perhaps the weirdest bit of the whole article is Koukoulas’ attempt to twist numbers to suggest it’s actually easier for young people to buy a house now than it was in the 1970’s. His argument is that since interest rates are lower now, the fact that capital cost of property has increased substantially is irrelevant.
Again, here are some facts: In 1982 more than 55 per cent of Australians aged 25–34 owned a house. In 2011 that figure collapsed to 34 per cent. A raw drop of 21 per cent. Meanwhile the percentage of 65+ year olds who own a home actually increased by 6 per cent over that same period.
If it was so much easier to buy a house the numbers would show that to be the case. Instead the numbers show the opposite. As pretty much everyone (except Koukoulas, it seems) knows housing affordability is a massive, massive issue.
Koukoulas cites Reserve Bank of Australia (RBA) research that apparently justifies his argument that interest rates, not housing prices, are the real factor when it comes to affordability. But here’s what that RBA research actually says:
“Of the possible economic causes of declining home ownership rates among younger households, the most obvious would be the sharp rise in housing prices in Australia since the mid 1990s”
Ok so that directly contradicts Koukoulas.
“The rise in housing prices since the mid 1990s has contributed to declining home ownership rates among younger households.”
Another direct contradiction from the RBA.
Here’s some other factors that the RBA thinks are creating affordability issues:
“An increase in income inequality over recent decades… leading to increased borrowing capacities for households with high home ownership propensities, which will tend to have advantaged older households over younger ones.”
“The shift from traditional rules of thumb based on debt-servicing ratios for assessing mortgage serviceability to more sophisticated net income surplus models, and elsewhere, probably had the effect of advantaging higher-income earners (lower-risk borrowers), who are often older.”
Basically every assertion Koukoulas makes about housing is demolished by the RBA research paper he links too.
I think there’s a risk in over-egging the whole “generational war” theme developing in Australia, and Osmond Chiu has put that case well here.
But when an economist publishes inaccurate and sloppy assertions in a highly respected publication, it’s worth responding. The economic issues facing Millennials are much more complex than “Argh baby boomers!”, but clear, generational disadvantages are emerging.
When a middle-aged and economically secure bloke like Koukoulas emerges to lecture young Australians about how good we have it, and demonstrates his deep, deep lack of knowledge about the basics of coffee consumption, we should point, laugh and then cry. Because even though he’s so very wrong, he probably owns a house and we never will.
*Some bits of data for this article were originally published by SBS.