Firstly, I am massively unqualified to make any economic prediction. That being said, I have a very serious prediction for what could happen to the economy within the next five years.
I believe we will see some kind of economic crash within the next five years. I previously said ten, but nowadays my pessimism has increased considerably. I’ve based this on several factors, and created a step-by-step guide on the events that could result in an economic crash.
1. Graduates being underpaid.
Graduates are massively abused by businesses. They come out of university with huge amounts of debt, and are then expected to work for minimum wage (plus unpaid overtime) in order to potentially create a longstanding career at a reputable company.
Generally speaking these are also pretty entry level jobs, general “dogsbody” type of work.
2. Decreased demand for housing, increased demand for rent, but continuously increased housing prices.
Graduates don’t make enough to buy a house, meaning they have to rent. Despite this, housing prices continue to rise, and the wealthy will still likely purchase the properties for rent due the increased demand for rentals.
This makes owning a home more financially difficult, further pushing people towards rentals.
3. Increased demand for finance.
Paying rent is expensive, more expensive on a month-by-month basis than having a mortgage. Because of this, people who rent properties tend to not have disposable income. These people still need a car to commute to work and also need items such as furniture, but they don’t have the money to purchase these things. Luckily, they can finance all of these items, paying it month-by-month just like rent.
Additionally, some people just want stuff that they can’t afford. I know of one girl who only makes £8k per year but who just started financing a Mercedes A-Class.
Many items don’t necessarily require any background information to finance, just confirmation that you can afford it each month.
4. A whole generation of people who don’t own their own stuff.
Now you have people living in houses they own, driving cars they don’t own, sleeping on beds they don’t own; all relying on monthly payments.
5. An event causes several big businesses a financial loss.
Simple events such as an election can have a huge impact on how much money people spend.
If a company’s sales start decreasing, they’re likely to look at their expenditure and get rid of anything unnecessary. For example, any expendable employees.
6. People can’t pay their bills.
Everyone who lives month-by-month suddenly can’t pay any of their finance or rent, resulting in the finance companies taking a financial hit and having to fire any of their unnecessary employees, creating a domino effect.
7. Guarantors Have To Pay.
Sometimes when renting and/or paying finance you’ll need a guarantor to ensure you make payment, for your average 21 – 25 year old this will be their parents. The finance companies will then start collecting the money from the parents, resulting in another generation being financially affected.
8. Everyone is fucked.
So the young adults now have no home, job or assets. Their parents have now been financially drained, too. Everything has become truly fucked.
This will likely change how finance options work, resulting in more extensive background checks.
This is just a prediction, but after seeing how businesses treat young adults and seeing how irresponsible many young adults are, I could certainly see it becoming a reality.