Catch the millennials before it’s too late

Young people have lost faith in the free-market system. Matthew Lynn suggests four things businesses can do to win back their trust.

A huge hike in corporation tax. Limits on executive pay. A sweeping programme of nationalisation. Big increases in public spending. It is hard to think of anything about Corbynomics that business in this country is going to like but, right now, it looks increasingly like that is what they are going to get. The Conservative party is descending into chaos and Jeremy Corbyn has seen a surge in popularity. The combination may well be enough to bring the most far-left Labour government since 1945 to power.

If that happens, it will largely be on the back of a huge rise in support for Labour among the 20-somethings who are angry with a system that doesn't seem to be working for them. They appear to be losing faith in a free-market economy in such a dramatic way that they may vote in big enough numbers for a radical change. If business doesn't want to see a hard-left government, it needs to start figuring out how to make a liberal, free-market system work better for the young. The government and business leaders should be working out ways to change the minds of young people, and giving them more of a stake in the system. But how? Here are four good places they could start.

First, how about dropping the requirement to have a degree for most white-collar jobs? Massive levels of student debt are a major grievance not least due to a 6.1% interest rate building up on loans. Labour is promising free tuition and perhaps even to write off old loans, but if firms offered a ladder to a professional career without a degree, people wouldn't need to take on £50,000 of debt just to get themselves a job. Some law and accounting firms are now doing that, but there is no reason why a lot more companies shouldn't make it easier for non-graduates.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Next, companies could raise wages far more quickly. According to Bank of England estimates, if real wages had risen at the same rate as productivity over the last decade, then they would be around 20% higher than they are today. For a few years, companies could commit to raising wages by at least the same rate as output per worker that would push living standards up quickly and make people feel the system was fairer.

Third, why not offer younger staff cheap loans? One of the biggest issues is that people are finding it impossible to get onto the housing ladder. Companies are sitting on a lot of cash (estimates suggests it is about £220bn) and earning practically nothing on it, so why not offer staff mortgages at 1% on extended terms and at high income multiples to help them buy that first property? The money would still earn a perfectly respectable return by today's standards and it would do a lot for staff loyalty as well.

Finally, there is no better way of securing support for a system than by offering people a stake in it. Mrs Thatcher discovered that in the 1980s when she made sure shares in privatised industries were sold to as many private investors as possible. How about FTSE companies committing to giving an allowance of free shares to every staff member under 30? Then by the next election, they would be a lot more worried about the impact Labour would have on the market.

Taken by themselves those policies may seem expensive, but business needs to take a broader view. It is not just the job of the government to make sure that the younger generation is sympathetic to a free-market, competitive economy company bosses have a responsibility to make sure of that as well. It may cost a little money this year or next, but it will be a lot better in the long run than a ruinous hard-left government.

Matthew Lynn

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years. 

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.