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Nicholas Barr

January 9th, 2020

OK, Generation Z – this is how Brexit will affect you

7 comments | 71 shares

Estimated reading time: 10 minutes

Nicholas Barr

January 9th, 2020

OK, Generation Z – this is how Brexit will affect you

7 comments | 71 shares

Estimated reading time: 10 minutes

Just before Christmas, Nicholas Barr (LSE) was asked by a 16-year old what he thought about Brexit and how it would affect members of Generation Z personally. In this letter, he explains why he believes Brexit will lead to four sorts of potential loss, as well as making it much harder to tackle the climate emergency.

My Letter to friends, posted a month before the July 2016 referendum, ended by saying that

‘The issue is not about the older generation’s past but about our children’s and grandchildren’s future. For those reasons, I shall vote Remain.’

Just before Christmas I was asked by a 16-year old what I thought about Brexit. I explained briefly why I think that leaving the EU damages both our standard of living and our international influence.

His response was to ask how Brexit would affect him and his contemporaries personally. Good question. I came up with four sorts of potential loss. (By the way, I recommend the BBC’s excellent Brexit jargon buster and its video explaining Brexit terms.)

What is being lost?

As a member state of the EU, British citizens also have European citizenship, which includes the right to free movement, settlement and employment across the 30 countries that comprise the EU and European Economic Area. Leaving the EU means that UK citizens lose European citizenship. The resulting loss of free movement has major ill-effects.

Photo: Remy Frank via a CC-BY-NC-SA 2.0 licence

Loss 1: Decline in employment rights elsewhere. Once we have left the EU, you will have the right to live and work in one country instead of 30, making it more difficult to have ‘taster’ jobs (e.g. with BMW in Munich) or a summer holiday job as a waiter in Seville and, when older, removing the ability to work in another member state as a right, and with minimal paperwork.

In many ways, such flexibility is particularly important for younger people. The loss is correspondingly greater for Generation Z, as my LSE colleague Richard Bronk has pointed out in evidence to a parliamentary committee.

‘The ability for young people to work freely in any European country at an early stage in their careers helps them gain specific job experience, for example in engineering or the arts, that would not otherwise be available to them …’

He also points out that finding a good match between a job and person’s skills and interests is helped by the ability to test things out through short-term or informal arrangements, well before the stage of a formal job offer – an option that is particularly relevant to young people after leaving school, or during or after an apprenticeship, during a gap year, or after completing a degree. Those options will be lost if it becomes necessary to have a visa to work in EU countries, particularly if the visa requires a permanent job offer.

Loss 2: Decline in personal rights. Consider a British student in a relationship with a French student who, after Brexit, has to leave after finishing his/her course. A Guardian article about the struggle of a 22-year old graduate who had arrived as a 16-year-old refugee from Chechnya to be allowed to live in the UK with her British husband illustrates what EU citizens could face after we have left the EU.

My second Letter to friends posted about a month after the referendum, included the following cry of anguish from a young person:

‘[T]he younger generation has lost the right to live and work in 27 other countries. We will never know the full extent of the lost opportunities, friendships, marriages and experiences we will be denied. Freedom of movement was taken away by our parents, uncles, and grandparents in a parting blow to a generation that was already drowning in the debts of our predecessors’ (reader comment, Financial Times).

Loss 3: A decline in the prospects of business start-ups in the UK. The EU is founded on four freedoms. Free movement of people is one; the others are free movement of goods, of services and of capital. Losing those freedoms has multiple ill-effects.

• The loss of free movement, as well as making it harder for Brits to work in other countries, also makes it harder for UK tech start-ups to draw on expertise from EU countries – a key element in their current success. Damage to the growth prospects of those companies reduces the number of jobs for British workers and, in the case of tech start-ups, particularly younger workers.

• The loss of the other three freedoms will make it harder to start a UK business that involves exports and imports (something you are interested in doing) because inputs (e.g. component parts) and finished products will no longer be able to cross borders without checks, and perhaps also paperwork.

Loss 4: A wider decline in job prospects. At least two separate effects are at work here:

Lower foreign investment. Foreign firms like BMW (Oxford), Honda (Swindon) and Nissan (Sunderland) built factories in the UK because free movement of capital and goods made it possible to build cars in multiple locations and move parts around. For example, the crankshaft of a BMW mini sold outside the UK had crossed the Channel four times. The loss of free movement of capital and good disrupts supply chains, and some foreign firms have already relocated, harming job prospects and training prospects. The areas likely to be worst hit by a hard Brexit are the old industrial regions such as the north-east of England where there are fewer alternative options for work.

Slower growth. There is near-universal agreement among economists that international trade increases economic growth. The loss of free movement of goods, services and capital will reduce trade with Europe and thus reduce growth rates.

‘There is no guarantee that Brexit assures Britain a bright trading future. Britain is certain to lose preferential access to a single market of 450m people right on its doorstep. There is no way it can compensate for this loss by signing trade deals with nations outside the EU. Nothing has ever undermined the Treasury analysis of the costs of leaving the EU that was leaked to BuzzFeed in January 2018.’ (Financial Times).

A slower-growing economy means slower growth of jobs and pay and reduces the UK’s capacity to spend on education and on training such as apprenticeships.

What are the counter-arguments?

Better employment prospects in the UK because of lower immigration. That may be true in some instances, but going in the opposite direction is the depressing effect of slower growth.

At its simplest, there may be fewer immigrants, but there will also be fewer jobs than would have been the case with faster growth. How this affects younger UK workers will depend on the balance of the two effects – a balance that will be different in different parts of the country and different sectors of the economy.

Faster growth outside the EU. A second counter-argument is that even if there is a short-term hit to the economy, it will be made up over time by faster growth in the long run because of better trade deals outside the EU. One might object to that line of argument by pointing out that the UK is in a stronger bargaining position in making trade deals as part of a market of 500 million (the population of the EU including the UK) than as a market of 65 million. A separate argument – one that depends only on simple arithmetic – is that a period of lower growth can take a long time to make up because it is not enough for growth to pick up – it needs to do so for long enough to make up for the output lost during the period of lower growth. (For a fuller explanation of how this works, see my March 2017 post.) So even if growth becomes faster outside the EU, today’s 16-year olds are likely to be around 30 before the initial lost ground has been made up and, without any extreme assumptions, could be into their 40s.

What can be done to mitigate the damage?

To avoid the worst ill-effects, Richard Bronk’s evidence mentioned earlier advocates negotiating reciprocal visa regimes with the EU that would offer greater rights of movement for young people than for other age cohorts. But, as Bronk acknowledges, such a policy, though helpful, is only a partial solution.

More broadly, the logic is clear: the closer the UK stays to the European single market and current arrangements, the less the damage to the individual rights of young people and to the economy in the short- to medium term. A hard Brexit would leave the UK with more freedom to set its own rules, but would reduce trade with our biggest trading partner, creating economic damage in the sense of lower growth than would otherwise have taken place and with the four sets of losses discussed above.

From my perspective, the damage to the rights and prospects of today’s young people is a very high price to pay for future economic gains which are uncertain and which, even if they do materialise, may not benefit Generation Z until they reach middle age. The least bad option is to stay close to EU economic arrangements post-Brexit.

What about the climate emergency?

The scale of this crisis clearly dwarfs that of the challenges of leaving the EU. So why does remaining closely aligned with EU economic arrangements matter so much? A hard Brexit matters because:

• It damages our economy and therefore makes it harder to afford green measures

• It makes it harder to co-operate with the EU in establishing effective regulations and technological initiatives to tackle what, by its very nature, is a cross-border problem – in the jargon, the Earth’s atmosphere is a global commons that can be safeguarded only by co-operating with other countries

• It reduces our international influence and soft power, and therefore our ability to apply pressure to countries like the USA, Brazil and Australia to act with greater urgency.

My generation grew up in the austerity years after the second world war, with food rationing, bombed-out buildings, and strained budgets for hospitals and schools (I was in a primary school class of 45). But to us, that was simply the world we lived in, and the only world we knew.

This is why climate change is perhaps the most important reason to avoid a hard Brexit. Generation Z can’t know what might have been had we stayed in the EU. But they do know that they will have to live with increasing and perhaps accelerating effects of the climate emergency. Many of them, alerted at both ends of the age range by Greta Thunberg and David Attenborough, are well aware of this. Matters can’t wait till all of today’s teenagers are voters. So my twofold message to them is to:

• Lobby for politicians to regard the climate crisis as an emergency and act now
• Lobby to stay close to EU economic arrangements to protect young people’s job prospects, personal freedoms and entrepreneurial opportunities, all of which are desirable both for their own sakes and because they boost the UK’s ability to combat the climate emergency.

Most of you don’t yet have the vote. But you have parents, grandparents, teachers and friends who do, so spread the word.

This post represents the views of the author and not those of the Brexit blog, nor LSE. I am grateful to Thomas Lee for asking the original question and for continuing to press for a clear answer, and to Richard Bronk and Abby Innes for very helpful comments on an earlier version. Remaining errors are my responsibility.

Nicholas Barr is Professor of Public Economics in the European Institute at LSE.

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nicholas barr

Nicholas Barr

Nicholas Barr is Professor of Public Economics at the European Institute, LSE.

Posted In: #LSEThinks | Economics of Brexit | Energy and the environment | Featured | Migration


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