Austerity in Europe: Government cuts have tended to land on the young

Posted: December 10, 2015 in economy
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MANY suspect governments of protecting increasingly wrinkly electorates over the young within the big austerity packages imposed since the financial crisis and recession. While youths have had a particularly rough ride within labour markets, the overall effects of the response to the crisis are a bit more complicated. A new issue of Fiscal Studies, an economic journal, published today compares the austerity packages implemented in six European countries (Britain, Italy, France, Spain, Ireland and Germany) and would seem to provide fodder for those who think the young have been given a raw deal.First, look at investment. When there is a hole to be plugged, governments might be tempted to slash investment spending and maintain current spending. This is politically easier; current benefit claimants will squawk more loudly than those who might have used the now-cancelled roads. The papers show that in all countries other than France and Germany investment spending was cut more quickly than current spending–future generations are the main losers of this prioritisation.Next, look at the packages of tax-and-benefit changes that governments used to curtail borrowing. The collection of papers compare net household incomes in 2014 with what they would have been if no policy changes had been made after the recession (2015 for Britain). They find that in France, Ireland and …

via Economic Crisis


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