The Challenge faced by a Young Generation in the Wake of Future Uncertainty

In recent decades, my hometown Beijing has become the epitome of China’s growing economy.
Every morning, millions of people populate the intertwined subway system, rushing to work, and spending their entire day in one of the many skyscrapers. While the cosmopolitan lifestyle is seemingly exciting, under the surface, many young workers are struggling to sustain. To reflect this social norm, Chinese columnists entitle these workers as the Moonlight Clan.

Moonlight Clan, also known as 月光族 (Yuèguāng Zú), describe a large group of young workers who expend their entire salary before the end of each month, suggesting little to no savings in their bank accounts. Usually, young workers from different provinces move into developed cities for future opportunities. In the early 2000s, there were 13.63 million residents in Beijing, in comparison with 21. 54 million in 2019. The significant influx of people from rural to urban areas, with limited spaces and resources, naturally drives up the living prices in the city. Recently reported, the average cost of housing as a share of net earnings is roughly 120 percentage points in Beijing, implicating that by income alone, it is nearly impossible for young workers to purchase an estate property.

Additionally, lacking the proper knowledge in financial management, these workers spend
relentlessly on entertainment, particularly on luxury items. Radically departing from their parents’ more conservative spending habits, members of the Moonlight Clan revel in the joy of consumption, with their lifestyles being representative of China’s booming economy.

This seemingly unsustainable manner of living has been abruptly put under the spotlight by the outbreak of the COVID-19 pandemic. Being the first country to implement national lockdown, China has enforced strict rules on firm's and factories’ operations. With immense future uncertainty, countless employers have decided to either lower the employee’s wage by more than half or dismiss individual employees altogether. Different from other Chinese citizens who have sufficient savings to cope with short- term crises, these young workers face much more severe challenges, finding themselves under rising prices with limited income availability. Even with the belated realization of saving, many are in the position with no excess income to save.

Ironically, the spreading of saving sentiments weakens the rehabilitation of China’s economy after the relaxation of lockdown. Learning from past lessons, young workers usually abandon the consuming lifestyle and adopt the traditional saving approach. The absence of the young workers, serving as the primary purchasing power, results in a less dynamic market environment than before. The conclusion which followed seems counterintuitive; the group, i.e., the Moonlight Clan, which has been suffered the most from the economic impact of the pandemic, is relied on to bring the economy back to normality.

A similar situation is mirrored in the United States. According to a CNBC report, the U.S. savings rate hit a record 33% as coronavirus forces Americans to stockpile cash and curb spending. Chief U.S. economist Gregory Daco states that “there is tremendous uncertainty and virus fear that is lingering, and that is retraining people’s desire to go out and spend as they normally would.”

Since the alteration of saving structure is rather lasting, globally, the young generation is facing a dilemma. On the one hand, the youth could permanently change to savers in case of future uncertainty. The downside of this approach is quite apparent; without sufficient consumption, it is unfeasible for the economy to recover. On the other, young people could remain as consumers, incentivizing the economy but facing tremendous future uncertainty and risks. Unfortunately, this extremely difficult decision must be made and would have enduring impacts on the future outlook of the global economy.