In: Uncategorized9 Dec 2013
One of the worst habits of the current generation of younger adults is to blame their older peers for many economic and social problems. Such scapegoating is understandable in those in an awkward teenage phase but anyone over 20 should have grown out of it.
Take the discussion of household debt. It is often framed in terms of the older generation having taken out excessive loans in a bid to live in more luxurious homes than they can really afford.
Or look at pensions. The elderly are often portrayed as parasitic on the younger generation as they insist on being paid lavish pensions which are economically unsustainable. If anything the next generation of pensioners, those who are approaching retirement, is seen as even worse.
Following on from these premises it is assumed that the older generation was at least partly responsible for the economic crisis. If their demands had not been so unreasonable the housing bubble would not have inflated so much and the Government’s fiscal state would not be so dire.
The underlying assumption that the older generation was at least partly responsible was implicit in the Autumn Statement. George Osborne, the chancellor of the Exchequer, announced an arbitrary rule that people should spend one-third of their adult life in retirement. That implies an increase in the state pension age to 68 in the mid-2030s and 69 in the late 2040s.
Such scapegoating of the older generation is shared across all the main political parties. It was spelt out most clearly by David Willetts, the minister for education and science, in his book The Pinch.
If anything recent figures from the Office for National Statistics appear to have strengthened the politicians’ case further. Since the start of the economic downturn in 2007/8 the median household income of the whole population fell by 3.8% in real terms to 2011/12. But look at non-retired and retired households separately and a different pattern emerges. The median income for non-retired households fell by 6.4% while those of retired households rose by 5.1%.
But start thinking about it more carefully and a different pattern emerges. Even on a personal level the vast majority of older adults are anxious to support their children. Indeed if anything they overindulge them. Even after their progeny have reached adulthood their parents are often still willing to help finance their lifestyles and even allow them to move back to their childhood homes.
The reality of the state pension is also that it is incredibly meagre. Nor is the labour market generally amenable to older workers. Even if they want to work there is often little available and what does exist is poorly paid.
On a more fundamental level the blaming of the older generation is completely misplaced. It confuses demography and economics.
The underlying problem that has caused our present plight is not demographic – the population has been ageing for decades – but economic. There has been insufficient investment and productivity growth. A more productive economy can support a greater number of dependents – whether they are elderly, disabled or students – than a less productive one. This argument is clearly spelt out in Phil Mullan’s excellent book on The Imaginary Time Bomb.
Scapegoating the older generation for contemporary problems is juvenile and morally repugnant. But it also fundamentally misunderstands the causes of our malaise.
Until the roots of our economic problems are properly grasped it will not be possible to tackle them effectively.
This comment was first published today on Fundweb.
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