donald hirsch independent consultant and writer on social policy forget the lucky boomers a...
TRANSCRIPT
Donald Hirsch
Independent consultant and writer on social policy
Forget the lucky boomers
A lifecycle approach to intergenerational equity
Three ways I might think about inter-generational equity
1959 2009 2059
Age 100
Age 50
Age 0
1. Do I get a good lifetime deal compared to other cohorts?
My parents’
generation
My generatio
n
My child
ren’s generatio
n
Three ways I might think about inter-generational equity
1959 2009 2059
Age 100
Age 50
Age 0
2. Am I getting a good deal today compared to other age groups?
Frail elderly
Third agers
Working age (me)
Young adults
Children
Equity between eg:
-Care spending
-Pension spending
-Tax burden
-Higher ed spending
-School spending
Three ways I might think about inter-generational equity
1959 2009 2059
Age 100
Age 50
Age 0
3. Are we constructing a distribution of resources that I or my descendents would choose over a lifetime?
My generatio
n
My child
ren’s generatio
n
My grandch
ildren’s
generation
The cohort perspective
“Baby boomers are the lucky generation. They were the first to benefit from mass higher education, and will be the last to benefit from decent occupational pensions”.
Really?
The cohort perspective
Year of birth 1932 1937 1942 1947 1952 1957 1962 1967 1972 1977 1982 1987
Postwar 1960sBoomers boomers
1962-1980s: student grants
1990-97: grants and loans
1998-2005 loans and fees
2006 onwards: top-up fees
(Based on best approximations, not precise data)
Percentage entering higher education
Year of 18th birthday 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
The cohort perspective
Year of birth 1932 1937 1942 1947 1952 1957 1962 1967 1972 1977 1982 1987
Postwar 1960sBoomers boomers
Year of 60th birthday 1992 1997 2002 2007 2012 2017 2022 2027 2032 2037 2042 2047
(Based on best approximations, not precise data)
Annuities on retirementPension payout on invested private contributions, relative to average earnings (1992=100)
Annuity rates
Pension yield
The cohort perspective
Year of birth 1932 1937 1942 1947 1952 1957 1962 1967 1972 1977 1982 1987
Postwar 1960sBoomers boomers
Year of 60th birthday 1992 1997 2002 2007 2012 2017 2022 2027 2032 2037 2042 2047
Age in 1967 – when no. of employees paying into private occupational
pensions peaked
20 5 0
Age in 2004 – when no. of pensioners receiving occupational pensions peaked 57 42 37
The cohort perspectiveTHE FANTASY“So life was never better than In nineteen sixty-three (Though just too late for me) - Between the end of the Chatterley ban And the Beatles' first LP.” - Philip Larkin
THE REALITYIf you were born in 1963, near the height of the baby boom, you were:
“Much too early” for truly mass higher education, and
“Much too late” for the golden age of pensions
The age group perspective
Thorny distributional issues ahead, eg
Will we continue to privilege spending for educating younger rather than caring for older people, against the population trend?
Proportionate rise since late 1990s in percentage of: GDP spent on
education: +19%
Children in the population: -9%
Meanwhile, the percentage of over-85s has risen by a fifth, while care funding has been squeezed
The age group perspective
Will the constraint of housing shortage continue to be felt by asset-poor younger rather than asset-rich older people?
Proportionate rise, 1998-2008, in:•Percentage of 25-29 year olds living
with their parents
•Percentage of people aged 75+ living on their own
Eight in ten 25-29 year olds living with parents relate this to housing affordability
The age group perspective
...and especially:
Do we redistribute sufficiently from wage-earners to pensioners via taxation and pension contributions?
Millions contributing to occupational pension schemes
Years of life expectancy for a woman aged 60
The life-cycle perspective
...or rather:
Are we being effective at smoothing economic well-being throughout our lives?
The life-cycle perspective
Life-cycle trade-offs when resource are constrained, eg:
Independence aged 28 or aged 78? Running up debt aged 20 or running down
equity aged 80?
The life-cycle perspective
We need to:
Rethink the terms of intergenerational reciprocity
Debate priorities about resource allocation in this context
The life-cycle perspective
Does the social policy debate think widely enough about what resources contribute to well-being at different life stages?
The life-cycle perspective
For example, time, money and energy:
Student
Mid-career
Retired
TimeMoneyEnergy
TimeMoneyEnergy
Time Money Energy
Conclusions
Yes, beware about over-mortgaging our futures But not a wilfully selfish grab by present generation Foresight and future-orientation works for ourselves,
not just our descendants And unlike Groucho Marx, we do care about
posterity