The Golden Age of the Late Baby Boomers?
In the ongoing debate about generational fairness, a compelling argument emerges: are the late baby boomers the luckiest generation alive? Born in the 1960s, we find ourselves at the center of this intriguing question. But is it a matter of luck or a carefully crafted narrative?
The Student Loan Conundrum
The English student loan system has sparked controversy, with younger graduates facing a 9% 'tax' on earnings, a stark contrast to the government grants and tuition coverage I received. This sense of injustice is palpable, but the issue is more nuanced. While today's students pay more, they also have greater access to higher education. The real victims might be those who never had the choice to borrow and study.
The loan system aims for fairness between generations, not across them. Interestingly, it's designed to make money from better-off graduates to subsidize the less fortunate. This personalized 'tax' system ensures that higher-income graduates cover the losses of their lower-income peers. A detail often overlooked is that the very rich graduates are penalized less due to their ability to pay off loans quickly, avoiding high-interest rates.
Housing: A Tale of Two Cities
The housing market presents a similar story. Buying a flat in London in the late 80s, I inadvertently gained an unearned advantage. House prices in England soared relative to earnings from the early 90s to 2021, benefiting those who bought before the mid-90s. However, interest rates have complicated matters, with lower rates favoring younger buyers but driving up house prices due to limited supply.
London's resurgence as a global hub has created a stark contrast in property gains. The city's population growth outpaced housing development, making it a winner's market. This regional disparity highlights the luck of those who bought in London, further emphasizing the generational divide.
Pension Privileges
Pensions reveal another layer of generational inequality. Baby boomers enjoy more generous pensions, funded by today's working population, than their parents or children. The state pension, bolstered by the triple lock, and the now-defunct State Earnings Related Pension Scheme have significantly improved pensioner incomes. Moreover, many baby boomers benefited from defined benefit pension schemes, where employers contributed a substantial 15% to 20% of salary annually.
In contrast, millennials and Gen Z employees accumulate savings in personal pension pots, with employers typically contributing only 3% of salary. This stark difference in employer contributions underscores the generational divide in pension privileges.
The Role of Economic Growth
While late baby boomers may have been fortunate in various aspects, the broader context of economic growth is crucial. The decline in per capita economic growth since the 2007/08 financial crash has led to a shared sense of material deprivation. When the economy grows at a slower rate, average incomes struggle to surpass those of previous generations.
The solution to intergenerational equity lies not just in addressing specific issues like student loans, housing, and pensions but in reigniting economic growth. A stagnant economy exacerbates generational tensions, making it imperative to find ways to boost growth and ensure a brighter future for all generations.
In conclusion, the late baby boomers' luck is a multifaceted issue, influenced by various economic and social factors. While some of us may have been fortunate, the broader challenges of economic growth and generational fairness demand our attention. It's time to look beyond individual experiences and work towards a more equitable future for all.
