Intergenerational unfairness

This thread on Twitter has attracted a lot of attention. It goes some way towards explaining why older people are generally in favour of Brexit, and why Theresa May's "strong and stable" mantra particularly appeals to the baby boomer generation. For those who aren't on Twitter, I've paraphrased part of the thread here.
I have been thinking about the "strong and stable" mantra, in the context of my mum, who thinks Theresa May is great. Mum is a product of post war Social democracy (born 1947). She got 6 good O levels despite failing the 11+, and went into the civil service. She got into a mess due to creating me with my irresponsible dad, but then met my stepfather, whom she is still with.
In material terms, since the early 80s my mum and my stepfather have had no money worries. They've had stability from their 40s to their 70s. And they also had stability in their earlier lives through full employment, the NHS, workplace/union rights, public sector employment, education. Although they were children in the first Austerity era (late 40s/early 50s), it was their parents who'd born the brunt of that. They had the stability of post-war social democracy. Then, from 1979 onwards, they got the income from the shares. They got the wealth from property price rises. They got the dividends of Thatcherism, and they also got the pensions from post-war social democracy.
So they've had a lot of stability. Stability was their era. If you appeal to them with "Stability" they recognise themselves. And because they did well out of the upswing of Thatcherism after the rockiness of the inflation years and the disruption and "discontent" of 1978-9, they also identify with "strong". They voted for Thatcher, and she put a stop to disruption and discontent.
To them, stability came under Thatcher because she was strong, and they see May, their contemporary, reflecting it back at them. They see "strong and stable" as values they associate with their own characters. They don't see themselves as being stable because of post-war social democracy. They don't see healthcare, education, housing, rights. They see themselves as having the right qualities, the right approach to life. Their stability comes from "working hard and saving", even though they've had more holidays than anyone I've ever met and were well into the bank of his mum and dad (civil service pension). And also, as gleeful Brexiteers, they don't see any of the stability or material comfort as having come from 45 years of EEC/EU membership. 
May's mantra of "Strong and Stable" resonates and reinforces how they see themselves. So they say things like, "I'm sure we'll get a good deal because Theresa May is strong" and "we can trade with Australia". Mum thinks Theresa May is "really good because I think she'll get us a good deal". This is just faith. Faith that being 'strong' works: faith that being 'strong' will restore Britain to what it was when they did well out of it. Being Strong will make you Stable.
It's delusional nonsense. It's the politics of Affect. But it's a structure of feeling. It ignores history, it locks on to characteristics. Also, of course, it's difficult to counter it by giving your parents a little lecture on the Post War settlement and the neoliberal rupture.
They see the struggles, failures & penury of their children as failures of New Labour. Borrowing money, switching jobs. They had stability because they were strong. We have instability because we are weak. We are flighty, we get into debt, we can't keep a job. Weak.
I say to them, what about my child? What about my 13 year old? She won't have what you had. Is that "strong and stable", Mum? Your granddaughter having to pay private health insurance when she might not even be able to get a job?
I see their "strong and stable", and I raise them "you have voted to make your grandchildren's lives unstable and precarious". I want to make them feel guilty for what they have done.
But when I talk to my mum and I say "you know your grandchildren almost certainly won't get a state pension" she says "I know".
They don't care. 
I've highlighted the comment that particularly attracted my attention. For to my mind, this is where the author's perception failed him (or her). You can't make people feel guilty about something they don't think is anything to do with them. And the baby boomer generation don't see their wealth and their entitlements as in any way connected with the materially poorer future faced by their children and their grandchildren.

Believe me, I have tried. I have spent endless hours explaining that NI contributions are not payments into a savings pot to be drawn on in retirement. I have spent almost as many hours trying to get across to older homeowners that the current value of their property has nothing to do with their hard work and everything to do with the insane rise in property prices since the 1960s. I have shown how the NI fund faces bankruptcy by 2020 unless either the state pension age rises significantly - for current generations, not just for the young - or NI contributions rise astronomically. I have patiently explained to those living on the income from savings that raising interest rates beyond what the economy can afford will make everyone, including them, poorer in the future. I have pointed out that the returns of the 1980s were anomalous and will never return. And I have commented that retaining the triple lock on state pensions, thus continually raising pensions above both earnings and inflation, will progressively immiserate the children and the unborn of today.

All my attempts failed. They did not want to know. When I said that today's pensions are paid by today's workers, and that tomorrow's pensions will be paid by tomorrow's workers (the children and unborn of today), I was shouted down. "WE PAID IN: YOU PAY OUT", they shrieked. Even those who did understand that current contributions pay current pensions, and that the wealth of the old is mirrored by the debt of the young, refused to accept any responsibility for the uncertain future faced by the young. They think they are entitled to their property wealth, their pensions and their benefits, and they are damned if they are going to relinquish any of them without a fight.

It's not that they don't care about the young. They do. After all, they have children and grandchildren. So they want their state pensions so that they can provide free childcare for their grandchildren, thus enabling their daughters to go out to work. They want the state to pay for their social care so that they can pass their property and pension wealth on to their children. They even want the triple lock to continue so that their children and grandchildren will in due course have higher state pensions.

They seem unable to see that the money they want to drain from the state to subsidise their own children must come from taxing other people's children, many of whom will be materially poorer than theirs. Or if they do see, they don't care. They don't see the cost of their demands as any of their concern. They have worked hard and paid in all their lives. Now it is time for them to reap their just rewards.

The real problem is that they do not understand the "social contract", on which our welfare system is based - and which forms the foundation of our entire social economy. The "baby boomers" have been systematically led to believe that their security in old age comes from their own efforts, not from ensuring that future generations have a bright future. That is the legacy of the "cult of the individual" which was the moral underpinning of Thatcher's revolution. The baby boomer generation bought former council houses, participated in the sell-off of state assets, contributed to defined benefit pensions, paid tax, NI and SERPS. They believe that through their own hard work and saving, they have provided for their own old age and acquired assets to pass on to future generations. Their property, pensions and benefits are simply the capital they have built up. They are entitled to them - in full.

So the reason it is so hard to shift their sense of entitlement, even though they know that future generations will not have such generous pensions and benefits, and may never own their own homes, is that they believe they have paid. Any attempt to cut their pensions and benefits, or reduce their returns from saving, or force them to draw on their wealth to pay for care, is thus seen as robbery.

But that's not how the social contract works. This is how the Government's report on intergenerational fairness describes it:
The welfare state has long been underpinned by an implicit social contract between generations. The provision of benefits and public services to the current pensioner population is funded by the taxes of the current working-age population. In turn they expect to receive similar benefits and services when they retire, and so on. 
The sad truth is that the baby boomers have not paid for their pensions and benefits. This chart - from research carried out in 2004, and cited in the Government's recent report on intergenerational fairness - shows that everyone born before 1971 will contribute less in tax over their lifetimes than they receive from the state, once things like free education and the NHS are taken into account: 

We should not be fooled by the percentages here. The oldest generation have paid in considerably less than they receive, but in money terms they both paid and received much less than those born since the war. Financially speaking, the people who have taken the most and paid the least are my own generation, those born 1956-61.

Of course, this research is out of date. The Government's report calls for further research to be undertaken, to determine what the situation is now. But it seems unlikely that the balance between tax and receipts has improved. It is more likely to have deteriorated, since people are living longer, state pensions and benefits have risen and the cost of the NHS is rocketing.

But as the Government's report explains, the contributions shortfall is not the only problem:
The UK economy has become skewed. Rapid and sustained rises in house prices have concentrated wealth in the hands of those who own property. Far too many young people cannot afford homeownership and instead have to pay costly private rent. Life expectancy has risen faster than anticipated at a time when the large baby boomer cohort, born between 1945 and 1965, are reaching retirement. As the taxes of working people support the retired, the ageing population places strain on those in work. Pensioners have been protected from public spending cuts that have largely been felt by younger groups. Pensioner poverty has been drastically reduced and average pensioner household incomes now exceed those of non-pensioners after housing costs. The millennial generation, born between 1981 and 2000, faces being the first in modern times to be financially worse off than its predecessors.
This chart (from the same report) shows just how skewed against younger people the housing market has become:

And this pair of charts shows all too clearly who, above all, bears the cost of the UK's disastrously distorted housing market:
Children do. After housing costs, 30% of children are in relative low income - compared to 15% of pensioners and 20% of working age adults. The report expresses concern about millenials, but the generation beyond looks in even worse shape.

The truth is that as long as younger generations remain "weak and flighty", highly indebted, insecure and poor, older generations' view of themselves as "strong and stable" must be a delusion. Strength and stability can only come from ensuring that future generations have prospects that are even better than those we had. By looking after themselves at the expense of future generations, older generations are undermining their own stability. And as if that were not bad enough, now they have shafted the young people on which their future depends. The economic fallout from Brexit will hurt young people far more than it will the property-owning, pension-reliant old.

The irresponsibility of older generations threatens not only the future of younger generations, but their own prosperity. Entrenching intergenerational unfairness, as the old seek to do, is folly.

Related reading:

Raising interest rates is not that simple, Lord Hague
The foolishness of the old - Pieria


  1. The problem is neither Baby boomers nor any other generation, but rather everyone's failure to comprehend the new monetary paradigm required to extricate ourselves from both the current austerity and the long term monopolistic financial paradigms of Debt and Loan ONLY. Direct and Reciprocal Monetary Gifting is absolutely necessary or the business model of Finance will continue to dominate every other business model and 95% of the general populace....until the wheels really fall off and we blow civilization to smithereens or become the complete cattle that Finance would like us to be.

    We've all failed to comprehend. We all need to wake soon as possible.

  2. Your nation and my nation have the same problem. We have to solve the problem, but before we can, we need to know the cause of the problem. You seem to be saying that the older generation is the problem. In fact, you call them "irresponsible" and "unfair." In other words the problem is human nature. Good luck with that. It won't change, now or ever. So the solution must be found elsewhere. Got any ideas?

    Maybe the system of economics must be changed so that the generation that now depends on the older generation to do the right thing can be freed of that connection. I've got an idea! If we want the generation that needs money today because of the irresponsibility and unfairness of the older generation, then why don't we just give it to them? No... I'm not kidding. I am serious. If you want people to have the money they need to deal with the necessities of life then give it to them. I suppose you could give them some important services for free and give them money to buy the rest. In fact, rather than give them money you could just pay their bills: utilities and all that. A utility company would no longer need to bill its customers. It could just bill the government and get a check the next day.

    Now I learned a long, long, long time ago that I had never had a new idea and I still haven't. So, somebody has had this idea already, and you probably know all about it. If so, can you tell us a little about it? How well did it work?

    Should I try to patent it?


    Your American friend,


  3. For most of us, the jury is out on Theresa May. She was a less than average Home Secretary, but then the so-called strong Margaret Thatcher was a less than average Education Secretary. The brutal fact is that Mrs May is all we’ve got, because I don’t think for one second you are suggesting that we crusties vote for Jeremy Corbyn’s Labour.
    It could be argued that the social contract has changed and that older people (I don’t qualify as a baby boomer, because I started school the year your mother was born) have kept their side of the bargain as it existed during the years in which they were net contributors. Throughout my working life there were very few in-work benefits, save for Family Allowance, and stringent conditions on dole payments and the awarding of National Assistance for anyone falling on hard times. What has changed over recent years is the expectations placed on the social contract, promulgated by politicians, that the State will provide a safety net against all of life’s misfortunes.
    Although it undoubtedly does take a large share of the welfare pie, the state pension is nowhere near as generous as your article implies. Despite low housing costs I, and my fellow pensioners, would be living in abject penury if that was our only source of income.
    David Hardy

  4. so some lecture on the post war settlement is getting a lot of attention .

    in 2013 a guardian journalist said that the labour party never deals
    with its economic failure .
    in other words , they dont do the history .
    at least not in the public domain .
    [they may do it at the elite level ]
    there is one thing worse than not doing history .
    and thats doing it badly .

    a party loses all credibility .
    the old , who actually lived through the period ,
    just stop listening .

    of course the impressionable , naive young may fall for it .
    especially with dumbed down education .

    but the old vote . and there are more of them .

    so its a big own goal .

    yet bull shit history boosts moral amongst the radicals .
    keeps the internal party united .

    your twit history has huge holes in it .

    the sdp split , leaving the democratic socialists in control .
    the failure of democratic socialism [ in opposition ] , and the creation of new labour .
    the failuire of new labour [ in govt ] , so the return to failed democratic socialism .

    a vote for strong teresa may , is a vote against the coalition of chaos .

    failed democratic socialism + failed new labour + waste of space lib dems + snp + green loons .

    yes , rejecting labour + hangers on , means more thatcherism .

    life sucks .

    but who is to blame for the state of the left wing .

    in the end those who support it .

    by voting . by donating money . by blogging .

    let labour die .

    and as for brexit shafting the young ,
    well just dont mention light touch regulation
    and that financial crisis .

    you might just have to do some history .

  5. I am a 57 year old male Brit who has now been employed for 36 of the last 40 years. So I'm on track for a full state pension (at age 66 BTW) I asked the DWP for my NI contribution record and totalled it up. The amount was £64,543. Someone could take my contributions and do a net present value calculation or tell me what sort of income I could get if I had invested those payments I suppose, but whatever way you cut that contribution it seems to me to be 'not very much'. I'd go so far as to say 'too good to be true' - which rather reinforces your point, Frances. I bet I'm really unusual in knowing my contribution total by the way.

    1. If you had invested those contributions in bonds and the stock market, you would have probably around three times that capital. Say 180,000 Pounds. Just drawing down capital at the State pension of 7,500 per annum would provide 25 years worth of pension.

      Clearly that excludes any "benefits" that come along in addition.

      The government decided to tax and spend, rather than tax and invest on your behalf. IMO You are fully entitled to claim the State pension from the current tax payers.

      It is the system.

      I would prefer to have no NHS taxes to pay, and a personal pension plan. But we are not considered to be financially responsible enough. A sentiment which I tend to agree with.....

    2. Richard, what would you prefer the government to have done -borrow hundreds of billions of pounds to invest in UK assets?

      Good luck with that.

    3. Anon, yes I realise that there has never been a prudent UK government.

      However, my general and probably unworkable idea, would be that all the NHS contributions would be spent on infrastructure, old people's homes, retirement villages, hospitals and similar rent generating projects.

    4. Richard,

      You don't mean NHS contributions. You mean NI contributions.

      I'm afraid your idea is completely unworkable. The NI system is unfunded by design, because otherwise older people who had lived through the war could not have benefited from the 1946 Beveridge settlement.

      Changing the NI system to a funded scheme as you suggest would mean immediate cancellation of all existing pensions and contributory benefits, with no reinstatement until the fund had built up to a size sufficient to support them. That would take decades. And the only alternative is to double the contributions from working people and their employers, again for decades to come, thus enabling payments to be maintained while the fund builds up. Either way, it is a massive hit to an awful lot of people. And therefore it is, politically and socially, a complete non-starter.

    5. Your political economics is not too clear .
      There is not a savings pot , but there is a ni fund which is about to go bankrupt .
      Maybe govt tops up the pot .
      To give pensioners a decent income .
      Maybe there is a temporary baby boomer problem .
      Maybe there is a long term problem with older people living longer .
      You first have to decide whether there is a limited amount of spending the govt can afford [ all areas ] , or as Jeremy corbyn says >>> the money is there .
      It is always there .
      If you go for the limitation argument , then there is a zero sum game .
      More on pensions , less on liberal spending on sure start centres , asylum , sending massive amounts of teenagers to university for three years .
      You can avoid the limitation argument by using the left wing preferred investment theory .
      By investing in education , asylum seeking [ new workers ] , and sure start centres , govt income , in the future increases .
      The investment theory is a great combination of economics and politics .
      The left wing vested interests get loads of spending on their pet projects . And voters are told they will be better off .
      Sadly there is a problem .
      Voters often think it is all bull shit .
      And simply re distribution from them to the vested interests of the left wing .
      And to invest now , I think you are arguing that pensioners should accept less .
      As for being better off , remember the winter of discontent , and the u k losing 7 .5 % of its gdp .
      I think its a long time since labour had economic credibility .
      Maybe people believed that Wilson s ministry of economic affairs should be given a chance .
      Given the heath failure , maybe the social contract seemed worth a go .
      In 1997 labour went to the country with a economic policy the tories could virtually sign off . If you ignore the windfall tax on the utilities .
      They didn't mention that light touch regulation .
      As some intellectuals on the left have said , voters won't be fooled again .
      Labour might as well go with an overt ambitious policy , rather than a secret one .
      But they have zero credibility .
      They can only hope for a protest vote .
      People are either desperate , or they are not .

    6. Francis,

      Thanks for the reply.

      I realise that to get from here to there is one of those "don't start from here" things. But it would not have to be a sudden change.

      There could be a relatively easy multi-step process.

      1. Segregate NI contributions from the general government accounts and create a separate entity to pay State pensions.

      2. A bond could be issued for the amount of investment required, Mr Carney has easity enough finger strength to cover it. He already has 400 Billion of monetised government bonds sitting in his computers. Another 50 Billion is neither here nor there. Mr Dragi indeed seems to have no limits to the amount he can issue.

      3. The necessary investments would be made along the lines I described.

      There would be no need to cut existing pensions or double exisitng contributions.

      There is no shortage of funds, just a complete lack of vision, wisdom and long term thinking.

  6. Hi Francis, we are in exactly the same narrow age window....

    I have to agree than I am very happy to have received an almost free tertiary education. Otherwise I have not claimed any substantial benefits from the "system" and the State pension does not kick in for another few years, provided I have not kicked out. Course fees and the attendant student loans have primarily led to massive inflation in the cost of education. That seems to be what happens when money is made available.

    Regarding the "triple lock", surely there has to be an annual increase to compensate for inflation? The triple lock only guarantees a minimum of 2.5% if wage inflation or general inflation fall below it. It is questionable how often the minimum 2.5% would even apply.

    I have given up on the UK house price infatuation. High property prices and high rentals are not only sucking the economy dry through concentrating the wealth in the hands of the few, and giving the banks large wads of interest payments, but also tend to move the banks to lending into the "safe" sector in preference to more risky commercial investment. I cannot see a solution to this. Any government that tries to fix it will be voted out.

  7. As someone of the earlier generation than yours, I felt that having my university fees paid and getting a student grant was reasonable given National Service and what we had put up with in the 1940's. Mine and the generation before felt that they were owed by the State for the two great wars. This attitude was handed down to your generation along with the belief that what we paid in would be what would be paid out. Politicians and experts said little or nothing to contradict this, indeed the so and so's kept telling us that we could have things "free". Sooner or later this one was going to hit the buffers and as you suggest quite soon also as you suggest the voters do not want to know and probably do not believe it.

  8. What is missing here is the fact that Finance's enforced monopolistic paradigms of Debt and Loan ONLY prevent possible prosperity for all and also unnecessarily binds business to their austere system. If we had the good sense to take control of both monetary policy and the pricing system this problem could be solved for all. For instance, implement a direct universal dividend to the individual and also implement a discount policy of say 30% for every business model's retail product (that is its product to the next business model in the economic/productive process as well as at final retail sale) that was rebated back to them by a monetary authority specifically mandated to do so and you will have solved both modern economies' chronic scarcity of demand and simultaneously done the supposed impossible, i.e. harmlessly integrated price deflation into profit making systems.

    Or we can continue to allow Finance's dominating paradigms of Debt and Loan ONLY to prevent such solutions. If you honestly look at it for a moment the correct decision is a "no brainer".

  9. I don't think that every approach has been considered here. We could afford all this in the past and can do so again. The assumption seems to be that if it costs we can't afford it. Other countries manage fine, or at least better, so what have we lost that means we can't rise, to this admittedly huge, challenge. We've lost the value of the collective.

    The debt we owe those who fought in the is also due to their descendents. The moment we abandoned Full Employment is the moment we suddenly couldn't afford to care for each other. I don't look at the ludicrous debt clock, I look at the output gap of an economy not at full potential.

    Add in the parasitic finance sector and rip off fees no wonder we can't afford pensions. We forgot the art of nation building in the mistaken belief that the interests of great corporations coincide with ours, they don't.

    Imagine how much the minimum wage would have to be if each individual had to cover every living expense covering health, education and pension. This is where the collective works. bill40

  10. Well. This incredible uninformed post seems to assume that old people fire up their barbecues with money which simply disappears in smoke? In reality this money doesn't disappear in some black hole but only changes hands. The spending of this money is the income of the next generation. Or the saving of this money is the inherited wealth of the next generation.

    1. You did not read the post properly. I pointed out exactly that.

      However, you have not correctly identified the causation chain. The old are intrinsically unproductive. They do not earn their income - they take it from others. So, you need to consider 1) who pays the income of the old 2) who inherits the wealth of the old.

      Re income, you have the causation the wrong way round. The income of the old comes from the taxes and savings of the working young. Their taxes and savings are deductions from their wages, which are the reward for their effort in producing goods and services. Those goods and services may be bought by the old, but to say that the money the old spend is the income of the young is really stretching things rather far. Old people's spending of money earned by the working young simply returns to (some of) the young what was taken from them. And not all get their money back - after all, the owners of the means of production also have to benefit from the spending of old people. It can't all go back to the young in the form of wages. Some of it goes to shareholders and bondholders - many of whom who are, of course, pensioners.

      The wealth of the old goes to the young, but only to those young who are fortunate enough to have wealthy relatives. The rest continue to pay the incomes of the old through their taxes and savings, but never benefit from inheriting their wealth.

      Consequently, wealth inequality becomes deeply entrenched across the generations.

    2. I think that part of the confusion is whether one is implicitly assuming full employment or less than full employment.

      If all of society's productive resources are already fully employed, then obviously for some people to consume more than they currently contribute to output means that there has to be less output left for consumption (plus capital formation) by others.

      The opposing view implicitly assumes unemployment. In this case, if the elderly did not consume so much, then those involved in the production of goods and services consumed by the elderly would be unemployed and therefore worse off.

      (To avoid complicating a straghtforward argument, I have ignored imports/exports and ownership of foreign assets.)


  11. Hi Frances,

    Another excellent piece - very interesting and thought provoking, thank you.

    I have a question for you please.

    To what extent are the problems faced by the younger generation: lack of stable, well paid jobs, excess debt, unaffordable property, no chance of a reasonable pension etc.) caused by the "greedy" baby boomer generation, versus them being caused by the "elite" (the 0.01%/0.001% or whatever it is) creaming off the fruits of increased productivity, longer working hours, technological innovation etc.

    The trillions held in tax havens, the inherited wealth billionaires and property moguls - have they had a part to play in these problems? What proportion of wealth do these people hold and what has the effect been on the rest of society in the UK?

    It seems we are at risk of a generational "war", when maybe this is a distraction from the real problem, that is that society and the economy has been "hollowed" out by powerful vested "rentiers" whose greed knows no bounds.

    I would really welcome your insights on this.

    Many thanks,


  12. James from Durham15 May 2017 at 12:41

    I so identify with this. I have teenage daughters whose future has been ruthlessly sabotaged by their grandparents voting for the Tories and voting for BREXIT. They really don't care. They are the ME ME ME generation. They would happily abolish the NHS. They would happily scrap disability benefits even though family members would suffer.


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