One of the most dismal ideas for our youth to entertain is that their lives won’t be as comfortable as their parents’. Everyone in the older generation knows how much their lives have improved over the decades, and how much better off we are than our parents were.
We’ve come to regard continuous improvement in living standards and quality of life over the generations as part of the natural order. Our pay-off for living in a capitalist economy.
So how can our kids have become so pessimistic about the future? How can they imagine their parents would allow such an appalling prospect to befall their offspring? Isn’t improving their kids’ chances in life a big part of the reason parents work so hard?
Isn’t it why so many parents pay so much to send their kids to private schools? Isn’t preserving their kids’ inheritance the reason the well-off retired fought so hard against Labor’s plan to take away their dividend franking credits?
Trouble is, the kids are right to be so pessimistic. We can’t know what the future holds, but we do know that various trends in that direction are well-established.
And the plain truth is that one way governments have got themselves elected and re-elected in recent decades has been to pursue policies that favour the old and don’t worry about the young.
Politicians have been tempting us to put our immediate interests ahead of our offspring’s future – and it’s worked a treat.
This week the Actuaries Institute of Australia published a new index of inter-generational equity, which compares the “wealth and wellbeing” of people aged 65 to 74 with that of people aged 25 to 34 between 2000 and 2018.
Note that this is before any effect of the coronacession. And remember that the faces in these two aged groups keep changing as people age. No one who was between 65 and 74 in 2000 is still in that group now.
Since the Baby Boomers were born between 1946 and 1964, probably more than half of them were in the 65 to 74 age range by 2018. And the Millennials were joining the 25 to 34-year-olds.
The actuaries have divided “wealth and wellbeing” into six “domains”: economic and fiscal (allocated a subjective weighting of 30 per cent in the index), health and disability (20 per cent), social (including rates of homelessness, incarceration and being a victim of robbery; 15 per cent), environment (15 per cent), education (10 per cent) and housing (10 per cent).
The scores for people aged 65 to 74 in 2000 were given an index value of 100. In the same year, the scores of people aged 25 to 34 amounted to 70. It’s hardly surprising that people 40 years younger have significantly lower scores. They’ve had much less time to gain promotion, earn, save and pay off a home (or even receive an inheritance).
No, what matters more is how the two groups’ scores have changed over time. Over the 18 years, the older group’s score has risen to 115, whereas the younger group’s score has fallen to 69.
Turning to the size of the young’s deficit relative to the old, it improved from minus 30 to minus 11 between 2000 and 2006 – presumably mainly because the young did well in the resources-boom-driven labour market – but then deteriorated to minus 20 by 2012.
That year, 2012, was when the resources boom started winding down. And it was when the Baby Boomers started reaching 65. Over just the six years to 2018, the young’s deficit relative to the old worsened dramatically to 46.
They’ve benefited also from increasing levels of educational attainment and, socially, from modest reductions in the gender pay gap and falling rates of robbery (which affect the young more than the old).
But these gains have been more than countered by losses in other domains. In ascending order of loss, young people have suffered economically as, since the global financial crisis, education-leavers have taken much longer to find full-time jobs; government spending has been skewed towards older generations (higher spending on health, pensions and aged care, but less on the rate of unemployment benefits) and public debt has risen.
The young have suffered in housing, as the rate of home ownership for their age group has dropped from 51 per cent to 37 per cent over the past two decades. But their greatest loss (sure to grow in coming years) is from the deterioration in the natural environment: rising carbon emissions and temperatures, the drying Murray-Darling Basin and declining biodiversity.
And all these trends before the likely weak and prolonged recovery from the coronacession scars the careers and lives of another generation of education-leavers, without governments or voters being too worried about it.