Donald Hirsch

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Forget the lucky boomers A lifecycle approach
to intergenerational equity
Donald Hirsch Independent consultant and writer
on social policy
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Three ways I might think about inter-generational
equity
1. Do I get a good lifetime deal compared to
other cohorts?
My generation
My parents generation
My childrens generation
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Three ways I might think about inter-generational
equity
2. Am I getting a good deal today compared to
other age groups?

• Equity between eg
• Care spending
• Pension spending
• Tax burden
• Higher ed spending
• School spending

Frail elderly Third agers Working age
(me) Young adults Children
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Three ways I might think about inter-generational
equity
3. Are we constructing a distribution of
resources that I or my descendents would choose
over a lifetime?
My generation
My childrens generation
My grandchildrens generation
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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?
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The cohort perspective
Postwar 1960s Boomers
boomers
Year of birth 1932 1937 1942
1947 1952 1957 1962 1967 1972 1977 1982 1987
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The cohort perspective
Postwar 1960s Boomers
boomers
Annuities on retirement Pension payout on
invested private contributions, relative to
average earnings (1992100)
Pension yield
Annuity rates
(Based on best approximations, not precise data)
Year of 60th birthday 1992 1997 2002 2007
2012 2017 2022 2027 2032 2037 2042 2047
Year of birth 1932 1937 1942
1947 1952 1957 1962 1967 1972 1977 1982 1987
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The cohort perspective
Postwar 1960s Boomers
boomers
Year of 60th birthday 1992 1997 2002 2007
2012 2017 2022 2027 2032 2037 2042 2047
Year of birth 1932 1937 1942
1947 1952 1957 1962 1967 1972 1977 1982 1987
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The cohort perspective
THE 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 REALITY If 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
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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
Meanwhile, the percentage of over-85s has risen
by a fifth, while care funding has been squeezed
GDP spent on education 19
Children in the population -9
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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
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The age group perspective

• ...and especially
• Do we redistribute sufficiently from wage-earners
  to pensioners via taxation and pension
  contributions?

Years of life expectancy for a woman aged 60
Millions contributing to occupational pension
schemes
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The life-cycle perspective

• ...or rather
• Are we being effective at smoothing economic
  well-being throughout our lives?

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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?

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The life-cycle perspective

• We need to
• Rethink the terms of intergenerational
  reciprocity
• Debate priorities about resource allocation in
  this context

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The life-cycle perspective

• Does the social policy debate think widely enough
  about what resources contribute to well-being at
  different life stages?

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The life-cycle perspective

• For example, time, money and energy
• Student
• Mid-career
• Retired

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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