The Pinch E-Book

David Willetts

• Herausgeber: Atlantic Books
• Kategorie: Geisteswissenschaft
• Sprache: Englisch

Seitenzahl: 717

Veröffentlichungsjahr: 2010

Beschreibung

The baby boom of 1945-65 produced the biggest, richest generation that Britain has ever known. Today, at the peak of their power and wealth, baby boomers now run our country; by virtue of their sheer demographic power, they have fashioned the world around them in a way that meets all of their housing, healthcare and financial needs. In this original and provocative book, David Willetts shows how the baby boomer generation has attained this position at the expense of their children.Social, cultural and economic provision has been made for the reigning section of society, whilst the needs of the next generation have taken a back seat. Willetts argues that if our political, economic and cultural leaders do not begin to discharge their obligations to the future, the young people of today will be taxed more, work longer hours for less money, have lower social mobility and live in a degraded environment in order to pay for their parents' quality of life. Baby boomers, worried about the kind of world they are passing on to their children, are beginning to take note. However, whilst the imbalance in the quality of life between the generations is becoming more obvious, what is less certain is whether the older generation will be willing to make the sacrifices necessary for a more equal distribution. The Pinch is a landmark account of intergenerational relations in Britain. It is essential reading for parents and policymakers alike.

Leseprobe

THE PINCH

About the author

David Willetts is President of the Resolution Foundation, a Visiting Professor at King’s College, London and an Honorary Fellow of Nuffield College, Oxford. He was an official in HM Treasury and Margaret Thatcher’s Number 10 Policy Unit. He served in the Coalition Cabinet as Minister for Universities and Science from 2010–2014. He was the Member of Parliament for Havant from 1992–2015 and is now a member of the House of Lords. He is a Fellow of the Academy of Social Sciences and an Honorary Fellow of the Royal Society and the Academy of Medical Sciences. He has written widely on economic and social policy. His book A University Education was published in 2017.

First published in hardback in Great Britain in 2010 by Atlantic Books, an imprint of Atlantic Books Ltd.

This revised and updated edition published in 2019

Copyright © David Willetts, 2010, 2019

The moral right of David Willetts to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act of 1988.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of both the copyright owner and the above publisher of this book.

Every effort has been made to trace or contact all copyright holders. The publishers will be pleased to make good any omissions or rectify any mistakes brought to their attention at the earliest opportunity.

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A CIP catalogue record for this book is available from the British Library.

Paperback ISBN: 978 1 78649 122 0

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To Imogen and Matthew

CONTENTS

List of Tables and Charts

Acknowledgements

Preface to the New Edition

The Birth Rate Over the Past Hundred Years

Introduction to the First Edition

1 Who We Are

2 Breaking Up

3 The Baby Boom

4 Spending the Kids’ Inheritance

5 The Social Contract

6 Ages and Stages

7 Why Bother About the Future?

8 What Governments Do

9 Time for Childhood

10 Education and Social Mobility

11 Houses and Jobs: Generation Crunch

12 3G

Conclusion

Epilogue: Policy and Politics

Bibliography

Notes

Index

LIST OF TABLES AND CHARTS

Tables

Table 1: Household size: UK

Table 2: Defining the generations

Table 3: Median real household annual net income after housing costs by birth cohort: GB

Table 4: Family home ownership rates of successive birth cohorts: UK

Table 5: Distribution of private wealth between generations in £tn, 2014–16, GB (excluding physical wealth)

Table 6: Distribution of total wealth by age, 2006–8 (£bn): GB

Table 7: Distribution of total wealth by age, 2014–16 (£bn): GB

Table 8: Distribution of housing wealth by age, 2014–16 (£bn): GB

Table 9: Distribution of pension assets across different age groups, 2014–16

Table 10: Net household savings rates, selected countries

Table 11: Land value growth over and above GDP growth, 1995–2015

Table 12: Highly mentioned life events and happenings (%)

Table 13: Median ages of selected countries, 1950–2050

Table 14: People turned to for various problems (% of respondents)

Table 15: Attitudes towards the family (% of respondents)

Table 16: Lifetime carbon budget in a 1.5C world, broken down by generation (tonnes of CO2)

Table 17: Average spend/revenue (£ thousand per head) by age of recipient and type of public spending, 2020

Table 18: Net lifetime withdrawals from the welfare state by birth cohort

Table 19: Projected future spending and tax with no change in policy (% of GDP)

Table 20: Saving in time of mothers of young children between 1974–5 and 2000–1 and 2014–15 (minutes per day)

Table 21: Amount of time devoted to care of young children by different categories of mother (minutes per day)

Table 22: Absolute amount of time spent on different activities by a working well-educated mother in 1974–5 and difference from that level in 2000–1 and in 2014–15 (minutes per day)

Table 23: Time devoted to household activities by fathers of children under five (minutes per day)

Table 24: Age when a child could be allowed out unsupervised

Table 25: Income mobility for children of parents in the poorest quartile (%)

Table 26: Income mobility for children of parents in the richest quartile (%)

Table 27: Average cohort life expectancy at the age of 65

Table 28: Changes in healthy life expectancy (LE) at the age of 65 for males (M) and females (F) in years

Table 29: Median age of population

Table 30: Total of UK-born 20- to 30-year-olds, based on births 20 to 30 years previously

Table 31: Difference in family income above national average for people who join professions (%)

Charts

Figure 1: UK births 1896–2016 defining the generations

Figure 2: Opinions about whether young people will have a better life than their parents, 2017

Figure 3: Wealth has risen in relation to GDP

Figure 4: Real house prices, UK and London

Figure 5: Home ownership rates for each generation

Figure 6: Median real weekly employee pay by age and generation: UK, 1975–2017

Figure 7: Real net incomes after housing costs: pensioners and working age households, UK

Figure 8: Average household housing and non-housing consumption expenditure over time by age

Figure 9: Gross fixed capital formation as a share of GDP

Figure 10: Three measures of the demographic tipping point

Figure 11: Generational home ownership rates by age-group of head of family

Figure 12: Housing tenure of 18–29 year olds, UK

Figure 13: Proportion of income spent on housing costs by age and generation (UK)

Figure 14: Median real weekly employee pay by age and cohort: UK, 1975–2017

Figure 15: Highest qualification held at age 25–28 by cohort: UK

Figure 16: EU referendum 2016 voting by age

Figure 17: Proportion of voters voting Conservative or Labour by age, October 1974 and 2017 general elections

ACKNOWLEDGEMENTS

This book started life years ago when I was the MP for Havant. I had a stream of young people coming to my surgery who were trying to do the right thing for their families but were unable to find an affordable place to live: that set me thinking about why this was happening and what our obligations were to the next generation.

I am very grateful to successive researchers who were of great assistance with the first edition, particularly Melanie Batley, Henry Cook, Ryan Shorthouse, and Laura Fox. Annie Winsbury and Helga Wright provided invaluable support. Gervas Huxley has been an encouraging friend throughout. Nick Hillman has been a great source of wisdom and advice. I have a particular debt to Chris Cook for his wide-ranging research when I was first writing the book. Georgina Capel, my agent, believed in the project from the beginning. Caroline Knight of Atlantic Books was a shrewd editor of the first edition; James Nightingale and James Pulford have urged me on to this second edition. Responsibility for any errors is of course mine alone.

When I stood down from the House of Commons in 2015, Sir Clive Cowdery asked me to join the Resolution Foundation as Chairman, particularly to develop a new strand of work on fairness between the generations. The Resolution Foundation has been a wonderful intellectual home since then. I chaired our Intergenerational Commission, which reported in 2018, and the analysis we did has helped me update the book. The commissioners were: Vidhya Alakeson, Chief Executive of Power to Change; Kate Barker, Chairman of Trustees, British Coal Staff Superannuation Scheme; Torsten Bell, Director of the Resolution Foundation; Carolyn Fairbairn, Director General of the CBI; Geoffrey Filkin, Chairman of the Centre for Ageing Better; John Hills, Professor of Social Policy at the London School of Economics; Paul Johnson, Director of the Institute for Fiscal Studies; Sarah O’Connor, Investigations Correspondent and columnist at the Financial Times; Frances O’Grady, General Secretary of the TUC; Ben Page, Chief Executive of Ipsos MORI; and Nigel Wilson, Group Chief Executive of Legal & General. They were all an invaluable source of expertise and wisdom.

Matt Whittaker, Deputy Director of the Resolution Foundation, chaired the technical panel consisting of Kate Bell, Head of the Economic and Social Affairs Department at the TUC; Chris Curry, Director of the Pensions Policy Institute; Anna Dixon, Chief Executive of the Centre for Ageing Better; Bobby Duffy, Managing Director of the Ipsos MORI Social Research Institute; Frank Eich, Senior Adviser at the Bank of England; Laura Gardiner, Principal Researcher at the Resolution Foundation; Paul Gregg, Professor of Economic and Social Policy at Bath University; Andrew Hood, Senior Research Economist at the Institute for Fiscal Studies; David Kingman, Senior Researcher at the Intergenerational Foundation; Abigail McKnight, Associate Professorial Research Fellow, London School of Economics; Rain Newton-Smith, Director of Economics at the CBI; James Plunkett, Director of Policy & Advocacy at Citizens Advice; Jonathan Portes, Professor of Economics and Public Policy, King’s College London; James Sefton, Professor of Economics at Imperial College London; Anna Vignoles, Professor of Education at Cambridge University; Kate Webb, Head of Policy at Shelter; and Duncan Weldon, Head of Research at Resolution Group.

Just about every researcher at the Resolution Foundation contributed to the working papers which led to the Commission’s report: George Bangham, Stephen Clarke, Adam Corlett, Conor D’Arcy, David Finch, Laura Gardiner, Kathleen Henehan, Lindsay Judge, Fahmida Rahman, Daniel Tomlinson, and Matthew Whittaker. They are a fantastic team. Co-authors were Paul Gregg, Brian Bell, Hannah Shrimpton, Gideon Skinner, Suzanne Hall, Donald Hirsch, Laura Valadez-Martinez, Toby Phillips, Patrick Thomson, and Anna Vignoles.

Much of the new evidence in this second edition comes from our excellent team at Resolution led by Torsten Bell, and I am grateful to them all. I owe a particular debt to Laura Gardiner, who was principal researcher for the Commission and has worked with great energy and intelligence on the project. Now we have created an Intergenerational Centre at the Resolution Foundation to continue to provide evidence on what is happening to the different generations; its annual generational audits are funded by the Nuffield Foundation. If you wish to keep up to date with our work then do visit the website: https://www.resolutionfoundation.org/major-programme/intergenerational-centre/

I have a further debt to the wider academic and research community in Britain and sometimes abroad as well. Rein Jansons of the LSE, Edmund Cannon of Bristol University, Alistair Muriel of the IFS, Bob Pannell of the Council of Mortgage Lenders, and the late Alan Holmans of Cambridge University provided research on specific issues for the first edition. But the debt goes wider than that. During my time as a Visiting Fellow at Nuffield College, Oxford, for example, John Goldthorpe generously gave time to educate me on social mobility, John Muellbauer on housing, and Paul Klemperer on game theory. Nuffield College subsequently elected me an Honorary Fellow and once again those friends, the Warden Sir Andrew Dilnot, and the community there have stimulated my thinking and helped keep me informed of the latest research. I have greatly benefitted from participating in the wide-ranging conferences held at the Ditchley Foundation. Dr Paul Redmond at Liverpool University shared my fascination with the divergent attitudes of successive generations.

This edition has particularly benefitted from research by Ipsos MORI: the first edition got them thinking about generational attitudes and since then they have developed an illuminating research agenda which I have drawn on. Bobby Duffy who led this work is now a colleague at King’s College, London, where I am a Visiting Professor. Social policy experts at the LSE, especially Nick Barr and John Hills, have helped me to think about the welfare state and the life cycle. John Ermisch, formerly of the Institute for Social and Economic Research and now at Oxford University, and Geoff Dench of the Young Foundation helped me to understand family change, distinguishing between cohort and life-cycle effects. Paul Gregg, now at Bath University, and Simon Burgess of the CMPO at Bristol University shared their researches on education and social mobility, as did Jo Blanden. Anna Vignoles, now the Professor of Education at the University of Cambridge, has long been an important source of research and advice on education and social mobility which I continue to draw on. Professor Ken Binmore of Bristol and UCL has thought deeply about game theory and its applications to public policy, and his work above all stimulated me to set out some ideas in an earlier lecture at the LSE. Daniel Finkelstein of The Times and Matthew Taylor of the Royal Society of Arts share my interest in trying to apply insights from this discipline and evolutionary biology to politics, an approach whose time has come. Matt Ridley has also helped guide me through the literature on this. Jonathan Gershuny has generously assisted with advice on his treasure trove of time-use data. Tim Gill has helped with evidence on how loss of time for free play has changed the character of childhood. Mark Bogard of the Family Building Society and Jonathan Haslam have shared with me their material on transfers within families. I have benefitted from many discussions on saving and investment with Martin Weale, formerly of the National Institute of Economic and Social Research, and Andrew Smithers of Smithers and Co. Together with Martin Wolf of the Financial Times they persuaded me early on of the importance of national saving rates in explaining what was going wrong with our economy. Dieter Helm of Oxford University links that to the importance of investment, especially in infrastructure. At events at the Royal Society and elsewhere Martin Rees and John Beddington introduced me to scientists’ understanding of the challenges facing us over the next 40 years. James Sefton of Imperial College has helped with my understanding of generational accounts and kindly introduced me to Professor Ronald Lee of UC Berkeley and Laurence Kotlikoff of Boston University, two leading American experts.

Research institutes such as the Institute for Fiscal Studies and the Sutton Trust have been valuable research resources. Policy Exchange hosted the first event, back in 2005, when I attempted to set out some thinking on the shifts in wealth between the generations. More recently a new think tank, the Intergenerational Foundation, has become a lively contributor to the debate. Mervyn King when he was Governor of the Bank of England responded encouragingly to my interest in the links between demography and economics, and officials at the Bank have shared some of their data. Philip Booth of the IEA and Nick Bosanquet of Reform both tackled this issue as well. The National Centre of Social Research, and James Lloyd, then of the International Longevity Centre, provided their analyses of the distribution of income and assets, which the National Centre generously updated for the first edition of this book. Kate Barker took me through her work on housing. Adair Turner’s reports on pensions provided excellent analytical material. David Coleman of Oxford University has shared his wide understanding of demography. Sitting on the Global Aging Commission run by the Center for Strategic and International Studies in Washington DC gave me an opportunity to think about demographic change as an international phenomenon.

Many other experts, especially from the worlds of education and pensions, have patiently shared their knowledge with me. Punter Southall gave me the opportunity to continue to think about pensions after my front-bench responsibilities on pensions ended. Jane Falkingham and her colleagues at the ESRC Centre for Population Change at the University of Southampton have welcomed me to discussions of these issues and provided valuable material to help update the discussions of demographic change for this edition.

There have also been the opportunities to hear directly the voices of young people. Sometimes it has been very direct indeed – students protesting about university fees for example. Sometimes it has been more structured in TV studios or consultations. Presidents of the National Union of Students have been smart and well-informed advocates for young people. And sometimes it has just been a young person buying the book to give to their parents or some other older adult, hoping that they will realize young people can’t themselves be blamed for the problems they face.

More than a decade in Opposition after 1997 could have been sterile and frustrating. It was because of the generosity of so many people in universities and research institutes that I found them intellectually fruitful and I wish to acknowledge my debt and gratitude. After leaving government and then the House of Commons in 2015 I have similarly appreciated the stimulus of a surge in events and discussions on intergenerational issues which are too numerous to list. But every discussion always brings out a fresh angle on this fascinating and important issue, which ranges from the brutal economics of what makes us rich or poor through to the deepest questions of what holds a society together.

I should also acknowledge my debt to many friends in the much-maligned world of politics. They have recognized the problem and urged me on – hoping that books like this might broaden the range of what is politically possible.

My wife Sarah has shaped the thinking in this book more than she may know. She has always judged every family question by what is best for our two children. This book is dedicated to them.

PREFACE TO THE NEW EDITION

When this book came out, 10 years ago, it was the first to look at the post-War British political economy from the perspective of different generations and to argue that the Baby Boomers were doing very well – but at the expense of their children. We were familiar with the idea that social class or ethnicity or gender influenced our path through life, but I argued that there was also an increasingly important generational gap in the economic and social fundamentals of income, opportunity, and wealth. It challenged our assumption that things just got better for each successive generation.

I was able to draw on some data on the contrasting fortunes of different generations but it was limited and so the argument was more speculative. Now there is far more evidence, much of it obtained by the excellent researchers at the Resolution Foundation, and it enriches this second edition. In particular Chapters 4, 8, 11, and 12 have been completely revised and rewritten to include much more evidence from the past decade. The evidence is even more compelling: there clearly is a problem. The question is what we do about it, and that is tackled in the new Epilogue.

I first set out the argument in a speech in 2005,1 and in the 15 years since then it has been tested in every possible way. But there are still sceptics. I think particularly of the courteous letters I receive from older people in neat copperplate handwriting on Basildon Bond paper explaining that they have had a much tougher life than young people nowadays. And in many ways that is true for an 80-year-old. But it is not so true for a 60-year-old Baby Boomer. Brexit has also added an extra intensity to these arguments because, on average, older people voted to Leave and younger people voted Remain. I have decided not to engage with Brexit in this book as it would overload it. But it has opened up a new generational divide in attitudes and voting behaviour which makes it even more important to understand and do something about the gap between the generations. There have been other arguments too – all part of the very lively debate which the book has stimulated. Here is a distillation of the main challenges, and my responses to them.

There is no problem for the younger generation – and if there is it is only temporary

First there are the sceptics who claim there is no real evidence of a problem and the younger generations are all fine. But the latest evidence is overwhelming – and it is not just one or two economic indicators. Both major components of income – pay and the transfers from the welfare state – are heading in the wrong direction for the younger generation. Household income after housing costs for a 30-year-old Millennial born in 1990 is no higher than it was for a 30-year-old member of Generation X born in 1980. It also shows up in the key elements of wealth – housing and pensions – as the Boomers are still enjoying surges in wealth whereas the younger generation are finding it much harder to get started on the housing ladder or build up a decent pension.

The problems tended to emerge in the 1990s and early noughties and then got worse after the financial crash of 2008, though they did not all develop simultaneously. By and large the younger generation lost ground on asset ownership before they then lost ground on income. Nor are the problems all on the same scale. And there are of course nuances and qualifications. Home ownership fell first and fell heavily, but just possibly may have bottomed out. The loss of defined benefit pensions is a heavy blow to younger generations, but at least now there is auto-enrolment into defined contribution pension pots. Pay has been doing badly and a 30-year-old today earns no more than 10 or 15 years ago, but their pay is still more than a Boomer 40 years ago. State pensions are increasing in value while working-age benefits are being cut, but the pensions age is rising to offset some of the extra costs of the state pension. However, none of these qualifications disprove the core proposition that Millennials, born between 1981 and 2000, are having a tough time compared with the post-War Boomers.

The biggest special factor has been the 2008 crash. The decade since has been tough, especially for young people launching themselves into the jobs market. One argument is that this is the real story, and without the crash we would not have a problem. But most of the trends hitting young people began before then. They were already losing ground in the jobs market. Company pensions were already closing to them. The trends are deep-seated, and many span both the favourable decade before the crash of 2008 and the tougher one after it. The real story of the crash is that when sacrifices had to be made it was young people above all who made them – we were already in a political and social environment which ranked their claims behind the rest of us. The older people whose pensions and annuities depended on assets held by banks were protected at the expense of younger taxpayers. We are now emerging from that but the scars will last for a long time – some of the loss of income and productive potential may never be regained.

Nobody likes too much pessimism. It can be debilitating. It is better that young people believe they can shape their own future rather than being passive victims of fate. That is one reason why we welcome the rational optimists such as Steven Pinker in The Better Angels of Our Nature: Why Violence Has Declined, Matt Ridley (The Rational Optimist: How Prosperity Evolves), and Hans Rosling’s Factfulness: Ten Reasons We’re Wrong About the World – and Why Things Are Better Than You Think. Their books do what they say on the tin, and show how more people across the world have escaped from poverty into better lives in the past 40 years than in any previous period of human history. They are right to remind us that humanity is still advancing. The wheels of modern capitalism and scientific progress have not stopped turning. A young person today enjoys a wider range of technologies than ever, from extraordinary IT to modern medicine. And for anyone who thinks things were better in the old days there is that most compelling one-word riposte – dentistry. But such progress is not a unique benefit enjoyed by this generation today. Successive generations were already enjoying really significant technological advances on their predecessors. For the Boomers it was access to TVs, washing machines, and motor cars. Indeed one school of thought argues that the spread of technology then was at least as rapid as it is now.2 It is the backdrop against which every generation has lived their lives in the West since the Industrial Revolution.

The question is how the benefits and the costs are distributed, and here it looks as if today’s young people are losing out. Boomers are using smartphones and the Internet at least as much as our kids, whose job is often to provide unpaid technical support so their parents can fully reap the benefits. And there look to be long-term costs associated with technological advances which we are loading on to younger generations. Climate change is ever more real and intense. Pervasive access to social media does look to be a driver of the worrying growth of mental illness among younger people.3 The Boomers have been enjoying the benefits of a wide range of technologies while the costs are dumped on generations coming after.

I hope and believe that human ingenuity and advances in science and technology will see us through, but it is not going to be easy. In fact it is going to be a lot harder because of all the other heavy burdens the younger generation are having to face as well.

Yes, there might be a problem, but it is just a matter of bad luck – and if it is anyone’s fault it is not the Boomers but the younger generation themselves or Margaret Thatcher or migrants or…

You might be persuaded so far and accept that young people do face significant problems, but believe it is all just a matter of luck. I was lucky to be born in 1956 and not to have to go to war, unlike my grandfather and father who were shot at in the First and Second World Wars. Maybe the younger generation are just unlucky to be faced with economic risks. Global economic trends are not under any one generation’s control. But neither can the Boomers come over all powerless and innocent because they play such a significant role in our national life, and ultimately we do all have some power to shape the lives of future generations. We can decide how we respond to external shocks and global economic trends. We can decide how much we invest in infrastructure and skills for the future. We can decide whether we are going to make it easy or hard to build houses where young people want to live. We can decide whether the Boomers’ pension schemes are going to be so expensive that they close for future generations. We can decide how much government debt we are going to leave them and how to spend the money we borrow. Moreover, we would not regard it as remotely acceptable to say it is just bad luck if you are having a tough time because of your gender or your ethnicity or your social background. Bad luck won’t do as a justification of a raw deal for younger people either.

There are versions of this intergenerational problem in other countries too. But there is still something unique about the British problem. There are other countries where the younger generation are doing badly but nowhere else has the reversal of generation-on-generation progress been so precipitate as in the UK. It is not just a matter of some uncomfortable changes in the world economy affecting everyone.

There is one other form of the sceptics’ argument about luck. Perhaps it is not that the younger generation are unlucky. Perhaps they are having a typical deal in a tough world. Is it instead that the Boomers have had unusually good luck? Are the Boomers the aberration? This line of thinking has some of the melancholy about the human condition that is captured in the story of the Russian peasant who describes the harvest as ‘about average’ and when asked what that means, replies ‘not as good as last year but better than next year’. One can accept that there are some very special factors at play which took the Boomers to the top of the charts, after which decline was unavoidable. The most vivid example is the spread of home ownership, which reached exceptionally high peaks sooner than for any other generation.

But if it is all a matter of exceptional luck then the Boomers have been very lucky indeed. Here are examples of the luck they have enjoyed: inflation was high when they had big debts and low when they became richer; house-building was high when they needed houses but much lower when they had their own homes; credit was easy when they needed to get started on the housing ladder but much stricter afterwards; pension promises were weak when they were joining pension schemes but then were turned into gold-plated guarantees for them, after which companies stopped making such promises for future generations; benefits for old people were low when the Boomers were young but are worth much more relative to benefits for young people now the Boomers are old; consumption was high among young people when they were young and now is lower among young people and higher for older people; the Boomers’ parents stuck together for them but then the Boomers were much more likely to split up once they themselves were parents. There is a suspiciously clear pattern to this luck. If the roulette ball keeps landing in the same place, we must begin to suspect it is not just luck.

We are not entirely the playthings of fate and fortune. And that opens up another defence of the Boomers – if anyone is to blame, it is the young. In this argument the misfortunes facing the younger generation are their own fault, and blaming the Boomers for problems they have brought on themselves by their own behaviour is just typical of a self-pitying hypersensitive snowflake generation who should stop whingeing and get a grip. But what is the behaviour of the younger generation which has had such dire consequences for them? They study harder and for longer than Boomers did. As their incomes are squeezed they don’t borrow more but instead cut back on their consumption. They are more sceptical of the welfare state and much more likely to accept it is their responsibility to go out and get a job.4 If you want to find a group which broke with prudence and raided the piggy bank for themselves, it is not the younger generation but the Baby Boomers.

There is another argument against the charge that we Boomers broke the intergenerational contract. OK, maybe something has gone wrong for the younger generation which is not their fault but that does not mean it is our fault. There are other culprits. Indeed some critics on both Left and Right regard this stuff about the generations as a dangerous diversionary tactic. For some on the Left the real culprit is Thatcherism and neo-liberalism. There are some on the Right for whom mass migration is to blame. Both views have a certain similarity: that the bonds tying us together as a national community have been weakened, but not by the Boomers; instead it is by an external shock, be it ideological or demographic.

But it is wrong to blame Thatcherism when many of the indicators on which young people are now doing badly – ownership of houses and pensions – were actually Thatcherite priorities, where progress was made in the 1980s but has since been reversed. Moreover the power to shape the welfare state was used very differently in Margaret Thatcher’s day – compare the real cuts in the state pension then with the triple lock now.

As for those on the Right who claim mass migration is the reason why pay has not increased – our assessment at the Resolution Foundation is that at most migration has had a very small negative impact on the pay of native workers.5 I am regularly told by opponents of more housing that the only reason we have housing pressures is because of migrants and that if they could be confident new houses were really for their own kids they would support house-building. But there would be housing pressures even without migration, because we have not been building enough houses for people born here in the places where they want to live.

There is one other version of the argument: that to focus on the generations is a distraction when the real problems are elsewhere. Fairness within generations is claimed to be much more of a problem than intergenerational unfairness. It is this sort of objection to which we now must turn.

There is nothing here – there are no generations and there is no such thing as an intergenerational contract – and even if there are generations and exchanges between them that does not matter compared with injustice within generations

The challenge from these sceptics is that this generational analysis cannot bear the weight which is being put on it. Gender or social class or ethnicity come freighted with enormous historical and cultural significance, but attaching weight to the accident of when you were born is by contrast just rather trivial. They argue that something so banal is no real basis for political economy, and that as soon as we go back to looking at Britain from other perspectives we see that the real issues are within the generations rather than between them.

But the life cycle matters, and changes in the number of people at different stages of the life cycle is a very substantial change in how a society and an economy function. Serious political thinkers such as Thomas Malthus, Auguste Comte, Karl Mannheim, and Richard Easterlin have seen the changing sizes of different generations as one of the key drivers of human history. They did however tend to assume that it was big generations that faced the problems, whereas the unusual twist in my argument is that it is the big generation which has the advantage. This is because in the modern economy the consumer (and hence cultural) power of a big generation is so great. And in a modern democracy, where the state distributes resources through the welfare state, the voting power of a big cohort is very significant.

We are not self-sufficient through our lives: in particular young and old depend on others who are at different stages of their lives. Exchanges between the generations are crucial. Indeed it is at the heart of the social contract which holds a society together. That is why we understand that we have obligations to other generations: 50 per cent agree that the success of our society is measured by how well we provide for older generations, and 59 per cent agree that every generation should have a higher standard of living than the one that came before it.6 These beliefs show there is a contract between the generations, and different generations can do better or worse from these exchanges.

Some of the critics might concede that these are important arguments in principle but then claim that in practice the gaps between the generations are less significant than those within them. So they say we must not be distracted by these intergenerational appeals which are like the chaff put out by fighter planes to distract enemy radar – they just take our eye off the target. It is the gaps within the generations which we should focus on. There are indeed real differences within generations, and some of them are very big indeed. Those classic measures of disadvantage by class, gender, and ethnicity do matter. But we were so sensitized to these forms of unfairness that we failed to spot what was happening to the younger generation as a whole – even young people who appear to have every conventional advantage in life might still find themselves stuck in grotty rented accommodation with little prospect of getting started on the housing ladder. So alongside the masses of analysis and the thousands of books on those issues, it is right to add something from a generational perspective.

Moreover, some of the key differences within generations – such as in wealth – are getting worse generation by generation. That is indeed one of the problems facing the younger generation. One reason may be that if it is harder for younger people to build up income and assets of their own, what is inherited from parents matters more. Here we are beginning to see the close links between inter- and intra-generational issues. We might hope that each generation lives in a society with more social mobility not less. But individual families might be so worried about the prospects for the young that they tackle it the only way they can – by putting extra effort into their own children. This is part of the growth in the significance of the family and creates a society where property ownership and wider advantages are increasingly hereditary. So even if it is intragenerational unfairness you really care about, you ought to be tracking intergenerational unfairness because it can exacerbate the problems you most worry about.

You are promoting generational warfare – we are divided quite enough already without your making things worse, thank you very much

I believe that appeals to intergenerational fairness are powerful and desirable. Indeed I devote a whole chapter to trying to prove that these claims are at the base of those great projects for human co-operation: the family and the nation state. But one of the most widespread criticisms and the one which I really take to heart is that I am promoting intergenerational warfare. It is, they say, inflammatory to blame one generation for the problems of another: it turns the generations against each other. But the whole point of this book is to appeal to one generation which has done exceptionally well – the Boomers – to do more to help those generations coming after them. I do believe that the behaviour of the Boomers has made things tougher for the younger generation – consider those campaigns against house-building and the regulations which turned our defined pension schemes into a one-off special offer. But I don’t believe that the Boomers did this with the deliberate intention of damaging the younger generation. It is a disaster caused by a failure to consider properly the interests of the younger generation rather than driven by active hostility to them. Indeed, this book is an appeal to the better instincts of the older generation who genuinely care about the prospects of the younger generation. The more we understand what we are doing, the greater the chance we will do something about it.

__________

The Baby Boomers do have an extraordinary capacity to come up with alternative explanations when the evidence for their responsibility is overwhelming. Like Macavity, T. S. Eliot’s mystery cat, whenever there is a problem the Boomers are not there:

He always has an alibi, and one or two to spare:

At whatever time the deed took place – MACAVITY WASN’T THERE!

But as we shall see, the evidence shows the Boomers were there. They can’t escape their responsibility. It is time to do something about it.

David Willetts

July 2019

THE BIRTH RATE OVER THE PAST HUNDRED YEARS

The chart below shows the number of babies born each year in the UK over the past century. This basic information is one of the most important predictors of the changing shape of our society and our economy. It shows when there are going to be surges in the number of children needing more places in school. It shows when there are big increases in the number of young adults – disrupting the old order and looking for work. It shows when a big cohort is going to be in middle age – paying most tax and using public services the least. And it shows when we can expect to see surges of older people getting older and using the NHS more. And, of course, it shows how big the twin peaks of the post-War baby boom were. The chart is a particular focus of Chapter 3, but is referred to throughout the book.

Figure 1: UK births 1896–2016 defining the generations7

INTRODUCTION TO THE FIRST EDITION

We all know the story. The parents return home from a night away to find a teenage party has got out of hand and the house has been trashed. Every few months a particularly dramatic episode gets into the media – with distraught parents tidying up a mess left by a swarm of young people summoned on Facebook. It plays to a deep-seated fear that younger people will not appreciate and protect what has been achieved by the older generation. This is the eternal anxiety of each generation about what comes after. But what if, when it comes to many of the big things that matter for our futures, it is the other way round? What if it is actually the older generation, the Baby Boomers, who have been throwing the party and leaving behind a mess for the next generation to sort out?

The Boomers – roughly those born between the end of the Second World War and 1965 – have done and continue to do some great things, but now the bills are coming in and it is the younger generation who will pay them. We have a good idea of what at least some of these future costs are: the cost of climate change; the cost of investing in the infrastructure our economy will need if we are to prosper; the cost of paying pensions when the big Boomer cohort retires; all on top of servicing the debt the government has built up. The charge is that the Boomers have been guilty of a monumental failure to protect the interests of future generations.

The Baby Boomers have concentrated wealth in the hands of their own generation. It is far harder for the younger generation to get started on the housing ladder or save for the future in a decent company pension. This leaves them more dependent on their parents for longer. That in turn means new barriers to the spread of opportunity and ownership. Growing to adulthood and starting a family take longer and are more difficult. And young people found themselves by far the biggest victims of the recession – unable to find a job or a mortgage. We are rightly sensitive to the injustices and inequities of life chances within a generation but we ignore the injustices between generations, perhaps because they are harder to measure.

I had better declare where I fit in here. I was born in 1956, in the middle of the baby boom, and in Birmingham, in the middle of England. It was the year of the Suez Crisis and the Soviet invasion of Hungary. My mother remembers being worried about the dreadful, dangerous world into which she had brought me. So far, however, my age group has turned out to be, by and large, a lucky generation. Over the past 10 years I have spent a lot of my time involved in education and pensions. I have come to see how they are linked – they are about the obligations of the generation in the middle to the generation coming after and the one which went before. That set me to applying my interest in economic policy to the links between the generations, and how some get a better deal than others.

What if instead of being born in 1956 I had been born 50 years earlier, in 1906? Then a mother, depending of course on her social class, might have felt things were looking pretty good for her newborn child. Britain was rich and powerful, with social reform on the way as well. She could not have expected that her son’s father would die in the trenches of the First World War, that this young man would then not be able to find work in the Great Depression, be conscripted in the Second World War and endure austerity after it. He would finally have retired in 1971 only to find his modest savings destroyed by the worst 10 years of inflation in our nation’s history. It was an unlucky generation.

So what of a child born now? These two examples warn us that of course we cannot know. But many Boomers are guiltily aware of the heavy burdens being piled on their children and grandchildren. Try asking a group of people who are middle-aged or older whether they have enjoyed greater opportunities and prosperity than their parents. Almost everyone will say they have. But then ask them whether life will similarly be better for their children or grandchildren. They are not so sure. It is what, deep down, most parents are most anxious about – the life chances of their children.

How has this happened? It would be easy to slide into generational name-calling. But that gets us nowhere. It is not that some generations are good and others bad; it is that some are big and others are small. That is why Chapters 2, 3, and 4 track the demographics of boom and bust and what this means for the distribution of wealth and power. Being a great big generation makes you a powerful disruptive force: you pour through society like a flooding river breaking its banks.

We can make sense of the economic and social changes around us if we see them as the continuing story of the extraordinary impact of this massive post-War generation. Some economists thought it would be a disadvantage to be in a big generation; with more crowding and competition at every stage, it would be like travelling through life in economy class rather than business class. But, so far at least, being big has turned out to be a fantastic advantage, enabling that generation to dominate marketplaces and shape politics.

Successive generations at different stages of our lives have different needs and different things to offer. That is why it makes sense for different generations to co-operate – so we educate the younger generation now and then hope to benefit from what they produce in the future. What you get back need not be a direct exchange but instead an expectation that the next generation will do the same for you, so for example you care for your parents now and hope your children care for you when you are older. These types of exchanges between the generations, explored in Chapters 5 and 6, are how families and whole societies function. I try to get down to the fundamentals of human co-operation, drawing on recent insights coming from game theory and evolutionary biology. They help us to understand how these ties between the generations, the implicit contracts between them, can actually work.

I believe that a lot of our social and economic problems can be seen as the failure to understand and value these contracts between the generations. Much of what we see as social breakdown is in fact the breakdown of relations between the generations; much mistrust is mistrust between generations; much of what has gone wrong with our economy is a failure to get the balance right between generations. This is what low savings and big deficits are all about, and it is what environmental degradation is about too. Sometimes we do not even appear to understand what we are doing to future generations nor how much we owe to previous ones.

The great French thinker Alexis de Tocqueville put the charge as powerfully as anyone:

Among democratic nations new families are constantly springing up, others are constantly falling away, and all that remain change their condition; the woof of time is every instant broken, and the track of generations effaced. Those who went before are soon forgotten; of those who will come after, no one has any idea; the interest of man is confined to those in close propinquity to himself… Thus not only does democracy make every man forget his ancestors, but it hides his descendants and separates his contemporaries from him; it throws him back forever upon himself alone, and threatens in the end to confine him entirely within the solitude of his own heart.1

There is one obvious explanation why we are failing to protect the interests of future generations. We can reasonably hope that successive generations will be more affluent, unless the entire mechanism of economic growth since the Industrial Revolution is turned off. In Chapter 7 we look at the argument that economic growth means we do not have to worry about future generations as they should be richer than us. But I do not believe this does remove our obligation. We each of us benefit from what we inherit from previous generations and we must do our best to leave something worthwhile for the next.

Think of life as a relay race. We are handed a baton to run our lap and then pass it on to someone else. We may be able to run faster than the earlier runners, perhaps because we have better kit or better training, and we might expect that later runners coming after us will do better than us. But we still have to try to do the best lap we can. We cannot escape our obligations to future generations just because we think they might be richer, any more than previous generations could decide not to educate us or build roads and sewers or leave great public buildings because we would be rich enough to do all this for ourselves. Indeed the only reason to assume that successive generations will be better off is if we invest in the future – if there is one thing which would turn that process off it would be a belief that the future did not matter.

Moreover we do actually depend on future generations. Just as we were provided for in our childhood by the older generation, so in our old age we are provided for by the younger generation. What we will live on in our old age is not produced now; it will be produced then. The bread we will eat is not baked now and stored in the garden shed; it will be baked by the younger generation and we will hope to get some of it, either by taxing them or by owning a stake in what they produce. The challenge is how we can stake a claim now to that future output in a way which ensures that claim is honoured. If the younger generation feel they have had a raw deal, they will not protect the Boomers in their old age.

It is the contract between the generations which binds these two interests together. This is where government fits in too: maintaining the balance between the generations, as we will see in Chapter 8. Native American peoples have a rule that they should consider the impact of every decision for the next seven generations. Good government values the future; bad government takes from it.

There is nothing more natural in human affairs than the eternal repeating cycle of childhood, adulthood, and old age – or what used to be called the seven ages of man. This cycle gives a deep pattern to our lives which we can all recognize whatever our political and ethical views. The basis for co-operation between the generations is that we can exchange to mutual benefit because we are at different points in the cycle and have different needs and capabilities. In the final four chapters I focus on particular stages of our lives to see what they reveal about the relations between the generations.

We immediately confront an important paradox here. If anything, relations between parents and their children are better than they used to be – what was called the generation gap is disappearing. There is striking evidence of the enormous effort most parents are now putting in to raising their children: they are closer to their children than parents were a generation ago. Many children are now dependent on their parents for longer than ever – and it is unwise to row with your banker. The dependence of the generations on each other in the family is more mutual as well, perhaps because of the speed of technological change – neatly captured in the cartoon of a mother holding a gadget like a TV remote and calling out desperately to her baby: ‘How do I get it to work?’ But however close we are to our families, we cannot just do our best for the next generation one by one. We also have to offer a fair share of power and wealth to the younger generation as a whole. This is where the gap between the generations is getting wider, and it is a different sort of generation gap from the one we are used to. We may be better parents than we are citizens.

This is the challenge for the Baby Boomers. At the moment this generation dominates just about every important institution in the country: it has most of the wealth and power. How will this generation discharge its obligations to the younger generation? Will the Boomers be selfish with their luck, or will they pass that luck on to the next generation? So far the evidence is not good. The Baby Boomers, having so far enjoyed a spectacularly good deal, are dumping too many problems on the younger generation. It has the great advantage of being a giant generation, but how will it use that power? At the moment it looks like a selfish giant.

The Boomers are a rich and powerful generation. They are now past the halfway stage but it is not certain their luck will last. Solon, the great Athenian statesman, visited Croesus, the richest and most powerful man of his day. Croesus was surprised that Solon was not more impressed by his good fortune. ‘Call no man happy until he is dead’ was Solon’s dry response. Subsequently, Croesus lost his wealth, his kingdom, and his family, and died a captive.2 So this is a challenge to the Boomers to value not just future generations but also their own future. It is a matter not just of other people’s futures but of what – for today’s long-lived generations – has been called the Long Now.3

Britain is at an unusual point of generational equipoise. Now is a good moment to judge the balance between the generations. If you line up the British population today by order of age, the middle person in Britain would be aged 40. Their life expectancy is 80. So the middle person is likely to be almost exactly halfway through their life. What happens in the next 40 years matters to them even if they do not feel any obligation to other generations.

One of our deepest human instincts, somewhere between a desire and an obligation, is to transmit something worthwhile to the next generation. It is not just wealth but a body of knowledge, a set of values, an understanding of how to lead a good life. We know that each generation is going to move on, and we hope that it will do better than us, but we know its chances of doing better than us are greatest if it is standing on our shoulders. Much of this experience, wisdom, and values is transmitted within the family. This is where the contract between the generations is played out most personally for each one of us.

So we will start in Chapter 1 with families, and how they shape the deepest features of our society.

1

WHO WE ARE

Picture a family gathered around steaming plates of pasta on a massive trestle table under a tree in a Tuscan garden, with uncles, aunts, brothers, daughters-in-law, elderly sisters all engaged in an excited, voluble hubbub. That is a real family, the kind of family in the film My Big Fat Greek Wedding. It is easy to assume – I certainly used to – that at some point in the past the English lived like this too. Even if the food was not so good we surely lived in big, extended peasant families, and in those times all the land belonged to a feudal lord as well. Then there came a great transformation – perhaps the rise of Protestantism, or the Civil War, or the Industrial Revolution – which drove the spread of private property and the modern nuclear family. But the truth is that England was never a society of peasants living in extended families, and we never had true serfdom. As far back as 1250, and probably even earlier, it looks as if England had a very different social structure, different even from the rest of the British Isles. Forget everything you think you know about extended families, arranged marriages, serfdom, and seigneurs. As far as we know none of that happened in England – ever. When it comes to families, England was the first nuclear power.

Instead, think of England as being like this for at least 750 years... We live in small families. We buy and sell houses. We go out to work for a wage. Our parents expect us to leave home for paid work when we are in our teens. If you are a boy you go off to be an apprentice, and if a girl perhaps to be a servant in another house. You try to save up some money from your wages so that you can afford to get married. You are not dependent on inheriting property from your parents so they have a limited hold over you and you can choose your spouse. Indeed, when it comes to choosing your partner what matters is love, actually. It takes a long time to build up some savings from your work and find the right person with whom to settle down, so marriage comes quite late, possibly in your late twenties. If a man gets a girl pregnant before then he might well have to marry her but they tend to avoid full sex, settling instead for elaborate forms of heavy petting.

Because we marry quite late and the two parents then bear a large part of the burden of raising the children, we do not have many of them.1 If a society has extended families or clans then this spreads the costs of raising children across more adults, who then have more children younger. That means there is a danger of cycles of population boom and bust as surges in the birth rate are followed by famine and collapse. But that is not the English model. Our population grows slowly but steadily after the catastrophe of the Black Death in the fourteenth century, which may have reduced it to 2.5 million. Britain’s first great economic statistician, Gregory King, estimated that the population of England in 1688 totalled 5.5 million. His key table includes estimates of average family size.2 The upper-class ‘heads of families’ do indeed have many family dependents. But where the wider population is concentrated – categories such as the 750,000 ‘freeholders of the lesser sort’ or the 1,275,000 ‘labouring people and outservants’ – estimated family sizes are 5, 4, or 3.5. This first demographic analysis of England offers further evidence that we have long had small nuclear families.