The question of whether the late baby boom generation is the luckiest in history is a complex and multifaceted one. While it's true that we've benefited from a range of advantages, it's important to consider the broader context and the challenges faced by younger generations. In this article, I'll explore the evidence and my personal perspective on this topic, focusing on three key areas: higher education, housing, and pensions.
Higher Education
The English student loan system has been a topic of debate for years, with critics arguing that the terms attached to loans are unfair and immoral. While it's true that younger graduates face higher debt burdens than previous generations, it's also important to consider the broader context. The participation rate in higher education has increased significantly over the years, from 3.4% in 1950 to 49% in 2022/23. This means that while the loan system may look unfair, it has been designed to make higher education accessible to more people, while also providing fairness between generations.
One of the key features of the student loan system is that it's designed to make money from better-off graduates to cover the cost of subsidising less well-off students. This personalised tax approach means that many graduates will never earn enough to pay back the full cost of their higher education. However, it's also worth noting that the very-rich graduates have been penalised less than the quite-rich, because they can pay off their loan quickly and avoid paying the high interest rates.
In my opinion, the student loan issue is more ambiguous than often realised. While today's students do pay far more than I did, a lot more of them have the chance to go to university. This means that the victims of injustice are not the students choosing to take out a loan and pay for college now, but the many people I went to school with who were never even offered a choice about whether to borrow and study at all.
Housing
The housing market is another area where the late baby boom generation has enjoyed an unearned advantage. By buying a flat in London in 1988, I've arguably enjoyed an advantage that others have not. The fact that I lost money on that flat when I sold it in 1995, but still upgraded to a bigger flat which soared in value over the two decades I held it, tells the basic story of house prices in England. If you managed to buy a property before the mid-90s, you've likely enjoyed substantial capital gains. If you came into house-buying age after 2015, you'd already drawn the short straw.
The timing was propitious for those who bought as this transition from a high interest rate regime was occurring. I was lucky in that regard, as were many of my cohort. However, it's also worth noting that London and its catchment area have enjoyed bigger gains than elsewhere. The population of London has grown by 29% since 1996, while the number of homes has only grown by 23%. This means that if you were lucky enough to buy in London, you were much more of a winner than home-buyers elsewhere in the country.
Pensions
The baby boom generation has also benefited from generous pension schemes. Prior to the baby boomers reaching retirement, pensioners were the group most associated with poverty. But between 1995 and 2010, pensioner incomes doubled in real terms and have since stabilised at that new higher level. This is partly due to the state pension, which now pays out vastly more than it did in previous generations, when measured as a proportion of median earnings.
One of the greatest pieces of luck for my generation was that we worked in an era in which employers - public and private - offered membership of defined benefit pension schemes. These schemes meant that through one's career, we earned entitlements to a decent pension set at a fixed proportion of salary. However, these schemes have become expensive for employers to sustain as life expectancy improved, and they all but died out in the private sector in the 2000s.
Conclusion
In conclusion, while the late baby boom generation has enjoyed a range of advantages, it's important to consider the broader context and the challenges faced by younger generations. The student loan system, housing market, and pension schemes are all complex and multifaceted issues that require careful consideration and analysis. As we move forward, it's crucial that we work towards restarting the growth engine that has been spluttering, in order to ensure intergenerational equity and fairness.
One thing that immediately stands out is the role of economic growth in shaping the opportunities and challenges faced by different generations. If the economy grows at a per capita rate of 2% a year, average incomes grow by about a third every fifteen years. But when per capita incomes grow at an average of 1% a year, average incomes only grow by about 16% over a 15-year period. This lack of economic growth accounts for a shared sense of material deprivation, and it's crucial that we address this issue in order to ensure a brighter future for all generations.
