The question of whether the late baby boomer generation is the luckiest in history is a complex and multifaceted one. While it's true that we've benefited from a combination of favorable economic conditions and societal changes, it's important to consider the broader context and the experiences of other generations. As an expert commentator, I'll delve into three key areas: higher education, housing, and pensions, to explore this question in depth.
Higher Education: A Double-Edged Sword
The English student loan system is a prime example of the generational divide. While younger graduates face significant debt, it's essential to recognize that the system has evolved over time. When I was young, the government provided annual maintenance grants and covered tuition fees, ensuring that higher education was accessible to a select few. Today, the system is designed to fund the growth of graduate numbers while also being fair to non-students. However, the extra 9% tax on earnings for younger graduates is a stark contrast to my experience, and it's a point of contention for many.
The ambiguity lies in the fact that while today's students pay more, they also have the opportunity to attend university, a privilege that was once reserved for a small percentage of the population. The overall participation in higher education has skyrocketed, with 49% of state school pupils from England starting higher education by the age of 25 in 2022/23. This shift in accessibility means that the injustice is not solely felt by the students taking out loans but also by those who never had the option to borrow and study.
Furthermore, the student loan system is designed to make money from better-off graduates to subsidize less well-off ones. It's a personalized tax, and many graduates will never earn enough to repay the full cost of their education. This system is a reflection of the changing dynamics of fairness between generations rather than across generations.
Housing: A Tale of Two Londons
Housing is another area where the late baby boomer generation has enjoyed an unearned advantage. Buying a flat in London in 1988, I witnessed the property market's transformation. While I lost money on the sale in 1995, my subsequent purchase of a bigger flat led to substantial capital gains over two decades. This story is mirrored across England, where house prices have risen relative to earnings since the early 1990s.
However, the timing of house purchases is crucial. Those who bought before the mid-1990s, like many boomers, have likely benefited from substantial capital gains. In contrast, those who came into house-buying age after 2015 have faced a different reality. The global fall in interest rates has provided a gift to younger buyers, but the limited supply of houses means that prices continue to rise, making homeownership increasingly challenging.
The inequality is stark, with London and its catchment area experiencing more significant gains than the rest of the country. The population growth in London has outpaced the number of homes, making it a challenging place to buy or rent. This disparity highlights the varying levels of luck within the baby boomer generation.
Pensions: A Generous Legacy
In the realm of pensions, the baby boomer generation has indeed been fortunate. We benefited from defined benefit pension schemes, where employers contributed a substantial portion of our salaries, ensuring a decent pension. This generosity is in stark contrast to the defined contribution pensions offered to millennials and Gen Z employees, where employers typically contribute only 3% of salary.
The state pension has also played a significant role in improving pensioner incomes. Since 1995, pensioner incomes have doubled in real terms, and the triple lock policy has further bolstered the basic state pension since the early 2010s. However, it's essential to acknowledge that not all baby boomers had access to defined benefit pensions, and the mass closure of such schemes in the private sector in the 1990s left many without this security.
The Broader Context: Economic Growth and Intergenerational Equity
The grand disappointment of the last two decades lies in the decline in per capita economic growth, particularly around the time of the 2007/08 financial crash. This lack of growth has led to a shared sense of material deprivation, as wages don't grow as fast as expected, taxes rise, and imports become more expensive. The normal growth rate of 2% per year, which led to substantial income growth in the 1980s and 1990s, has been replaced by a 1% average growth rate, resulting in slower income growth and a sense of intergenerational unfairness.
In conclusion, while the late baby boomer generation has indeed been lucky in certain aspects, such as higher education, housing, and pensions, it's essential to recognize the broader context and the experiences of other generations. The economic growth trajectory has played a significant role in our luck, and addressing the spluttering growth engine is crucial to ensuring intergenerational equity. As an expert commentator, I believe that a nuanced understanding of these factors is essential to navigate the complex debate surrounding generational fairness.
