Covid-19 demands immediate action. It also demands a major reconsideration of policies to create a new social contract between the generations.
We are all aware that the elderly have a higher risk of death from coronavirus than other age groups. We are also aware that protecting them by locking down the economy has had a disproportionate impact on younger generations.
The Great Barrington Declaration, a statement published last month by public health experts critical of lockdown restrictions, argues that the costs to the young (“millennials” and “generation Z”, those born since the 1980s and 2000) are too great and the measures should be eased and replaced by isolation of the older generations.
Some even apply the concept of Quality Adjusted Life Years (QALYs), used by NICE to calculate the value of healthcare measures, to argue that the cost of adding a few years to the life of an elderly person is outweighed by the greater harm to young people who lose their education and opportunities for work.
Neither approach is sustainable. Epidemiologists doubt that older generations can be effectively separated from the rest of society, meaning higher infection rates in the general population will inevitably hit the most vulnerable. And while QALYs might be acceptable in deciding how to spend limited resources on different medical treatments, the same approach is not justifiable — politically or morally — as a response to this pandemic, as shown by the outcry over deaths in care homes earlier this year.
But accepting the need for restrictions does not mitigate the impact they are having on young people’s financial futures. That impact needs to be recognised — and alleviated. To tackle the intergenerational divide, society’s protection of “Baby Boomers” by locking down the economy must be matched by social and economic policies to compensate the young.
The Baby Boomers (and I count myself among them) are, as former Conservative minister Lord David Willetts put it, “the pinch generation” who took their children’s future.
We were the fortunate generation. Take home ownership: 64 per cent of those born in the early 1950s owned their home by the age of 35, compared to just 46 per cent of those born in the early 1980s. Thanks to rising property prices, it is estimated that a third of all millennials will never be able to afford a home.
Then there’s education. The minority of Baby Boomers who went to university received state support and graduated with little debt. Far more people go to university today, but these record numbers of new graduates go into their working lives with substantial debt.
Social mobility is also a factor. For Baby Boomers who did not attend grammar school or university, they could still secure decent skilled jobs at a time of full employment, often without formal qualifications. Deindustrialisation means that many of those jobs have disappeared, leaving a gap between “lovely” jobs for those with formal credentials, and “lousy” and precarious jobs for those without.
Meanwhile, pensioners have done well. In 1979, the median income of a pensioner was two thirds of the median income of the non-pensioner. By 2009, the median pensioner was better off.
This effect has been accentuated by the “triple lock” on state pensions, which means retirement benefit will be double the rate of unemployment benefit by the mid-2020s. It also reflects Baby Boomers’ generous defined benefit pension schemes from their employers — something that few millennials and generation Z can hope to receive.
And the Baby Boomers with assets have gained further. The rate of return on capital has exceeded the rate of economic growth, and quantitative easing has inflated values as austerity hit those without assets.
The pandemic has not caused these trends, but it has exacerbated them. The Baby Boomers “pinched” the future of later generations, who are now suffering to protect the lives of those who came before them. It is time to act.
For a start, wealth and inheritances should be taxed. Rather than the assets of the deceased going only to heirs and fuelling inequality, they could be used by society as a whole to spread out this wealth.
This shift could be linked with the reform of social care advocated by Andrew Dilnot’s report of 2011. Currently, someone needing long-term care for dementia will use most of their assets paying for assistance; someone who has cancer is treated by the NHS and can leave their assets to their descendents. If everyone paid no more than a capped amount, for which they could insure or save, this lottery would be removed, with the cost to the state covered by a tax that is equitable between everyone
Second, the financial assistance offered during the pandemic has reopened the case for universal income support. This could be continued, smoothing out generational distortions. A basic income could be paid to everyone who is economically active, for example, or a minimum inheritance provided on reaching adulthood.
Above all, the costs of borrowing to deal with the pandemic and the rising level of national debt must not be treated as a burden on future generations to be reduced by austerity. History shows that the best way to reduce debt is by a combination of low interest rates, moderate inflation, and above all growth. Policies are needed that allow faster green growth and reduce the number of “lousy” precarious jobs for today’s young people.
The Baby Boomers are the lucky generation. It is time for them to pay that forward and revitalise the intergenerational social contract. Their time is, literally, running out — for by around 2030, millennials, generation Z and those even younger will outnumber their votes.
What Do We Owe Society, an online lecture by Professor Martin Daunton for Gresham College, is being live-streamed tonight, 6pm–7pm. Register here.
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