We frequently hear discussion about the possibility that younger generations are going to be poorer than their parents. Many young adults are in entry jobs at ages when their parents were established and having children. Some claim that the baby boom set itself up with good education, good health insurance, good jobs, good job protection, and good pensions, and then supported reduced benefits and guarantees for the younger generation. Politicians and media speculate that public pension programs like the Canada Pension Plan or US Social Security may not be able to support the same benefits for the younger generation. The rising costs of health care are attributed to the ageing population. Questions are raised about public debt being offloaded onto the young, who are already saddled with student loans.
For the most part, these fears tend to be over-stated. The public pension plans are actuarially sound. True, the eligibility age for old age security and for social security has been increased, and the incentives for early retirement in the Canada Pension Plan may be ratcheted back a bit. But despite political posturing about “unsustainable costs,” the increase in life expectancy provides a solid rationale for increasing the retirement age. Increasing years of “senior living” in good health, plus the demand for more education in the job market, mean that a shift to later starts in career jobs, with consequent later retirement, makes sense. And health care costs are increasing due to increasing costs of medical technology, pharmaceuticals and improved services and procedures as well as population ageing. So spending more money on a commodity that we like is not a bad thing. And if we could pay for that by spending less on carcinogenic products, pollution, prisons and wars, it would be a virtuous shift.
Nonetheless, social policy has large and lasting financial impacts, and new research published by the LIS Datacentre shows that it can indeed shift the balance between generations. A study by Louis Chauvel, Luxembourg, and Martin Shroder, Denmark, compares the employment and income experience of mid-20th century birth cohorts with those born about 1975.
(INEQUALITY BETWEEN BIRTH COHORTS OF THE 20TH CENTURY IN WEST GERMANY, FRANCE AND THE US, LIS Working Paper Series No 628, January 2015 http://www.lisdatacentre.org)
The authors begin by acknowledging that coming of age to enter the job market at the point of an economic upswing or downturn, can have a long lasting, even permanent effect on incomes. But then they set out to determine whether an advantaged generation protects itself at the expense of the one to follow. They find little evidence to support that view in Germany or the USA, but their findings for France are quite different. They observe a “dualization” of the welfare state in France (sometimes also called an “insider-outsider” model) wherein strong protection of jobs for the older generation is offset by lower labour standards and higher unemployment and job precarity for the young.
“In this sense, our results for France are alarming; they indicate that older generations have monopolized lucrative positions and social transfers, to the detriment of those born after 1950”. (p 13)
They express the opinion that;
” … while some studies deny generational conflicts in Europe …. our study showed that generations in France have every reason to be in conflict…” (p 13)
Their study shows that the older generation in Germany is only a bit better off than the younger (at similar age points) with the German apprenticeship system given kudos for helping younger people into the tight labour market. In the USA, the younger (1975) generation seems to be sharing in economic growth pretty much the same as their parents.
That doesn’t mean that workers of all ages in the US have benefits and protection similar to those in France. To the contrary, young and older workers in the USA share similar but relatively low levels of social protection. Average wages and incomes in the US are higher than in France, but with much more inequality in the wage structure. Labour productivity in France is not much below that of the USA at about 92% of US levels (oecd-ilibrary.org search labour productivity). However US workers put in many more hours at almost 1800/year than do the French at about 1500/year (oecd-ilibrary.org search hours worked).
In all three countries, increasing education levels and the shift from one to two earner households have had strong positive effects on the household incomes of younger generations.
