‘Rethink Fairness : Generations’ a podcast review

This blog was started in May 2018 with a piece titled: ‘Economics in the UK is unfair to young people and what can we do about it’.  I wanted to look at other countries and see what they are doing to tackle the problem. I wanted to look at influential people who are waking up to a similar conclusion and share their thoughts. I wanted to look at the problems it is causing society and suggest change.

The problem as I see it is that the the wealth gap in the UK has got wider.  The wealth distribution is unfair and this is making it difficult for young people to enjoy the benefits that earlier generations have enjoyed.

My attention was drawn to a podcast that I wanted to share.  It was released by the BBC on the 8th January 2021 and titled ‘Rethink Fairness : Generations’ presented by Amol Rajan. I would urge anyone with an interest to listen to this excellent podcast.  Rajan speaks with 5 guests, Baroness Shafik, Joe Earle, Professor Ian Golding, Catherine Geddes and Tara Grace Connolly.  This article for Rebel Economics may read a bit like a summary of the podcast.  I have done this because the longevity of the podcast is a year, but this blog has been running since 2018 and its useful to look back and reflect on earlier articles.

The premise of the podcast is that the pandemic has brought renewed focus on the economic pain faced by the young who have been disproportionately hit economically. They will also live with the consequences of climate change, soaring national debt and high housing costs. And for many there is the additional burden of student debt. So is now the time to rethink whether we can bring about a fundamental shift in the contract between the generations and, if so, what might that look like?  

The podcast is fascinating.  It examines the contract between generations and the role of the state.  When you are young you are a net beneficiary of the state, you have access to free healthcare and education. Then in your middle years you work, earn an income and pay into the state in the form of taxes. When you are old and no longer economically active you again benefit from the state in terms of pension and healthcare. There is an idea of an emotional and moral contract of giving and taking between the generations. 

Baroness Shafik, thinks in terms of a balance between  the generations in terms of giving and taking. Are we investing enough in the education of young people today? Are working people contributing enough to invest in the young and support the old and are old working long enough to invest in the needs of younger people and their prospects? Is the contract between generations fair?

Covid 19 has a starkly different impact on the young and the old.  Almost all who have died are elderly, for them pandemics are a mortal threat to health.  The majority who have lost jobs, seen opportunity crumble due to missed education or suffered mental health problems have been young.  To them the pandemic is a threat to both wealth and health. 

It is sometimes said that pandemics don’t create new trends so much as accelerate existing ones. The deep global long term trends of recent years have created profound feelings of anger and betrayal amongst the young. Huge inflation in asset prices, boosted by low interest rates, have seen a transfer of wealth to the already rich.  Many young people will never own a home. Generous pensions that existed a generation ago are long gone.  Universities back then were free.  Young people should expect to work longer. In addition the trends of globalisation and automation may have deprived many from the jobs that created dignity and a livelihood.

Joe Earle, founder of Ecnmy, feels let down by the generations that have come before, and says there has been a failure of stewardship. The young are inheriting a world of crises: an economic crisis with high unemployment and under employment, a climate crisis and a crisis of equality.  We are told a story that success or failure is down to the individual that you are in control of your life, but the reality is that this is out of our hands. What it is to be an adult in terms of: work, careers, relationships and housing has changed over the generations.

Professor Golding says that this might be the first generation that have worse prospects than previous generations in terms of employment and mental health. Baroness Shafik agrees with this and says that young people in advanced economies have seen that they won’t be as well off as their parents. The one bright exception is the Nordic countries, which have been able to deliver better living standards to young people than their parents have experienced.  The Nordic countries can provide guidance for countries that aspire to deliver a more equitable economy.

In the past 30 years in Britain, assets values have doubled relative to GDP, from 3x to 6x GDP.  Causing a wealth transfer to asset owners, and for those that do not own assets, they have become almost out of reach.

Research by the Resolution Foundation says that young Millenials are on course to pay more and receive less from the UK’s: Education, Health and Benefits system than any other post war cohort.  Baby boomers in the 1950s have received the most. After the war the country was transformed in terms of housing, health, education and a more caring society. The post war period was a golden age, which was so fortunate for the baby boomer generation. 

The post war generation became very politically powerful and tilted the politics towards their demands.  That coupled with the economic growing strength of the elderly and austerity has created a perfect storm for young people.  The pandemic has compounded the problems and made it much worse. The underlying challenges were there before the pandemic. 

Another major trend is that the biggest companies in the world have gained unprecedented wealth but not passed this onto the work force. The returns to labour are diminishing.  Taxation of capital has declined steadily and the taxation of labour has gone up.  These tax issues have created an unfair environment.  There are more low quality jobs than ever, because investment per worker has never been lower than post war period. The UK has dramatically failed on technical skills, we have double the number of university graduates and half the number of technical compared to Germany for example. 

Anyone interested in the economic fairness between generations, would have time well spent listening to this podcast. The coronavirus cost has not been spread evenly between the generations.  Post the pandemic, governments will have to look to re-dress the imbalance between generations.