Wealth gap wides between generations
Published November 14, 2015
by Leonid Bershidsky, Bloomberg View, published in Charlotte Observer, November 13, 2015.
Forget the Marxist adage about the rich getting richer and the poor getting poorer. The emerging divide is an age-related one: The old are getting richer and the young are getting poorer.
A recent study showed that in developed nations, the U-curve of lifetime happiness bottoms out earlier than in poorer ones. In the U.K. and Denmark, for example, the nadir comes at 44. By 70, people in these countries are as happy as they were at 30.
There can be any number of reasons for that. One down-to-earth explanation is the growing intergenerational wealth divide. Financial security in advanced societies appears to increase with age.
A recent paper found that the material deprivation rate – defined as inability to afford things above basic necessity level – has increased for young people in most European countries between 2007 and 2013, but dropped for over 65s. That’s mainly due to rising youth unemployment.
It’s always harder for young people to find work during recessions. It’s also easier to lose work. So there’s nothing particularly surprising about the rise in youth unemployment as such. What’s less clear is the role that government policy plays in widening the inter-generational wealth divide. During the recent recession, programs that might have helped younger people were generally cut. Old age programs increased. Older people are getting more out of governments because they are over-represented in politics. A 2010 paper showed that the proportion of European political party members over 60 has increased since the 1990s, and often out of proportion to their share of the general population.
It may be a coincidence that countries with political party memberships younger than the general population have powerful leftist parties capable of upsetting established political balances. Somehow I don’t think so, though. The radical leftists in these countries are usually younger people who don’t want their generations to turn into lost ones. They may not know how to prevent it, but their efforts show that class warfare may be mutating into a fight against generational inequity.
This is something for older politicians to think about. Reorienting social systems to fight youth unemployment, and to prioritize education and young families might be a safer choice than trying to secure retirees’ more reliable votes. The reorientation is psychologically difficult: Today’s middle-aged were once young and remember those times as happy. Yet the lack of opportunity does foster drug epidemics, riots and the radicalization of electoral politics. It also helps create demographic troughs like the one in which Europe now finds itself: Today there are four workers per retiree in the EU, but according to forecasts, there will only be two by 2040. Who knows what that might do to the happiness U-curve: It might even turn into a downward-sloping line.
Leonid Bershidsky writes for Bloomberg View.
