Intergenerational Issues of Society
My student son aged 20 sits at the kitchen table computer at hand, headphones in ears and expects to be fed, washed and, if needed, propped up financially.
His parent aged 60+ sits at a desk in his own house expecting to pay most bills, do much of the shopping and, if lucky, get the occasional thank you.
In between us echoes the latest report about generational fairness.
How lucky dad was with free uni education, appreciating house prices, economic growth and generous super tax breaks.
How unlucky the son’s generation has been because of housing unaffordability, higher education costs, wage stagnation and, worst of all, paying taxes and health insurance to subsidise these prosperous boomers.
It’s all a generalisation of course but also a wicked problem.
What do we the older generation owe the younger generation and if there is some kind of deb and if sot how do we best to settle it?
On the other side, what can this allegedly younger generation do to help themselves?
Is the gap between how much they’ll need and what they can earn and or save so massive it’s pointless to be frugal?
The Grattan Institute report says less well-off younger Australians have less wealth than their parents at a similar age. While older established householders’ wealth has grown substantially, largely due to the housing boom and growth in superannuation assets.
“Working-age Australians are underwriting the living standards of older Australians to a much greater extent than the Baby Boomers did for their forebears, straining the ‘generational bargain’ to breaking point,” it says.
There’s always some debate about the Grattan Institute’s methodology and interpretation given the think-tanks’ political orientation, but there’s no doubt times have changed and for the first time the next generation might be less well off than its predecessors.
Their national ‘big picture’ policy solutions include tax reform, better education and smarter infrastructure spending which, while benefitting everyone, can help the young more.
More controversially, at least at the grass roots level, is the proposal to reform planning rules to allow more high-rise and high-density development in the suburbs to increase housing supply and hence hopefully make it more affordable.
Last, and most controversial, will be the political pressure for, as the Grattan Institute puts it, “a fair go for younger people means winding back age-based tax breaks for ‘comfortably off’ older Australians”.
Such proposals mean reducing superannuation tax benefits and including assets such as the family home in the assessment of social welfare.
And for those who claim the older generation had it tough as well and a good dose of more saving and less ‘smashed avocado’ would suffice, the institute says think again.
They say it’s a myth that today’s lifestyles and spending habits are to blame.
“In fact, younger people are spending less on non-essential items such as alcohol, clothing, and personal care, and more on necessities such as housing, than three decades ago.”
In terms of what ‘we’ owe ‘them’, the individual response of families to their own offspring are largely dependent on wealth and generosity and do not address the broader intergenerational issues of society.
And what I may choose to do to help out that 20-year-old now, might not be sustainable or even possible in ten years’ time. So, I do not have any answers, easy or otherwise, as to what may be best do in this family or this society.
However, it seems obvious the pressures are going to grow and we are going to have to face the problem, currently being largely avoided, or face some discordant music.
It’s going to be an interesting, exacting and difficult journey and we should not delay the planning any further.