No, the older generation is NOT living at the expense of the young (or: yet another Spiegel hit piece)

What’s left after you have laid blame of the current crisis at the feet of the poor and unemployed, those lazy Southerners (i.e. foreigners), and “greedy bankers”? Exactly, Divide et Impera: young vs old:

People vs. banks, north vs. south, and rich vs. poor? While all of these conflicts may be real, one of the biggest issues of the euro crisis is rarely discussed: Older people are living at the expense of the young, and it’s high time the next generation took to the streets to confront their parents.

David Böcking doesn’t mince words in identifying who he wants the young dispossessed to direct their anger at (hint, it’s not neo-liberal politicians who implement austerity):

They might have been more specific and instead chanted: “All the old people must go!” This phrase would apply because, in many ways, the euro crisis is also a conflict between generations — the flush baby boomers in their fifties and sixties are today living prosperously at the expense of young people.

A good hit piece needs a veneer of objectivity and Böcking is happy to provide just that:

Intergenerational equity — measured among other things by levels of direct and hidden debts and pension entitlements — is particularly low in Southern Europe. In a 2011 study of intergenerational equity in 31 countries by the Bertelsmann Foundation, Greece came in last place. Italy, Portugal and Spain didn’t do much better, landing in 28th, 24th and 22nd place respectively.

Such a statement can hide quite a few things. For instance

  1. Who or what the initiator of the study is, the Bertelsmann Foundation. Apparently

    Die Stiftung bewirbt, zur Lösung aktueller gesellschaftlicher Probleme, alle Lebensbereiche nach den „Grundsätzen des Unternehmertums und der Leistungsgerechtigkeit“ und dem Leitbild „so wenig Staat wie möglich“ umzugestalten.

    (Entry in the German Wikipedia August 12th, 2012 – the English entry is a bit sparse)
    which roughly translates as “The foundation supports solving current social problems by adjusting all aspects of life according to ‘principles of entrepeneurship and competition’ and the credo ‘as little government as possible’.” So it’s a neo-liberal organization. This is relevant information when evaluating their talking points.

  2. Intergenerational equity is obviously descriptive, looking at debts and pensions, among other things. What the measure doesn’t tell us how a society arrived at this place.
  3. In fact, it doesn’t even tell us what exactly are the components of “intergenerational inequality” (at least not in the way it’s presented here by Böcking). A society in which the young are debt-free and the old enjoy lavish pensions could be ranked similar to one in which the young have high levels of debt and the old meagre pensions. The former might be a capitalist welfare state that takes its obligations to young (via state-financed education) and old (via state-financed pensions) equally seriously, whereas the latter might be a neo-liberal construct like the USA.

Luckily for the reader, Böcking goes into specifics:

The employment market collapse has hit young Europeans much harder than older generations. In Greece and Spain more than half of those under age 25 are unemployed — twice the rate of older workers. Things are even worse in parts of southern Italy, where youth unemployment has risen above 50 percent.
One reason for this situation is unequal employment circumstances. Older Spaniards and Italians, for example, profit from worker protection laws preventing them from getting fired that are quite strong by international comparison. But almost half of young Italians and 60 percent of young Spaniards are on temporary employment contracts and can easily lose their jobs.

So it’s actually pretty simple: the young are getting screwed by neo-liberal, “flexible” labor markets while the older generation enjoys some vestiges of the welfare state. Böcking wouldn’t be writing this piece if he couldn’t put a spin on it, though:

In some cases, countries mulled uncomfortable labor market reforms that would have scaled back the privileges of older people. And they considered increasing taxes for the rich and a tougher battle against tax evasion, which has long been viewed as a trivial offense. Both are measures that would impact older, wealthier people in particular.

It was only a few years ago that the then “grand coalition,” a government comprised of Chancellor Angela Merkel’s conservative Christian Democratic Union and the center-left Social Democratic Party, pushed through a “pension guarantee” that prevents cuts to benefits for the elderly even if wages sink for young workers. Behind this decision was the fear there would be a backlash among outraged pensioners in the next election…

To listen to the neo-liberal, these “reforms” are inevitable and it’s just the political clout of the older that has prevented their being subjected to them.
In the real world, however, supply side labor “reforms” are a myth and neo-liberals went after the young for two reasons: 1) it’s harder to justify cutting pensions of those that worked in the old system than impoverishing those who haven’t “performed” yet, 2) if the young generation gets indoctrinated into accepting the new, semi-feudal world, they’re less likely to cause trouble in the future. Also, Böcking wants readers not to focus on the fact that wealthy people benefited from the tax (and tax evasion) policies but just claims that those people also are older.

Böcking also offers us this:

Meanwhile, income distribution between generations in Germany threatens to soon become a “new social issue,” warns a recent analysis in a journal published by the Munich-based Ifo economic institute. The disparity between what young and old people earn must shrink, it says. “Otherwise the conflict potential will increase.”

This is yet another smoke-and-mirrors paragraph. The Ifo institute just states that the gap needs to close. Böcking wants the reader to believe that this gap should be closed by subjecting the old to the same austerity madness that the young are already falling prey to but there’s nothing in this statement that precludes the alternative: improving the standard of living for the young.

We’ve established that the claim of the article – that the old are living at the expense of the young – is untrue. If anything, the old just get screwed a bit less than the young. The truth, and this is where this hit piece turns into a completely different level of disgusting, is that the older generation is not really doing well. After all, it doesn’t matter what the number on your pension transfer says, if there are no real resources for you to buy, e.g. medical and home care, this doesn’t help you one bit. And by forcing large numbers of young people into unemployment queues who could provide these real resources instead, neo-liberals impoverish the older generation.
And his bullshit claim that the older generation is wealthier? How about some examples, for instance from Greece, that hotbed of generational inequality:

The man has not been officially identified but was named in Greek media as Dimitris Christoulas. He was said to be a retired chemist, with a wife and a daughter, who had sold his pharmacy in 1994.

He shot himself in the central square just before 09:00 (06:00 GMT), Athens News reports.

In the alleged suicide note, found by police and reported by Athens News, he said: “The government has annihilated all traces for my survival, which was based on a very dignified pension that I alone paid for 35 years with no help from the state.

“And since my advanced age does not allow me a way of dynamically reacting… I see no other solution than this dignified end to my life, so I don’t find myself fishing through garbage cans for my sustenance.”

or Portugal, ranked 24 of 31 according to the Bertelsman foundation:

2. Impact of fiscal austerity measures on the human rights of the elderly

The population of Portugal is ageing, with 18% aged 65 and above. The elderly are vulnerable to poverty and are adversely affected by the fiscal austerity measures which have resulted in the lowering of incomes due to the freezing of pensions and cuts in social benefits. Other elements, such as the hike in prices of health care, public transportation, gas and electricity and food products have had a substantial impact on the living conditions of elderly persons with low incomes, especially those residing in isolated rural areas. Moreover, the Commissioner finds it worrisome that many families are reportedly withdrawing older persons from residential care centres and taking them home in order to benefit from additional income in the form of their pensions. . .The Commissioner is concerned at reports indicating that violations of the human rights of the elderly are on the increase in Portugal.

or the US where this problem gets solved in the typical neo-liberal way:

The first was a report from the Census Bureau that used a new experimental poverty index. This index differed from the official measure in several ways; most importantly it includes the value of government non-cash benefits, like food stamps. It also adjusts for differences in costs by area and takes account of differences in health spending by age.

While this new measures showed a slightly higher overall poverty rate the most striking difference between the new measure and the official measure was the rise in the poverty rate among the elderly. Using the official measure, the poverty rate for the elderly is somewhat lower than for the adult population as a whole, 9 percent for the elderly compared with 14 percent for the non-elderly adult population. However with the new measure, the poverty rate for the elderly jumps to 14 percent, compared with 13 percent for non-elderly adults.

By this higher measure, we have not been nearly as successful in reducing poverty among the elderly as we had believed. While Social Security has done much to ensure retirees an income above the poverty line, the rising cost of health care expenses not covered by Medicare has been an important force operating in the opposite direction.

The other report suggests that this situation could get worse in the years ahead. The Pew Research Center released a study on wealth by age cohort. While many observers (including me) focused on the change in wealth over the last 25 years, what is perhaps more striking about this study are the levels of wealth it reported.

The report showed that the median wealth for a household over age 65 is $170,500. This measure includes everything that they own, including equity in their home. With the median house selling for roughly $170,000, this study implies that the typical household over age 65 would essentially have enough money to pay off their mortgage. They would then have nothing else to live on except their Social Security.

The situation looks even worse for the near elderly: the cohorts between the ages of 55 to 64. (Wealth typically peaks in these years, so these people are unlikely to have more wealth when they cross age 65.) The median wealth for this group was reported as $162,000. Using the Pew findings, the typical household in the 55 to 64 year old cohort would fall 5 percent short of the money needed to pay off the mortgage on the median home.

Alternatively, if they were to use this wealth to buy an annuity at age 65, it would be sufficient to get them an annuity of roughly $10,000 a year or just over $800 a month. This would supplement Social Security income that comes to less than $1,200 a month for a typical worker. The monthly premium for Medicare Part B is $100, which would leave $1,100 from a monthly Social Security check for a typical retiree.


The entire “discussion” of which this hit piece is a part is just a smokescreen to have people fighting each other for scraps instead of holding the decision makers accountable that got us into this mess. This is most primitive prisoners’ dilemma. I am still not sure whether those decision makers are incompetent or malicious – people like Böcking, however, who try to instigate the this fighting over scraps, have no excuse.

This entry was posted in austerity, economic policy, neo-liberalism, private debt, standards of living, wealth distribution. Bookmark the permalink.

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