MPs have called for cuts to state pension generosity, but Professor Debora Price says it is unfairness within generations that needs solving.
The public have become used to portrayals of older people as sitting on gold-plated pensions and valuable housing, allowing them to live a life of luxury and leisure. By contrast, the young who cannot get on the housing ladder are laden with debt, struggling with unemployment, and see poor pension prospects.
Arguments around generational unfairness are not new, but by consistently framing our discussions of pensions, housing and debt in terms of intergenerational conflict, we shut down other important ways of looking at the issue.
Principally, we fail to focus on inequality. And inequalities within generations are much greater than inequalities between generations.
The inequality tangle
Two things follow if we focus on inequalities. First, we stop thinking that because pensioners are no longer poorer than other groups this is somehow a failure of policy.
It is instead a policy success that we no longer consign older people to a lifetime of low income because of their age, and something we must aim to secure, not erode, for the future.
For example, over the 10 years from 2003 to 2014 we halved the proportion of pensioners living in fuel poverty from almost 15 per cent to about 7 per cent, an excellent gain that augurs well for the health and wellbeing of our older population.
Second, we stop thinking that somehow it is a bad thing that older people have accumulated pensions and own their own houses without a mortgage. Indeed, social policies in housing and pensions have for decades focussed on ensuring this very thing. It is hardly surprising that older cohorts own more capital than younger people. We would worry if it were not so, and no element of blame or envy should attach to that.
This re-framing might lead us to think differently about some important policy issues too. Take, for example, the recent debate about the pensions triple lock – a promise that state pensions will rise by the higher of earnings, prices, or 2.5% – and which is currently under political threat with the Work and Pensions Select Committee recently calling on the government to scrap it, saying it was a symptom of an economy “skewed” against young people.
However what the triple lock does is incredibly important. For the new single tier pension it ensures that the value of the pension does not erode for future cohorts so that we keep secure the important gains we have made in ameliorating the poverty and social exclusion of pensioners.
But it also supports acceleration at modest pace for the ‘catching up’ that the dismally inadequate basic state pension needs to do for millions who will never be entitled to the single tier. It is about reducing inequality and making sure money gets to those who need it.
Research I recently published with colleagues showed that 39% of those over 65 had incomes above the poverty line only because of state pension and means tested benefit transfers. A further 7% of both men and women only had incomes above the poverty line because they were in receipt of disability-related benefits which are intended to compensate for the extra costs of disability.
We found 30% of women and 22% of men over 65 in poverty, and deduced that only 24% of women and 33% of men over 65 would avoid official poverty without income transfers from the state. A somewhat different picture to that of a bloated selfish pensioner generation.
There are a number of points to make about housing. First, about a quarter of pensioners own no property at all with about 20% in the social housing sector and another 5% in private rented property (and often in very poor conditions as highlighted in a recent report by Age UK).
For those who do own their homes, geographical variation is substantial with housing wealth predominantly held in London and the South East. About 20% of older people live in homes officially classified as ‘non-decent’.
But there is another way to think about housing too. All of the housing wealth currently held by the older generations will inevitably be distributed to others in society. This will happen either by spending of housing equity on social care, through realising housing wealth and spending the money on other things, or by legacy on death.
What happens to money spent on social care or consumption becomes a matter for how social care is financed, how corporates and individuals are taxed, and how this money is then redistributed.
But if not spent, then inherited wealth is a far greater driver of social inequality than anything that people do during their lifetimes. Redistribution from housing wealth is ultimately not a matter of generational ‘hoarding’ but a matter of social policy.
In their recent review for the European Commission Abigail McKnight and colleagues concluded that contrary to arguments that welfare regimes inhibit economic growth, the introduction of European welfare state programmes complements the achievement of economic goals.
They concluded that the generosity of welfare benefits is critical to reducing inequality, and that the latest evidence suggests that universal models are more successful at reducing inequality than targeted regimes.
These are important messages. Some young people have few opportunities and struggle with debt and housing, while other young people are shielded by wealthy families who protect them from debt, pay for their education, use their contacts to secure jobs, and buy their children houses.
These inequalities between young people need to be addressed by redistributive policies that spread the wealth and opportunity around more fairly: policies for work, housing, education and benefits that support an understanding of shared citizenship and equal opportunities.
Policies that make the poor poorer, that leave workers poor, that fail to provide decent houses, and that penalise, stigmatise and alienate benefit claimants, mean that social inequalities grow.
- This article originally appeared on Citywire