The great generation grab....the older generations robbing from the young

[larven]

A good article by Vince Cable highlighting the great generation robbery. Many of the luxuries our elders took for granted such as free university places, sensible house prices and secure career opportunities have now been swept away. As a result our younger generations are crippled by debt when they leave university, are unable to afford a home because of overinflated house prices and that is even if they can get a job in the first place.

What do people think of this growing crisis sweeping through the UK?

A crisis that is dividing our young and old

When Britain was last hit by recession and high unemployment in the early Eighties and Nineties, there was a gulf between North and South.

A generation of middle-aged, male manual workers in Northern industrial communities was never able to return to work and remained stuck on benefits.

The economic crisis this time could well be worse and it is not clear who the main casualties will be. I do, however, get a sense that a big division is opening up between the generations.

Younger people are worried about jobs and expect the Government to do what it can – including using inflationary policies – to fight unemployment. Many are also burdened by debt, particularly mortgages, and want relief in the form of low interest rates.

Many older, retired people have different – indeed opposite – concerns. They are unlikely to have a debt problem and a job to lose. They are worried about inflation and are angry about low interest rates and poor annuities that deprive them of income to supplement the State pension.

These concerns are pulling generations in opposite directions. In practice, life is more complicated.

Younger people have parents. My generation has children and grandchildren. In most families we help each other financially. So differences of interest do not necessarily mean conflict.

Also, there are plenty of poor pensioners who do not have savings and plenty of young families who have never been able to get on the housing ladder, with the attendant mortgage.

The different experiences of this recession also reflect some major changes over recent decades.

Those of us who have paid off our mortgages are sitting on large property assets, even after the recent crash in prices. But the same high prices mean that younger people cannot afford to buy.

Many of us enjoyed free university education, which is no longer available. Now, most students leave college heavily in debt.

We could look forward to secure, predictable careers with decent pensions. Now, younger people face job insecurity with short-term contracts and poor or non-existent occupational pensions.

So while falling house prices are good news for the young, who can now at least see the possibility of buying a home, they are bad news for older people who have drawn money from an equity release scheme or are looking to downsize or pass on an inheritance (as well as the 3million families now believed to be in negative equity).

Lower interest rates are a great boost to families on tracker mortgages and for companies struggling with business costs, but are bad news for many older savers.

Inflation is regarded with dread by pensioners on fixed incomes who are painfully aware of the rising cost of food, but helps families with heavy mortgages cope with their debts.

This potential conflict between generations will be resolved, in part, through the ballot box.

There are many more pensioners worried about the loss of their interest income than youngsters benefiting from lower mortgage payments. And we know that older people are more likely to vote, while many young people are no longer interested in the democratic process.

This suggests that the interests of the elderly are likely to prevail. That may be desirable to the extent that it stops governments from lurching into reckless policies that produce high inflation. But it may also tie the Government’s hands in fighting unemployment and economic slump.

How can we balance these interests in a better way? There has, first, to be greater financial stability so that society is not swinging from boom to bust, particularly in house prices. That requires more careful management of bank lending than we have seen in the past.

Second, when emergency measures are taken – as now – to stimulate the economy and to arrest falling output, employment and wages, there has to be compensating action to help those damaged, notably by low interest rates.

The priority should be to help those whose savings are virtually confiscated under the benefit system, which ridiculously assumes that everyone in receipt of pension credit and other benefits earns ten per cent a year on their savings. And there must be greater freedom for pensioners who are at present compelled to take out annuities.

The bigger task is to ensure that there is financial security at different stages of life and to ensure that people have incentives to provide for themselves – be it for house deposits when young or personal care when old. That means, for example, a decent State pension to provide a platform for personal savings.

Such long-term thinking is difficult to implement at times of economic crisis, but unless we do so, the sense of community between our young and older people will break down.

[VaastuShastra]

Yep.

[Caiman]

Perhaps we should start considering mandatory age limits on the population. 55, 60?

[C-Beam]

[Bachy Soletanche]

[Bones]

Total crap! In my day only 7% of people went to Uni. So 93% missed out on the opportunity even if it was free.

[Pobbie]

if you did go to uni however you were pretty much guaranteed a position of prestige. Nowadays most degrees aren't seen as special at all, since so many people get them.

[Bones]

Well , of course, if you go from 7% to 40% as a subset of society it will be less elitist and lower quality. Why the mystery? We can't be like Lake Wobegone, the mythical town where all the children are above average.

[VaastuShastra]

It doesnt lower quality neccecarily - I think I'm probably more useful than a bioscientist from before the advent of computers and genetics - but I'm less employable than they were.

[PresidentBjork]

There is a greater need to have university degrees today if one is to have greater employment prospects. I would be interested to know how many of the degrees that made up that 7% are actually responsible for the increase.

Anyway, I think that is an excellent article. Not least because it highlights what I think is a problem deserving of some attention - the growing polarization of society. We were recently discussing how compared to other countries Britain has far less family cohesion - grand parents and the such are not usually there to look after kids which adds a greater burden on already busy parents who need to work all the hours god sends them to pay the mortgage.

[Republica]

the whole country is set up for short term thinking in most departments, unfortunately.

[gazzab1990]

stop robbing my monies you old bastards

But seriously, I'm not too fussed about paying £3,500.00 for uni. The whole 'don't pay the loan back until you're earning more than £15,000' thing is pretty cool & fair if you ask me

[Noostairz]

we need to sort out our lax immigration laws and stop letting these old robbing bastards into the country.

[gothicform]

here's something i wrote on the economic sense of it -

Ahhh that 250k figure. People forget that applies to ALL graduates in employment today including those who are now in their fifties and sixties, who are high earners as a result of there being fewer people around with degrees at the time and them having not only the advantage of that but the compouding advantage of age to rise through their professions.

The govt loves to quote that figure, they are rather less keen on other figures such as the average income improvements for those graduating *today*. People graduating with a degree in Art will actually be worse off than the average. Even the best degree you can get will not provide you with an extra 250k over the lifetime.

Consider this? If you're a secondary school teacher you will not be able to leave school at 16 and work. This means you will wipe six years earning off your lifetime income straight away thanks to 2 years A levels, a degree and PGCE. Lets conservatively estimate you'd have earned an average of 16k a year during those 6 years that's reduced your income by 96k and would now earning the average wage. At the same time you will have taken on debt to get through university... lets say thats another 25k. That puts you £121,000 worse off at the age of 23.

Im going to exclude inflation and interest rates from this now but we know the interest rates are higher on the loan than inflation so this will be a best case scenario.

Average income is £23,764. You have to make up that £121,000 in 42 years which means you will have to earn on average for your entire career assuming that there is no interest on the loan and no inflation an equivalent of £26,044 just to break even earning £1,093,848 over the length of your career.

Of course thanks to the inflation swindle where the loan is being calculated at a higher rate so you have to earn more. Remember you're also starting at a lower salary, I believe that newly qualified teachers start at £20,133 checking from the data last January so at the start of your career the differential is still growing by over £3600 a year.

Assuming it takes you four years to hit the average income and you've earned £7000 less during these four years than the average you now need to earn an extra £128,000 more in 38 years or an average of £27,132 a year but you're still under that so the differential is still growing between what you needed to earn and break even. The longer you are under the amount you need to be average to earn plus what you would have earned and enough to pay off your debt the longer it will take to reach break even so you will have to earn higher amounts in less years.

It's only once your income overtakes this level that you can actually close the gap but the longer it takes you to even reach the average earnings then the more you need to earn just to break even and remember we aren't even counting interest on the debt!

Interest on £25,000 debt right now is £550 a year above the inflation rate which we are ignoring. You also have to include other things like the fact you have to make higher pension contributions because you started saving for one at 23 rather than 16, lower savings and returns on those which have been missed out. All of this has to be made up by earning more.

What's really unfair though is that £25,000 you have in debt is so big, not because of anything you did, but because of the financial situation your parents have. Why should poor people get less debt than those in the middle whose parents earn over a certain amount? Why should you then end up paying off money because of your parents financial situation. What has their financial situation got to do with the job you get and the income you have, your own situation and the debt you are carrying as a result? The answer is nothing.

To say that degrees make people better off is totally utterly incorrect. In many cases degrees can make you worse off. If you become a head teacher then yes, you'll be better off, but if you are just a standard teacher the difference will be neglible.

Unless you're going into a high earning profession such as law or accountancy or architecture or medicine with a degree and a well mapped career path that is usually financially rewarding, the chances are you will be better off without it. Most teachers never become head teachers and it'll become even harder when we have the government insisting that ALL new teachers have masters degrees which means yet another year at university, more debts, and another year of lost income.

[VaastuShastra]

To top it off, after earning nothing during education, graduates can look forward to years of unemployment

[gazzab1990]

Originally Posted by VaastuShastra

To top it off, after earning nothing during education, graduates can look forward to years of unemployment

I bloody hope not . How does this sort of thing work in India?

[VaastuShastra]

I know how it works in Sheffield

But in India, I hear there was a time when students just had to keep going back to university course after course, collecting degrees. It also probably didn't help that some unis were controlled by armed militant communist or right-wing student organisations.

[Republica]

I dont see my student loan as real debt, just a graduate tax. Therefore i dont worry about it

[Isaac Newell]

Perhaps our Grand Parents and Great Grand Parents should have just let Hitler walk in.

[gothicform]

republica, just wait till they lose some of your payments then send you threatening letters saying you owe them money and sell the debt to a debt collecting agency who harass you, and then get your parents details and harass your parents! the whole thing goes on until you call trading standards.

SLC are scumbags, 5 days before xmas in 2002 they took six months payment at once - that was exactly 700 quid leaving me overdrawn with no money to finish buying my xmas presents and bank charges. nice eh. i know many many other people who have had similar problems of the SLC talking too much and then saying "oh you never paid us" and deferment forms being "lost in the post" (funny i sent it recorded delivery, want to see the receipt).