Drivers of Intergenerational Inequity
In the UK, the final report by the Intergenerational Commission speaks in terms of an intergenerational contract – “the principle that different generations provide support to each other across the different stages of their lives”, and also the notion that each successive generation should be better off than previous ones.
One of the biggest issues in current reporting on this and so-called “generation wars” is the cost of housing, which has become significantly less affordable for Millennials compared to Baby Boomers.
The Financial Times challenges the entire underpinning of this argument, namely that there is no such thing as an intergenerational contract. They argue that generational boundaries are arbitrary (which in my view is only relevant to labelling), that inequality within each generation is far more significant than between them, and that the idea that successive generations should enjoy a better life is simply a proxy for sustained economic growth.
These are all good points, particularly the latter. As they point out, in the last decade, real GDP rose by 3.5 percent, compared with 29 percent in the previous decade.
The other consideration is the ageing population: as birth rates are collapsing in many countries, this poses a huge risk to economic growth as not enough young people are coming through the system.
We’ve discussed earlier the impact to wealthy families of increasing life expectancies, and will probably revisit this in future.
Consider This: It’s very easy to make arguments about how things ought to be between generations, but there are always implicit assumptions, and it’s a good exercise to challenge them. What are the unstated assumptions about how things ought to be between generations in your family?
- The focus on intergenerational inequity is a delusion
- A New Generational Contract: The final report of the Intergenerational Commission
Here is more on reading on family business governance.