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Over the weekend, the Work and Pensions Select Committee called on the government to scrap the pensions triple lock, framing it as a symptom of an economy skewed against young people. In an article in Citywire published today I argue that the Triple Lock is incredibly important in addressing inequality, and that by continuing to use generations as our prime unit of analysis, we are failing to focus on the real problem which is redressing economic inequality in society.  Aggregating generational data without looking more closely at how resources are distributed means we risk introducing policies that penalise the poorest.  We should instead focus on thinking about social and economic inequalities across society.

The article is mainly reproduced below, or you can see it here on Citywire: http://citywire.co.uk/new-model-adviser/news/the-triple-lock-is-incredibly-important-scrap-other-policies-instead/a966445


A trailer for a recent episode of Dispatches on Channel 4 asks “Is it party time for Britain’s older generation?” – older people drink and dance in the background, while next door in the darkness a desperate young couple with a baby hammer on the wall in frustration.  The public have become used to seeing these portrayals of older people as rich, with gold-plated pensions and valuable housing, living a life of luxury and leisure, in contrast to the young who cannot get on the housing ladder, laden with debt, struggling with unemployment, and whose pension prospects are troubling.

Similar arguments of generational unfairness arose repeatedly through the latter half of the 20th Century. Economist John Hills argued against these in the 1990s[1] showing that to judge this question involves analysis of each cohort’s interactions with the welfare state over a lifetime. Looked at this way there was very little intergenerational injustice, and he also reminded us of the harsh lives many older people had had as young adults.  Sociologists responded slightly differently by demonstrating the resilience of generational solidarity within families.  Indeed, research continues to show that financial transfers flow down the generations within families until people are well into their 70s[2].  If we think about legacies as transfers down the generations too, then this argument becomes even more cogent.

However, there is another problem.  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.

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 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 reframing might lead us to think differently about some important policy issues.  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%, currently under political threat.  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 that I did with colleagues published recently in Ageing and Society[3] showed that 39 per cent of those over 65 had incomes above the poverty line only because of state pension and means tested benefit transfers.  A further 7 per cent of both men and women only had incomes above the poverty line because they were in receipt of disability-related benefits  – intended to compensate for the extra costs of disability (and also under political threat).  We found 30% of women and 22% of men over 65 in poverty, and deduced that only 24 per cent of women and 33 per cent 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 too about housing inequality.  First, about a quarter of pensioners own no property at all.  About 20 per cent are in the social housing sector, and about 5 per cent in private rented property, 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 per cent 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 by spending of housing equity on social care, or 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 of what we know about reducing inequality for the European Commission[4], Abigail McKnight and colleagues concluded that contrary to commonplace arguments that welfare regimes inhibit economic growth, the introduction of European welfare state programmes complements the achievement of economic goals.  They conclude 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. The real issue is inequality.

[1] ‘Does Britain have a welfare generation’ in A. Walker (ed) (1996) The New Generational Contract. UCL press.

[2] Arber, A. and Attias-Donfut, C. (2000) The Myth of Generational Conflict. Routledge; Attias-Donfut, C., Ogg, J. and Wolff, F (2005) ‘European patterns of intergenerational financial and time transfers’ European Journal of Ageing 2:161-173

[3] Price, D., Glaser, K., Ginn, J. and Nicholls, M. (2016) ‘How important are state transfers for reducing poverty rates in later life?’ Ageing and Society, Volume 36, Issue 9, pp. 1794-1825

[4] McKNight, A., Duque, M and Rucci, M. (2016) Creating more equal societies: what works? European Commission.