Thursday, January 04, 2007

"The Baby Boomers Will Soon Retire" – enter the new new economy

I’m not quite sure what Mark Bahnisch means here, after quoting the first part of the above headline, but as it happens, boomer mass retirement over the next two decades is a topic I’ve been meaning to write on for a while.

In a nutshell, capital is going to come back into fashion with a vengeance. Think of the era, and typical scenarios, of Jane Austen and then double it. Soon, wage/salary income, as it has been understood for the last hundred years or so won’t exist; service (with varying degrees of indenture) will be its effective replacement. The change here will not only be sudden, it will be widely lauded as a good thing. If you think I’m exaggerating, read this letter from Martha Farnsworth Riche:

[T]he media has misrepresented what America's “young” economy will look like. People over 45 have more discretionary income than younger people. It is the older generation's spending, on more health care and travel but fewer flashy gadgets, that will create jobs and be the impetus of the new economy.

Yes, she actually uses the phrase “new economy”. Without any irony, or other rhetorical context, I’m pretty sure.

Lordy lordy, forget for a moment Jane Austen’s time, when capital meant frills, and plain calico for the best of the rest. Instead imagine a health-care driven, hi-tech gerontocracy - think Davros from “Doctor Who” - wizened half-human, half-bots who can come across as defenceless old dears – but only immediately prior to channelling some fresh outrage over some poor service they have received. Self-righteous-millionaires-over-50 are already a tabloid TV staple.

Admittedly, Farnsworth Riche’s letter doesn’t use the “capital” word (“discretionary income” is disingenuously used in lieu), and it avoids being boomer-retirement specific. But in her reference to over-45s (many of which will still be saddled with university-age (or younger) children, but almost all of whom will have made a killing in residential real estate) she is clearly talking up the boomer-retirement economy. As an Austeneque vignette, she could be drawing a tidy, well-provisioned ship whose access ladder has been permanently drawn up.

Coincidentally, in the same edition of the Economist as Farnsworth Riche’s letter is an OpEd article giving a solid, bar one thing, anti-boomer venting to, inter alia, the dwindling of defined-benefit superannuation (“pension” in the UK) schemes and house-price inflation in times of low CPI inflation. The article’s glitch is in its presupposing of the immediate post-boomer generation as being boomers’ children. Umm, Ryan Heath is boomer spawn. And I – along with 99% of the mid-1960s-born – most certainly am not

Australia’s dismantling of defined-benefit superannuation since the mid-1980s has been even more swingeing than in the UK, yet has attracted curiously little attention, despite its patent intergenerational injustice*. Instead, a trillion-dollar funds-management industry has grown up, around the rather bizarre concept that a lump sum of $300k – at most – is going to see a GenXer on average earnings (and with 40 years of uninterrupted labour) through their retirement.

The key point here is not the actuarial inadequacy of the lump sum, but that the industry never ever breaks down Xer superannuation into defined-benefit equivalent income streams. Without this calculation, superannuation is meaningless – a tax dodge for rich (with it or without it) boomers, who could always sell some spare real estate in the unlikely event that they couldn’t fall back on the old-age pension, but a stupid con on GenXers – who are usually without any other fall-back or safety net.

I’ll leave the penultimate word on Australia’s superannuation deforms to one of their prime instigators: our very own Margaret Thatcher, aka Paul Keating:

I have always thought that owning the home was fine, but being able to share . . . in the stock market was a way of the ordinary mums and dads having a share in the bounty”.

Umm, HECS, labour casualisation and real estate inflation together mean that Xer home-ownership has largely gone out the window. Not to mention, talking of "ordinary mums and dads", decimating my generation’s fertility/procreation rates. For f*ing over GenXers and then dumbly boasting about it, take a bow, Paul Keating.

If my life is a “bounty”, bring on the mutiny.

* In a nice piece of Obscene Boomer Hubris, Oz journo Alan Wood recently suggested that the Future Fund (which notionally funds boomer-and-older defined-benefit superannuation payouts for decades to come, until the last boomer dies) is unfair to baby boomers, specifically.

You're gonna love this, if you love bashing boomers.
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