The UK’s young people are losing out to baby boomers – but tuition fees are not the problem

The significance of the changing size of different generations as they go through the life cycle is a well-developed theme in academic social science. Charting the effect of the baby boomer generation on the UK’s post-war social policy is not unlike studying the consequences for a python of swallowing a pig.

One of my intellectual heroes, Karl Mannheim, opened up the whole issue in his brilliant 1928 essay “The Problem of Generations”. However, great demographers from Robert Malthus to Richard Easterlin have tended to assume that small generations must do better than larger ones. It looks obvious that it is better to go through life with less competition in the jobs and housing market.

However, in my book, The Pinch, I argue that the opposite is now the case. When The Pinch came out almost 10 years ago, it was the first British book to argue that the younger generation were losing out to the boomers, born between 1945 and 1965. But as its updated second edition is published (packed full of new material), it is striking that what was then a rather eccentric argument is now widely accepted – because the evidence is overwhelming.

I argue that in a modern market economy, big generations have the most power as consumers. And with the big post-war welfare state, their voting power can also be used to shape the distribution of tax and public spending.

When the boomers were young, child benefit was introduced and pensions were cut; now they are older, state pensions are rising in value while working-age benefits have been cut. Home ownership among younger people peaked at 50 per cent in 1989: it is now down to half that. And household income after housing costs for a millennial born in 1990 is no higher than for somebody born in 1980.

Meanwhile, employer contributions to defined-benefit pension schemes run, on average, at about 16 per cent, but are only about 3 per cent for the defined-contribution schemes of which younger workers tend to be members. And it goes beyond economics. To get to the Intergovernmental Panel on Climate Change goal of holding global temperature rise to 1.5 degrees, the younger generation will have to emit one-eighth of the carbon dioxide of the boomers.

The sceptics say that all this is just a diversion from the real divides, which are intra-generational. There are, of course, other types of inequity – by gender, class, ethnicity. But the generational gap is also important and much less studied. It helps to explain intra-generational gaps, too.

Indeed, I argue in the book that one of the key changes in the structure of the British economy is the rise in the value of assets over earnings. UK wealth used to be less than three times its GDP: it is now almost seven times. That change has massively benefited the boomers, the main owners of wealth during this re-rating. It also increases the importance of inheritance relative to earnings as a means of acquiring wealth. That is a barrier to social mobility and opportunity within generations.

What does the author of The Pinch think of the policies of the former universities minister who trebled the maximum tuition fee that universities could charge? I believe that it is in the best interests of young people – and the rest of us – that as many as possible of those who can benefit from it have the opportunity of well-resourced higher education. The introduction of £9,000 fees was controversial but did mean that even when austerity was at its most intense, the resources behind each student were not cut but, instead, went up a bit to compensate for decades of falling behind schools. And we set universities free from number controls, so the number of young people going to university went up as well. Nowadays, the new school of “edusceptics” aren’t happy with all that, but I believe that both reforms were in the interests of young people.

We can debate the right balance between graduates paying back their income-contingent loans when they are in well-paid jobs and the generality of taxpayers paying by writing off outstanding debt. I personally think the current earnings threshold for repayment of £25,725 a year is too high, and we can expect graduates to pay back rather more over their working lives. But that is a legitimate policy choice and does not mean we have to tear up the scheme and start again.

The critics also charge me with provoking inter-generational conflict. But is drawing attention to ethnic gaps provoking ethnic conflict? And I don’t believe that the older generation actively take these decisions to disadvantage younger generations. But that has been the consequence of too many of our decisions. This is something emerging from bread-and-butter politics. How easy is it to build new houses, for instance? How much do we restrict access to mortgages by regulation? How much do we regulate to enhance company pensions, despite the risk they will then be closed to younger generations?

These are times of division in our politics. If anything, I believe that the appeal to the interest of the future generations unites us regardless of our cultural, religious or ethnic divides. Indeed, the real purpose of my book is to argue that the social contract is actually a contract between the generations. Thinking of it this way does not divide us: it unites us.

Lord Willetts is the author of A University Education and was the UK’s minister for universities and science between 2010 and 2014. The revised and updated edition of his book, The Pinch: How the Baby Boomers Took Their Children’s Future – And Why They Should Give It Back, is published this month.