Wednesday, 18 November 2015

No Dr Pirie, you can't say that. It ain't so. Taking the Adam Smith Institute to task on the elderly.


The Adam Smith Institute is one of the good guys. I like their consistent defence of liberty and classical liberalism. Sam Bowman, the Research Director is one of those amazingly and eclectically brainy people that challenge how we look at things.

Sometimes they get stuff badly wrong:

Popular perception of the circumstances in which pensioners live is somewhat out of accord with modern reality. The image of a woman with a blanket over her shoulders, huddled over a fire and wondering if she can afford to toss another stick onto the flames does not accord with present day reality for most pensioners. Some 86% of pensioners live in households with assets in excess of £50,000. The average income of over 65s is £15,400. A young person working on current minimum wage for a normal working week earns just under £13,000. Yet the young person is taxed while the older person is guaranteed a triple locked pension that will rise with inflation, or average earnings, or 2%, whichever is the highest. On top of this comes a winter fuel allowance, a Christmas bonus and a free bus pass.

Don't get me wrong here - I have some sympathy with the argument being made (although the 'it's all baby boomers fault' schtick is a load of nonsense). But if you're to make an argument do it in a way that doesn't open you to having your argument blown out of the water.

"Some 86% of pensioners live in households with assets in excess of £50,000"

Yes. And this is a consequence of twenty or thirty years paying off a mortgage plus maybe fifty years squirrelling money away in a pension pot. Nothing to do with taking money from the young. And does Dr Pirie really think assets of just £50,000 is such a great big deal - especially since those assets, most commonly, represent the person's home and the savings they'll need to see out today's long retirement. More to the point, Dr Pirie is deliberately conflating assets with income to make his point.

"The average income of over 65s is £15,400. A young person working on current minimum wage for a normal working week earns just under £13,000. Yet the young person is taxed..."

First we've compared average income for the elderly with minimum wage for the young. Secondly most working young people are earning more than minimum wage. And while its true that the personal allowance is higher for those elderly over 77 (and they don't pay national insurance), it's not true to say that old people aren't taxed. And the basic state pension is included in that calculation.

This whole argument is out of the same box as the idea (which I'm sure the ASI would criticise) that somehow the rich have got that way at the expense of the poor. It really is nonsense - by all means say that pensioners get too much of a good deal but it's simply not the case that there's a great deal of 'redistribution from relatively poor young people to comparatively affluent older people'.

Finally most of those assets and that income will, in the end, get spent (quite rightly) on providing social care (mostly delivered by those low paid young people).



Anonymous said...

There is a way in which the asset-rich old benefit at the expense of the asset-poor young: in the housing market.

Reform of the planning system, more house building and perhaps some changes to property taxation should be the way to restore 'intergenerational justice'.

Anonymous said...

Sure, the retired did not get "rich" (as you point out, £50,000 in assets is not rich) on the backs of today's workers.

On the other hand, there is a problem in expecting the country to make huge cutbacks whilst ring-fencing by far the largest single welfare expenditure in the budget. Whilst the retired will be hit by cuts in public services, they're not being hit by everything else.

The question is, to what extent are people today going to be able to retire with decent pensions and asset wealth. It does not look good. Housing is beyond the means of many of today's workers. Jobs are low pay and low security compared to that which many retirees experienced, so savings harder. Work is not rewarding or dignified when it involves a constant, five-decade, hand-to-mouth struggle to build anything at all.

Can we really ask workers in this situation to bear so much of the burden? Decreasing pensions is far from a panacea. But if "we're all in this together", that should mean pensioners too.