The Kids Are Not Alright – But Are We Boomers To Blame?

As 50-somethings, we’ve lived through a seismic shift.

Our generation, the baby boomers, used to be the embodiment of progress. Our parents were sure we’d have it better than they did. And, for a time, we did.

But now, the tables have turned. Younger folks are grappling to secure jobs, buy homes, start families, and save for their golden years.

You’d think with the world richer than ever, it’d be easier for them. But, it seems like we’ve hit a roadblock.

Why is this happening? And more importantly, what can be done about it?

The Numbers Game

Remember back in our time when we had that massive population surge, yet we turned out pretty well-off?

Lord David Willets, a British chap with a knack for numbers and trends, reckons that being part of a big group is actually advantageous.

He attributes this to the voting power and market influence a large demographic can wield.

Boomers Calling the Shots

Back in our youthful days, we voted for things that made our lives better – affordable education, family benefits, and solid social welfare.

As we climbed the career ladder, our votes started leaning towards reduced income taxes, less red tape for businesses, protection of domestic industries, and those pesky zoning laws to keep our home values intact.

A House is Not Just a Home

With the push towards suburban living and single-family homes, houses morphed from simple dwellings to significant investments.

And the scarcity of these homes only served to drive their prices up.

Can you believe there was a time when our shiny new cars cost more than our homes?

Now in our sunset years, we vote for things that protect our interests – retirement benefits, medical facilities, and tax reliefs, even if these may be at the expense of the schemes that gave us a leg-up when we were young.

The Power of Favorable Policies

Think about this – if millennials received free college or secondary schooling, they’d likely be in a much better position. It could be the boost they need to break into the housing market.

Size Matters

Willet’s theory overlooks one vital detail that tipped the scales in our favor.

We were a large group in a small world. We held the voting power with little competition.

It’s not simply about us buying homes when they were cheap. That was a byproduct of the bigger issue – we dominated, and the world was our oyster.

So, as we watch our children and grandchildren navigate the complexities of today’s world, it’s worth pondering how we can help ensure they don’t just strive, but thrive.

As much as things change, we should remember that it’s the next generation’s turn to shape the world, as we once did.

A Less Competitive Landscape

Back in the 60s and 70s, when us baby boomers were growing up, the world was quite different.

The population was a third of what it is today, and if you happened to be a male, there was even less competition.

Job markets had fewer candidates, which actually tipped the balance in favor of the workers.

Economic Advantages for Households

In those times, not as many women participated in the workforce.

While it might have reduced the overall household income, it also reduced the need for expenditure on childcare, food, and general maintenance.

Thus, with higher relative incomes and lower outgoings, houses were often bought with only a year’s worth of income.

The Reality of Interest Rates

Now, I can hear you say that interest rates were higher back then, especially during our prime home-buying decades in the 70s and 80s.

But let’s take a look at the numbers: in 1985, the median US home cost $82,000. When we adjust this for median household incomes, it comes to $103,000.

The average mortgage rate was around 15%, or $15,000 per year.

In comparison, the median home today costs $430,000 with an average interest rate of just over 5%, or $21,500 per year just in interest payments.

Considering inflation, the two situations might seem comparable.

The Myth of Inflation

Contrary to popular belief, the inflation rates during our home buying years didn’t render these higher interest repayments meaningless.

While consumer price index inflation was high at 13.5% in 1980, housing inflation was relatively modest.

Why Housing is a Crucial Factor

Looking back, I realize that the high interest rates of our time actually helped us. Savings for home deposits grew faster with bank accounts offering 10% interest per year.

Moreover, these higher interest rates ensured that housing prices remained within reach.

Housing is a significant part of our lives, but it’s also an unproductive asset.

While a house provides shelter or rental income, it doesn’t really produce anything of value. When the value of housing inflates, it can put people out of homes and slow down economies.

The Housing Affordability Crisis and Social Mobility

As housing becomes more expensive, cities become less accessible to workers who can’t afford the skyrocketing rent.

This situation hinders social and geographical mobility, a trend highlighted by a 2020 Pew Research study.

It found that 52% of young American adults still live with their parents, bound financially to their parents’ location and facing difficulties in accessing better job opportunities elsewhere.

Generational Wealth and Economic Consequences

The concentration of wealth within a generation can have profound economic impacts.

Wealth accumulated by us, the ‘boomers’, is often tied up in private family businesses or property.

When passed on to the next generation, they often don’t have the knowledge, skills, or willingness to continue running these businesses, potentially impacting the economy negatively.

Intergenerational Wealth Problem

If and when wealth gets transferred to the next generation, it usually happens late in life.

By the time they inherit, they’re sometimes nearing retirement themselves, and are more likely to use the funds to support their own retirement rather than invest in the economy

. This is what economists call the “intergenerational wealth problem.”

Is It the Baby Boomers’ Fault?

As a boomer myself, I can tell you that blaming our generation for the current economic issues isn’t the way forward.

It’s crucial to remember that voting for our own best interests is part of democracy.

Besides, not all “baby boomers” had the same experience. There were many of today’s great experiences, that we missed out on in our youth.

China’s “lost generation” of baby boomers, for instance, spent their working life in a dysfunctional economic system, missing the benefits of the economic boom that followed.

A Look Back, But Not In Anger

In retrospect, the second half of the 20th century, our time, was a period of relative peace, burgeoning international trade, and an abundance of cheap energy, all contributing to significant economic growth.

We were fortunate to live in those times and some of us amassed considerable asset. However wealth concentration isn’t just a generational issue, it’s a systemic one that needs addressing.

Just as every generation blames the one before, we are no different.

The rather derogatory term, boomers, which is thrown at us, will no doubt morph into a different derogatory term, thrown at the upcoming generation, by their offspring.