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A response to Judith Sloan’s ‘Lets not fall for this myth of generational justice’

Updated: Apr 2, 2020

Judith Sloan's original article is available here.

Intergenerational equality is a new phrase for an old idea, that young people today should have the same - if not better - opportunities as a young person 40 years ago. Previous generations of Australians have largely succeeded in leaving Australia a better place for the next generation. But for young people today, the context has changed. Judith Sloan’s dismissal of intergenerational inequality is a perfect example of the ever widening gap between the generations in Australia. While school children protest climate change, baby boomers protest franking credits. As the youth mental health and homelessness crisis worsens, boomers worry about their tax concessions. Intergenerational inequality critiques are useful because they provide a lens to ensure policy decisions aren’t benefiting the wellbeing of one generation over the other. We have designed our economies, institutions and communities for three or four generations living and working at a time. But due to longer life expectancies we have the largest number of generations living together than ever before. This has implications for how we structure the tax system and spend government money. Sloan rightly points out that removing the seniors and pensioners tax offsets and exemptions to the medicare levy don’t go far enough to tackle intergenerational inequality. However, she pulls off a bait and switch, claiming intergenerational inequality is a myth; supposedly because Grattan once advocated for ‘minor’ reforms and the larger reforms weren’t electorally successful. This does not invalidate the need for intergenerational equality itself. Sloan starts by noting that the generational bargain has always existed in society. Older generations care for the young and when that generation can no longer work the young care for them. But in Australia two demographic factors are undermining this bargain: a larger ageing population and due to lower birth rates a smaller pool of young people to support them. My friends and I are signing up for a very different generational bargain than Judith did 40 years ago. In her article Sloan also misrepresents Grattan’s research. Their research does not define the problem as differing wealth positions of young vs old, as she suggests, nor does it advocate blanket taxation of people irrespective of age as a solution. Rather Grattan’s research identifies that the wealth being transferred from the working young to the retiring old in Australia is increasing. The number of working-age Australians for every person aged 65 and over fell from 7.4 in the 1970s to 4.4 in 2015, and is projected to fall even further. This means young people have to pay more tax. This is exacerbated by tax concessions that mean older Australians contribute a lot less than they once did. Retiree tax concessions are considered legitimate because of deeply held notions about the elderly as the “worthy” poor. But with an increasingly dim economic outlook can the nation let wealthy retirees hide behind the image of the frail old lady with the walking stick when the economic facts don’t back it up? The cost of ageing baby boomers will surpass that of Medicare in the next nine years. They need to pay their way in retirement (by paying a fair share of tax) or risk passing the buck to their grandkids. Some boomers are protecting their interests by claiming their whole generation deserve benefits that only a small proportion need. Sloan herself acknowledges increasing housing costs but argues that the biggest barrier to home ownership is saving for the deposit – the tired “avocado toast” myth that young people aren’t saving enough to afford a home. Research from economists at Alpha Beta note Millennials are 30% more likely to save regularly than their parents. Sloan’s “bank of Mum and Dad” may prevent some young people being left behind but a generation more reliant on inheritances entrenches problems for children of less well-off parents. Millennials should recognise that baby boomers didn’t ask to be born into a time of unprecedented growth. Older Australians may not realise their boomer privilege but generational envy isn’t a good look for us millennials. In their position we too would have worked hard to take advantage of the opportunities free education, wage growth and affordable housing provide. What we can do is ask our elders to move beyond glib cries of “bunkum” or avocado toast and engage in the difficult and uncomfortable conversations we need to have on how we tax and spend to care for our elderly without limiting the prosperity of our young.

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