The generation game and the 1 per cent

For a generation (fifteen years) or more I’ve been writing and rewriting the same piece about the silliness of the “generation game”, the idea that one’s year of birth matters more than class, gender or race in determining life outcomes and attitudes. But this is a zombie idea that can never be killed.

Stephen Rattner in the New York Times is the latest example, with a piece showing that US Millennials (those born after 1980) are doing much worse than previous generations at the same age, despite higher levels of education. Rattner notes the role of the recession, now nearly a decade old, but then jumps to the conclusion that it is the Baby Boomers, as a group, who are to blame. His only evidence for this is the long-discredited claim of a looming crisis in Social Security.

Rattner doesn’t present any evidence about the recent experience of non-Millennials, but his piece leaves the impression that the experience of doing worse than older cohorts at the same age is uniquely Millennial. So I thought I’d do his work for him, and dug out this graph prepared by Doug Short HouseholdIncomeByAge As can be seen, the group suffering the biggest loss, relative to older cohorts at the same age, are those households with heads aged 45-54 in 2013, a mix of late Boomers (for aficianados, this group is called Generation Jones) and early X-ers. But the main point is that median household income is falling for all groups except the 65+ cohort (mostly called Silents in the generation game). Part of this is due to declining household size, but (IIRC) household size has stabilized recently as forming a new household has become less affordable.

Rattner doesn’t mention, even once, the obvious and well-known explanation for the fact that median income is falling while mean income rises. This can only occur if the distribution of income is becoming more skewed, with the top tail (the 1 per cent) benefiting at the expense of everyone else.

If Boomers as a group have done no better than anyone else, can Rattner at least claim that it was Boomer mismanagement that brought the economy to its present pass. Not really. Here’s Time Magazine’s list of 25 people who made big contributions to bringing about the Global Financial Crisis. The top three (Angelo Mozilo, Alan Greenspan and Phil Gramm) are all Silents, as is the emblematic Ponzi figure Bernie Madoff, and, a striking omission, Robert Rubin. And that’s without even considering the financial deregulation of the 1970s, which set the whole process in motion. Inevitably, given that they constitute a large share of the adult population, there are plenty of boomers among the bit players in the list. Equally, given the preference of Wall Street firms for young hotshots, much of the actual work of designing and selling bogus securities was done by X-ers in their 20s and 30s.

The point here is not that one generation is more or less to blame than another. As I said back in 2000, most of what passes for discussion about the merits or otherwise of particular generations is little more than a repetition of unchanging formulas about different age groups. The people who caused the crisis were mostly born before 1945 because they were of the right age to hold powerful positions in the financial sector in the 1990s. But it was their membership of the 1 per cent that is what matters here.

50 thoughts on “The generation game and the 1 per cent

  1. “It is ludicrous to claim such people are rich. They are middle of the middle class maybe; not even upper middle class.”

    I don’t suppose it matters so much since it’s clearly just a definition, but if your wealth (and earnings for that matter in that group) put you into the top percentiles, you are clearly comparatively rich in a very rich country. It reminds of surveys looking at people’s perceived versus actual comparative wealth, where quite well off people think they are poorly off.

    I’m more worried about the younger generation not getting anywhere due to regressive subsidies, especially since it appears we are in for a tougher few decades going forward so they won’t get the same thing when they are old.

  2. @conrad

    Look, I agree that the current younger generation are getting screwed and they are getting screwed by the politics of neoliberalism. I also agree that there is a sense in which the boomer generation is very complicit in neoliberalism; in its development and its continuance. I am a boomer and unusual because instead of being self-rightous and self-justifying like most boomers are I am actually critical of my cohort and by implication of myself.

    You said “boomers are a rich group”. In a sense, they are, even the average ones. My own family highlights this whole dilemma. I am a boomer and my wife a late boomer. We benefited from all the growth from about 1970 to the GFC. We also benefited from the asset inflation housing boom. However, my kids now 21 (twins) face HECs debts, graduate unemployment dangers, impossible house prices and rents and so on.

    The boomer generation are extremely selfish, stupid and short-sighted and they are screwing their kids’ futures. The boomer generation does appear to have a cohort character in addition to class structure. They have been bought off in a sense by getting all the benefits shoveled onto themselves and all the future costs, poverty and climate change shovelled on to their kids. They have acquiesced to neoliberalism and voted for the neoliberal major parties, namely LNP and ALP. They (and I) are culpable.

  3. I think the confusion about Baby boomers and political positions might be because baby boomers so far are only a minority of the 65+ cohort. The first baby boomers were born in 1946, which means they will turn 70 next year. As baby boomers progressively occupy more of the cohort, we may see a change in voting patterns. It will be interesting to see.

    While I agree with a lot of what Prof Q says, there are observed differences in voting patterns in age cohorts, and my own small amount of qualitative research on women who had children in the 1970s and 80s did suggest to me that those born during the Second World War were in some ways more conservative than those born after.

  4. I think you are too hard Ikonoclast — I just see the current situation with wealth distributions as caused mainly by greed, and which groups arn’t greedy? Boomers were just smart/lucky enough to capitalize on it. It’s just the (hard) matter of redistributing stuff, so things like housing ownership doesn’t end up like a hereditary peers system, even if people don’t like what that means.

    For example, in terms of positive things, the boomers laid the foundations for (or at least let happen) a lot of good things too — it’s clearly better in any number of ways to be female, gay, and more or less any non-white group these days than back then. This is the majority of the population. In addition, whilst people might worry about inequality and wealth distributions, those previously oppressed groups are more or less free to do what they want now, including make money and get good jobs. So even if inequality indices are worse these days, some groups have moved from always being unable to participate in society in many ways to being able to participate and this is clearly a big achievement.

  5. @conrad

    Fair enough. The one final issue to me is an economic system (which of course entails an ownership system) which needs major redistribution via taxes and welfare. If the system is imbalanced or biased in its primary allocation of wealth and income before redistribution then that primary bias needs correction. It is always better to take the bias out of an engineered complex system rather than leave the bias in and have to steer against it. That is inefficient. The economy is in essence an “engineered” complex system meaning designed and built by humans. We can use central command mechanisms (state directions) or distributed command mechanisms (markets) or any hybrid thereof. What we should stop doing is pretending we can’t control it. We could control it with the correct political will and political economic theory.

    We can’t control this system because we have let or aided a mixed central command-distributed command system (the mixed economy) turn into another form of distributed command, namely corporate-oligarchic command in the main with badly impaired governmental and democratic command.

  6. It is always better to take the bias out of an engineered complex system rather than leave the bias in and have to steer against it.

    This is simply not true. Yachts are designed with a steering bias to windward because steering against this bias makes them faster.

  7. @Ikonoclast

    I am a boomer and unusual because instead of being self-rightous and self-justifying like most boomers are I am actually critical of my cohort and by implication of myself.

    Quoting Michael Flanders: ‘… and clever and modest and misunderstood.’

  8. Who is Michael Flanders?

    I think Ned Flanders has better quotes and indeed The Simpsons provides us with so many wonderful vignettes of the variety of relationships that baby boomers have with their millenial children.

    Homer quote:

    “Son, if you really want something in this life, you have to work for it. Now quiet! They’re about to announce the lottery numbers.”

    There is a 14 year gap between my oldest child a generation xer – he’s over 40 – and the youngest, a millenial in his mid 20’s.

    The gen xer has done very well, climbed the ladder to a 6 figure salary, overseas travel as part of his work, pic on the front of the company brochures etc, while youngest son has a dead end part time job and is studying psych part time and just drifting drifting waiting for the world to turn and make room for him.

    There was an exchange between these two that was interesting. Number one son says to youngest son, when are you going to get a good job and earn some money? Youngest son says probably never, I’m going to learn how to do things for myself so I don’t ever need a real job.

  9. @Collin Street

    What is your source for this claim ? A consideration of the physical forces involved suggests you are incorrect. If you have a steering bias this indicates the rudder will not be set parallel to your direction of travel and will be generating extra drag. This extra drag must reduce speed.

    This article on striking balanced helm indicates that dinghy racers balance the boat for speed including using balanced helm.

    http://www.sailingworld.com/how-to/striking-balanced-helm

    Quote: (In referring to a photo.)

    “1. Sail trim: The boat is balanced by easing and trimming the sails.
    2. Rudder Angle: With everything in balance (crew, sail trim, and heel angle), the rudder should trail freely behind the boat without drag; note the straight tiller and even exit of the wake.
    3. Crew Position: The crew is at maximum hike.
    4. Heel Angle: The boat is flat, and the sails are powered up, a perfect setup for the flat water and wind strength.”

    On large, high speed yachts the forces and effects might be a little different. I can imagine that it might be possible that at the margins a slight rudder angle might create turbulent flow which reduces drag: as I say, “slight” and “at the margins”. However, one would need to see reputable sources about this.

    What I am referring to is gross bias in the system which requires gross “steering” effort or gross corrective effort of some kind. A system cannot be efficient when it requires gross corrective effort as capitalism does for the gross income and wealth inequalities it creates.

  10. @J-D

    Oh, Lord, it’s hard to be humble
    When you’re perfect in every way…

    Mac Davis – It’s Hard To Be Humble Lyrics.

  11. @J-D

    More seriously, if something happens on your watch through negligence, inaction or mistakes of judgement then you must bear some of the responsibility. Neoliberalism happened on the baby boomers’ watch. The baby boomers’ cannot claim “no responsibility”. Nor can they be sheeted with all the responsibility. There are many other deep-seated factors at work.

  12. Ian Verrender’s article on the ABC sums up the current position very well;

    http://www.abc.net.au/news/2015-08-10/verrender-under-30-and-out-of-luck/6684382

    Now from my point of view the key question is this. Is this class war or generation war? My answer is that it is both. It is class war by the 1% against the rest. It is also generation war by the middle class and upper class baby boomers against the young (those under 30).

    The system is clearly being run in favour of established upper 1% wealth. It is also being run in favour of the late middle-aged (baby boomer) middle class. There is labour arbitrage and also what one might at a stretch call “conditions arbitrage” and “subsidy arbitrage” being practiced against the young under 30s and in favour of the baby boomer generation.

    As always neoliberalism works by wedge politics, differential treatment and selective compensation as a form of vote-buying. The young are at the pointy end of copping this wedgie. New measures are introduced which affect the young and are not applied to the mature (or were not applied when they were young). In this way, neoliberalism favours and cushions older cohorts to retain their vote while implementing the tough new measures for the young.

    The long game here is that the changes applied to the young lower class and young middle class will roll through society as they mature and the retained privileges for the mature and old lower class and middle class will die out as those generations die out. In this way, neoliberalism rolls new harsh measures through society. The young lower classes and middle classes are inexperienced, poor (or poor on their own account), vulnerable and malleable. They are the easy target. They can be molded (neoliberalism thinks) to have lower expectations, to comply meekly with neoliberal demands and remain the obedient disadvantaged for life once trained into that role.

    Middle class baby boomers who can’t see this phenomenon happening can’t see they are selling out their children for their own temporary advantage.

  13. David Irving

    Thank you. That is funny and clever and yes the “clever and modest and misunderstood” was there.

    I have never before seen this person but I have met, in the past an old bloke who would say odd things like this Flanders does, and I could never tell when they were serious or not. 😦

    and OMG did he really say about the Welsh people?

    “Middle class baby boomers who can’t see this phenomenon happening can’t see they are selling out their children for their own temporary advantage.”

    The ones I know are seeing, not that they are selling out their kids by their support for capitalism, but they are seeing that things are not working the way they were told they would. Several families I know of have gone without stuff to send their kids to private schools and it has not worked the way Howard told them it would; the old boys network does not extend to those who really don’t belong in that class and they are not getting ahead the way they should be.

    George Monbiot makes a case for the idea that it might be good for us and our kids if we stop aspiring for our kids to be rich and climb that ladder. He says;

    “We know that our conditions of life are deteriorating. Most young people have little prospect of owning a home, or even of renting a decent one. Interesting jobs are sliced up, through digital Taylorism, into portions of meaningless drudgery. The natural world, whose wonders enhance our lives, and upon which our survival depends, is being rubbed out with horrible speed. Those to whom we look for guardianship, in government and among the economic elite, do not arrest this decline, they accelerate it.

    The political system that delivers these outcomes is sustained by aspiration: the faith that if we try hard enough we could join the elite, even as living standards decline and social immobility becomes set almost in stone. But to what are we aspiring? A life that is better than our own, or worse?

    http://www.theguardian.com/commentisfree/2015/jun/09/aspirational-parents-children-elite

  14. @Julie Thomas
    I’m glad you enjoyed it. It’s a long time since I’ve listened to Flanders and Swann, but they were part of my childhood, along with Tom Lehrer.

  15. > A consideration of the physical forces involved suggests you are incorrect.

    I mean, you can’t credit people, can you. You obviously know nothing about the topic: someone tells you something that doesn’t gel with the nothing you do know, and immediately you conclude that they must be wrong and your knowledge — which you know to be zero — must be more reliable than what they’re telling you.

    This isn’t in the books they give to newbies, because the explanation — see below — is kind of technical and requires a decent knowledge of the theory and practice of sailing. You could try Frank Bethwaite’s High Performance Sailing.

    [sailboats develop lift from the flow of water over the underwater parts of the hull. They need this to counteract the lift from the wind: you need the flow discontinuity between the water and the air to get forward or sideways motion, which is why balloons don’t have sails. We can divide the boat into three sections for the purposes of generating lift: the bulk-of-the-hull, the keel/centreboard, and the rudder. All parts of the boat are symmetrical left-right, which means they can’t develop lift from camber, they have to have a non-zero angle of attack. The hull and the centreboard/keel are fixed relative to each other, which means that for the keel/centreboard to develop lift the boat needs to be moving slightly sideways through the water. This gets you your lift, from both the hull and the keel, but the hull has a very low aspect ratio and lift from the hull means a lot of induced drag. The _rudder_, on the other hand, can pivot, and it can take a much better angle of attack: if you generate more lift from the rudder you reduce the lift the keel needs to generate, reduce the angle the boat needs to point [“leeway angle”] and reduce the induced drag from the hull. But “bigger angle of attack” on the rudder means “pointing the steering away from the wind”: systems are systems and rarely do elements solely have one effect.]

  16. The data shown, Doug Short’s data, is US data, which is fair enough since Prof. J.Q. was criticising a US article – Stephen Rattner in the New York Times.

    However, I would ask do the data as sliced and diced disguise or hide some trends?

    For example, Doug Short at his site says “The data we’re analyzing is the median household income the age brackets for the heads of household.” (sic).

    This would mean that the delay in forming households by the 15-24 age bracket and 25-34 age brackets caused by high youth unemployment, student debt and high house prices (this last in Australia at least) would affect the data. This would be true if household formation is being so delayed. We will come back to that.

    Now, if first job is being delayed (high youth unemployment) and young adult household formation is being delayed, where do these young adults go? Answer, many still remain at their parent’s home not bringing in any earned income to improve household income. (Do these stats count welfare income I wonder?) The relative few that get good jobs early AND manage to form households early are somewhat atypical for the age group being income earners AND heads of households: or if not atypical, their household chart plot still excludes many non-earners of their age group. These excluded young people are hidden in a sense in the household graph plots of their parents as householders. Their increased occurrence and poverty is not reveaked or measured by this way of slicing and dicing the data.

    I hope people can see what I mean. I have explained it as best as I can.

    There are plenty of data around to show that an increasing percentage of the young adult cohorts are staying living with parents.

    http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/sonhr14-color-full.pdf

  17. @Collin Street

    This is a pedantic argument at the margins compared to my original and clear implication of a system which requires excessive correcting because of a severe design imbalance.

    In your case, on a steady heading, on a well-designed and well-trimmed yacht, the rudder is being used for trim for underwater lift and not for excess steering input to correct an undue, overall design imbalance.

    In argument as in sailing, one can always change tack if one is heading for the rocks. 😉

    My argument is that capitalism has a severe design imbalance which excessively biases it towards generating large inequalities. Any system which generates such large imbalances will not operate as nearly as efficiently as might otherwise be possible. It will take undue effort and create undue drag (to extend the analogy) to correct large built-in biases which come from bad design. I am talking about grossly inefficient biases outside the trim envelope.

  18. In your case, on a steady heading, on a well-designed and well-trimmed yacht, the rudder is being used for trim for underwater lift and not for excess steering input to correct an undue, overall design imbalance.

    If you’ve made a statement, “X is bad”, and you’re getting questioned, it’s very, very tempting to swap out “X is bad” and swap in “undue X is bad”.

    Tempting, but it’s a mistake: “undue X is bad” is a tautology, because the word “undue” explicitly and precisely means “enough of it that it’s a Bad Thing”. “[enough X that it’s bad] is bad” is certainly a true statement — tautologies always are — but it’s not a useful one. If you were talking about X, and suddenly you start talking about undue X, it’s very, very likely that your statements thereby become filleted of all meaning and utility.

    Here’s your initial statement:

    It is always better to take the bias out of an engineered complex system rather than leave the bias in and have to steer against it.

    It’s pretty absolute. Uses “always”, talks about “biases” without any indication that they’re large [to me, and I’d argue to you until you got caught, a “bias” can be quite, even vanishingly small]. You’ve walked away from it quite a way, in a way that leaves what you are talking about practically devoid of denotative meaning.

    People can see this, Ikon, even if you can’t. The man who runs away from every battle is certainly unconquered, but it’s not an achievement worth boasting over.

  19. @Ikonoclast

    ‘On your watch’ does not mean ‘while you are alive’ — that’s true of the original literal meaning of the expression, and it’s ludicrous to extend the figurative meaning in the way you appear to be doing. You don’t bear part of the responsibility for an event solely because it happened during your lifetime.

  20. @David Irving (no relation)

    Mine too: when my parents died I inherited both a boxed set of the complete Flanders and Swann on CD and a boxed set of the complete Tom Lehrer on CD.

    It’s only more recently that I learned that Michael Flanders was also an early disability rights activist (although it’s consistent with his introduction to the Gnu Song).

  21. @Collin Street

    Okay, let’s take my original statement without qualification. Let us take it entirely literally.

    “It is always better to take the bias out of an engineered complex system rather than leave the bias in and have to steer against it.”

    Yes, it would have been better if I had added some caveats or qualifications. In context, it was clear I was talking about contemporary capitalism’s (neoliberalism’s) generation of large scale inequalities; a large scale bias.

    To examine what I said more carefully, remember I referred to a bias which one would “have to steer against”. By possible implication, I had excluded biases which one does not have to steer against.

    If there is a bias which does not have to be steered against then this is a bias which (presumably) is designed into a well-engineered system because it counters (a) another existing bias in the system, (b) a counter-force or bias in the environment around the system or (c) it serves another purpose in the system (and is subject to cost/benefit trade-offs).

    In the case of (a) and (b), if the bias precisely counters another bias or force, in the system or in the environment then the bias does not have to be “steered against”. It is already balanced in essence as self-steering.

    In the case of (c), I can think of an example of designed bias which has to be steered against in some situations though not in others. The example is toe-in. (Of course, toe-in interacts with camber and a number of other variables but we can ignore this for now.) Toe-in assists straight-line stability (at the cost of other factors like slightly increased tire wear). When going in a straight line or very near straight line (arguably more than 50% of the time), toe-in assists steering and reduces steering effort. It will marginally increase the steering effort for making turns.

    In these above examples of (a),(b) and (c) , these biases do not “have to be steered against” at all or at least not for the majority of the time.

    My literal statement is left looking good in this context. By implication only biases which have to be effort-fully and inefficiently steered against (without other worthwhile benefit) are included in my statement. Also biases which require a relatively small effort to steer against but which confer stability or other performance bonuses are also by implication (to any sensible person) not included in my statement.

    Summing Up.

    Sure it would have been better to add caveats to my original statement. But in context, I think my thought was clear and supportable overall. But you took umbrage to my reply and made it personal. I said “A consideration of the physical forces involved suggests you are incorrect.” This was a fairly mild statement albeit strictly incorrect without caveats. “Suggests” is not a particularly strong word. It even leaves open the possibility that one’s suggestion is incorrect. It was not an insulting statement as such. You immediately progressed to insults after that point.

  22. But in context, I think my thought was clear and supportable overall.

    a: why do you think that your thoughts are clear when it is abundantly obvious that, in context, I did not interpret your words that way? I mean, unless you’re telling me that my confusion must be faked and that I’m posting in bad faith.

    b: it’s supportable because it’s tautologous and thus automatically correct. That’s what “extreme examples of X are” becomes, pretty . Also utterly devoid of any content worth communicating [a signal that cannot change cannot convey any message: a tautology is always correct and thus ipso-facto devoid of meaning].

    I could unpack this further, but I’ve wasted enough time already. I do have to apologise: I had assumed that you had observations about the world that you wished to communicate, and that there was a purpose to your interactions beyond your self-gratification. For this clearly-false assumption I apologise, and I assure you I will take every step that occurs to me to avoid making this mistake again.

  23. @Collin Street

    I need to be much more careful with my rhetoric, my analogies and the need for caveats on my statements. I certainly concede that.

    The substantive point to my mind is whether one considers capitalism an efficient and fair system or not.

  24. This is an interesting article if perhaps too long and unfocused. I don’t say I agree or disagree with the article. I don’t say I endorse it or dis-endorse it.

    http://www.theguardian.com/books/2015/jul/17/postcapitalism-end-of-capitalism-begun

    The point of view is roughly that;

    “Without us noticing, we are entering the postcapitalist era. At the heart of further change to come is information technology, new ways of working and the sharing economy.”

    The advent of Ethereum would seem to be a key development if the thesis of the above article has any legs at all.

    “Ethereum is a blockchain-based cryptocurrency that includes a virtual machine featuring stateful user-created smart contracts and a Turing-complete contract language. Ethereum uses its currency unit, Ether, as payment to incentivise a network of peers to provide computational services defined by the smart contracts deployed on the blockchain.” – Wikipedia.

    Ethereum is not just a crypto-currency as the quote above illustrates. J.Q. has (correctly in my opinion) negatively criticised the pure crypto-currency phenomenon in previous posts. However, does Ethereum represent something qualitatively different because it goes beyond the mere crypto-currency phenomenon?

    I put all the above as questions seeking answers or views. I make no claims. Perhaps, Prof. J.Q. could address Ethereum and related issues in a post. He has certainly posted before on issues related to the networked economy, the information economy and a new commons or shared economy (if I have got that summary right).

    Footnote: This doesn’t refer to generations but it does refer to the 1% and developments which might affect wealth accumulation (or otherwise) by the 1%. There is no topic currently running on this issue. I hope J.Q. might post on it soon.

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