Demographics

Why Young and Old Americans Have More in Common Than You Think


Why Young and Old Americans Have More in Common Than You Think

Photograph by Norbert Huettermann/Corbis

The catchphrase of the public policy moment seems to be intergenerational warfare, a conflict over scarce resources waged between aging boomers and those 35 and younger.

Case in point: Esquire. The magazine ran an article in April on “The War Against Youth,” with a subtitle that said it all: “The recession didn’t gut the prospects of American young people. The Baby Boomers took care of that.” Washington Post columnist Matt Miller in June joined in the generational condemnation with “Young Americans Get the Shaft”: “The question isn’t whether such talk will stir up generational war. That’s already being waged—and you’re losing.” That same month David Leonhardt, Washington bureau chief of the New York Times, highlighted a new generation gap (for those with fading memories of the ’60s) in “Old vs. Young.” “If there is a theme unifying these economic and political trends, in fact, it is that the young are generally losing out to the old,” he wrote.

What’s behind the incendiary charge that greedy boomers are shortchanging a younger generation? A major culprit is fearsome projections of the federal budget deficit and debt in coming decades. Social Security, Medicare (and Medicaid) account for more than 10 percent of gross domestic product at present, and with the aging of the massive baby boom generation these three programs alone are widely projected to absorb nearly 20 percent of GDP by 2050. The scale and scope of current and future financial commitments to the elderly mean there’s little left for investing in younger people. Instead, they’re on their own, saddled with too much debt (college loans, for example) and miserable job prospects (unpaid internship, anyone?)—or so we’re told.

For a variety of reasons the charge that a “kids vs. canes” battle over scarce resources is raging throughout the country falls apart. Instead, what’s striking is how similar are the experiences, challenges, and opportunities confronting both aging boomers and young adults.

First, let’s look at the intergenerational warfare charge. The idea typically emerges during tough economic times when the economy stumbles, federal finances deteriorate, and state and local governments cut back on their budgets. At least some of the immediate fiscal pressure will be relieved when the good times roll again, notes Dean Baker, co-director of the Center for Economic & Policy Research in Washington, D.C.

There are other choices for allocating federal spending. For example, defense spending and Social Security each account for some 20 percent of the federal budget. Perhaps the cuts should come out of defense? Don’t like that idea of reducing the defense budget? How about this change in Social Security? The trust fund is forecast to be exhausted in 2033. (That sounds much worse than it really is since Social Security’s deficit as a percent of GDP in a growing economy over the next 75 years is a mere 0.9 percent.) Raising the current ceiling on the Social Security payroll tax from $110,000 to $250,000 would extend the date of trust fund exhaustion by some four decades, according to the Congressional Budget Office. No to a higher cap on Social Security? O.K., let’s change the fiscal frame from intergenerational equity to intragenerational equity. Hike taxes on the well-heeled and invest the money in disadvantaged youngsters, less-skilled, underemployed, and unemployed younger workers.

The specific change you favor is beside the point. What matters is that there is no good reason for pitting younger Americans against aging Americans in the pursuit of a more conservative fiscal path for the federal government. Plenty of alternatives are available to policy makers. “Young people aren’t blaming their grandparents for the bad economy,” says Jill Quadagno, sociologist at Florida State University and senior policy adviser to President Clinton’s 1994 Bi-Partisan Commission on Entitlement and Tax Reform. “If anything, parents and grandparents are supporting their children and grandchildren.”

Indeed, in many respects aging boomers and the younger generation are united in shared experiences rather than divided. The young eventually age, so that both the old and the young have a stake in a strong retirement and Social Security system. The main factor behind long-term federal budget deficits, as well as state and local government fiscal pressures, is health care. Health-care reform is critical for everyone from the 27-year-old worker to the 65-year-old retiree on Medicare. The U. S. pays more than twice as much per person for health care as the average for other wealthy countries, and if America’s health care costs were comparable to costs in Germany, Canada or elsewhere, the U.S. would be looking at long-term budget surpluses, not deficits, calculates Baker.

The recession was harsh on the young and old alike. Layoffs were less common among older workers with years of service with their employers. From May 2008 to March 2011 the monthly unemployment rate for workers 25 to 34 was 9.4 percent, according to an analysis of the recession by Richard Johnson and Barbara Butrica of the Urban Institute. The comparable figures for workers 50 to 61 years old was 6.1 percent and for those 62 and over, 4.1 percent. Unemployed adults in their 50s, however, were about a fifth less likely than their younger counterparts to become reemployed each month, and those 62 and older about half as likely. Wage losses were particularly steep for the 62 and over unemployed when they got a new job. Their wages were barely half the median earnings of their previous job, compared with an 11 percent drop for younger workers.

Of course, that’s the past. Young people are eager to leave troubled times behind and launch their careers. They are typically idealistic, eager to land a job that offer both income and meaning. The same desire motivates aging boomers. The leading edge of the baby boom generation has gotten the “work longer” message, well aware that their decimated 401(k) savings won’t allow them to retire. Yet boomers aren’t only struggling to find an income. Time is running short, and many boomers want work that also offers purpose. “Older boomers are well aware they have a shorter time to live, and this realization affects their values,” says Marc Freedman, founder and chief executive of Encore.org, a nonprofit organization working to promote second and third careers among boomers. “They want work that gives meaning.”

The interests of 25-year-olds and 65-year-olds are converging. Each has a large stake in the other generation’s success. There are many worrisome divisions in our nation. Among them are the economic prospects of college-educated workers and workers without a college diploma. The 20 percent vs. the 80 percent. What doesn’t belong on that list of concerns is a divide between the young and the old. It’s time to lay that canard to rest.

Chris_farrell
Farrell is contributing economics editor for Bloomberg Businessweek. You can also hear him on American Public Media's nationally syndicated finance program, Marketplace Money, as well as on public radio's business program Marketplace.

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