"The younger generation are screwed, and the system is stacked against them"

[Brendan Burgess]

Very good article by Gerard Howlin in the Irish Times

Gerard Howlin: The younger generation are screwed, and the system is stacked against them

Expediency drives decisions on issues such as increased pension age and wealth tax, all of which would benefit the young

www.irishtimes.com

A plan to increase the age of eligibility had been in place for a decade. It was the policy in Government of first Fianna Fáil and then Fine Gael and Labour. It combusted instantly under political pressure. Sinn Féin had the last laugh and reaped the electoral harvest. But it is a cost that will bear heavily on the young all their working lives, have an impact on their old age and on the capacity of the State to provide for them

As you listen to political debate this week, think not on what they say, but on what they do. Two specific attacks on the prospects of young voters are the failure to increase the age of eligibility for an old-age pension and the refusal to countenance a property tax or a wealth tax based on property to fund local Government and redistribute advantage from the older generation to the younger.

 

[joe sod]

Another factor which is not politically correct to say is that the high rates of immigration which ireland now has benefits the old but not the young. The reason is that the workforce and economy is increased keeping tax receipts rolling in for now to pay for the pensions and provide the services for the old.it also increases demand for property which also hugely benefits the old.

However this works the opposite way for the young because it increases competion and prices for all the things the young need to buy . Also by the time the young get to pension age, well the migrants will also be reaching pension age and putting huge pressure on that aswell. That is where Europe is at now from the high rates of immigration during the 70s and 80s . Keeping immigration at very high rates to keep show on road is just unsustainable

 

[JimmyB99]

Not a bad article, Brendan but not a great analysis either.

A key failing is the lack of dot joining. For example, the surge in Sinn Fein popularity is due, to a reasonable %, on SF's capacity to capture the young voter. Other parties were then forced to abandon needed pension reforms intended to protect the young by future-proofing the system. It follows that the young, in buying the Sinners populism, have shot themselves, at least in part, in the foot. It would have been a better article if this point had been made.

Ireland may not be alone here. I'm not sure if people have been following events in France regarding pensions. Here's my take:
- Macron gets re-elected and is up-front of the need to reform the pension's system
- Macron then introduces the promised reforms........(to progressively increase the retirement age to 64 with all sorts of grand-fathering arrangements meaning that millions upon millions are unaffected by the changes)
- All hell break loose

In essence, the need for reform is again to do with the sustainability of the system. I have watched a good few interviews of protesting young people in the streets of Paris.........they seem to be completely blind that these reforms were designed for their benefit.

 

[NoRegretsCoyote]

I've said it before but the debate over 66 or 67 or 68 is not a very helpful one.

The system of a single rate paid from a single age is quite old-fashioned. Retirement is more of a process now than an event for a lot of people and there isn't a cliff edge where their income needs to be replaced by the state.

 

[michaelm]

I'd rather see a flexible State Pension age between 62 and 68. Maybe 100% rate @ 68 reducing 5% per year to 70% at 62 (adjusted for number of stamps also) or some such, whatever reduction is cost neutral relative to the 100% rate based on life expectancy.

 

[Silversurfer]

I'd rather see a flexible State Pension age between 62 and 68. Maybe 100% rate @ 68 reducing 5% per year to 70% at 62 (adjusted for number of stamps also) or some such, whatever reduction is cost neutral relative to the 100% rate based on life expectancy.

Should the age when the person started working be considered? A tradesperson would have started contributing before a person who completed a masters or phd.

 

[Purple]

Should the age when the person started working be considered? A tradesperson would have started contributing before a person who completed a masters or phd.

Yes, and possibly the work they do. A teacher or accountant can expect a longer working life than a roofer or bricklayer.

 

[Purple]

Very good article by Gerard Howlin in the Irish Times

Gerard Howlin: The younger generation are screwed, and the system is stacked against them

Expediency drives decisions on issues such as increased pension age and wealth tax, all of which would benefit the young

www.irishtimes.com

A plan to increase the age of eligibility had been in place for a decade. It was the policy in Government of first Fianna Fáil and then Fine Gael and Labour. It combusted instantly under political pressure. Sinn Féin had the last laugh and reaped the electoral harvest. But it is a cost that will bear heavily on the young all their working lives, have an impact on their old age and on the capacity of the State to provide for them

As you listen to political debate this week, think not on what they say, but on what they do. Two specific attacks on the prospects of young voters are the failure to increase the age of eligibility for an old-age pension and the refusal to countenance a property tax or a wealth tax based on property to fund local Government and redistribute advantage from the older generation to the younger.

I've been going on about those issues for years.
It's the sense of entitlement that older people have, including people my age, that gets to me most.

 

[michaelm]

Should the age when the person started working be considered? A tradesperson would have started contributing before a person who completed a masters or phd.

You can make an argument for that. If you're doing an apprenticeship you're earning so that's something . . and I guess many if not most students work part-time . . and perhaps someone with a Masters or PhD might pay more over their working life . . but it's hard to legislate for everything. I'd just like to see flexible cost neutral options. Also, it might allow more people to retire a little earlier and free up some jobs for younger people.

 

[joe sod]

David McWilliams has an interesting article on this topic on his website. Basically he says that demand for everything in the Irish economy is too high for the supply. The demand side is juiced up by massive FDI and the workforce to feed this is multicultural, young and modern. However the supply side is still the old ireland and is not able to supply this demand. He is sitting on a packed train that wouldn't be out of place in the 1960s, old diesel locomotive with old rolling stock. The population grew by 7.6% since 2016 and last year there were 32,000 international students in Ireland.
This is unusual compared to most developed countries as demand and supply are usually matched but we have juiced up our economy with massive foreign investment which has caused this big disparity between the supply and the demand of the economy.
At the end he only had a short paragraph about how to address this, to juice up the supply, that's easier said than done.
What he didn't say though is that maybe we need to reduce the demand by making it a bit less attractive for FDI and curtailing inward migration. The way the Irish state operates there is no way it can supply this demand

 

[DazedInPontoon]

Basically he says that demand for everything in the Irish economy is too high for the supply. The demand side is juiced up by massive FDI and the workforce to feed this is multicultural, young and modern.

https://twitter.com/x/status/1532143391802281984

 

[Purple]

At the end he only had a short paragraph about how to address this, to juice up the supply, that's easier said than done.
What he didn't say though is that maybe we need to reduce the demand by making it a bit less attractive for FDI and curtailing inward migration. The way the Irish state operates there is no way it can supply this demand

Money supply was increased massively after the crash in order to bail out the bank depositors and keep governments around the world solvent. Then the same thing happened during Covid; the money supply in the USA increased more in 2021 than it did during the entire Second World War. As @DazedInPontoon quoted, when money supply increases everything becomes more expensive. Labour rates haven't increased but money supply has more than doubled. That's why those who derive their income from their labour and don't hold capital wealth are poorer. That increasing money supply has caused the price of capital items to increase at the same relative pace.

 

[Marsupial]

It's the sense of entitlement that older people have, including people my age, that gets to me most.

Ditto.

Mind you, I can't wait for the free GP card and the free TV licence and the free units of electricity that I'll get when I turn 70 in 2025!
Do I need any of these perks? Absolutely not. But hey! I'm entitled to them!

And soon enough after that I'll need to start planning how to spend that extra tenner in my State pension when I turn 80!

And after that, it's only a matter of time before I'll be turning up at the Áras to collect my €2,500 Centenarian's Bounty from President Holly!

 

[Brendan Burgess]

What he didn't say though is that maybe we need to reduce the demand by making it a bit less attractive for FDI and curtailing inward migration.

Hi Joe

But you are suggesting it?

I agree that this heresy needs to be discussed.

In Dublin the demand for housing to buy and rent must be massively boosted by the employees of the tech companies and the companies servicing them. And they can usually afford it. Which makes it very difficult for anyone not on a very high salary.

Brendan

 

[Protocol]

@Purple,

it's tempting to link the recent rise in inflation to QE.

The ECB started QE in 2014, phased it out, then restarted due to COVID.

However, I asked a senior Economics prof (the type who might be on the news), and he stated the recent inflation of 2021-2023 is not due to QE.

 

[Protocol]

The main reason young people are worse off is housing.

So if two people aged 30 have jobs paying 40-50k in Thurles, Cashel, Ballinasloe / any provincial town, they are grand, as houses are somewhat affordable.

It's the cities where the problems are.

A modest 3-bed semi is 400k in parts of Galway city, the same type house is not far from 200k in many towns.

 

[Protocol]

@Purple

Here is a quote from Scott Sumner on the effects of QE. When CB buy huge amounts of financial assets, they pay for them by creating more bank reserves (liabilities of the CB).


"Paul Krugman developed the modern framework for thinking about liquidity traps. Krugman showed that a large injection of reserves into the banking system might fail to significantly boost inflation when the economy is stuck at the zero lower bound for interest rates. This possibility is not because large increases in the “money supply” (i.e., the broader aggregates) would fail to boost inflation. Rather, Krugman showed that a large increase in bank reserves would not even boost the broad money supply if the base money injection were viewed as temporary. Instead, banks would just sit on the extra excess reserves and the money multiplier would fall as the monetary base increased. As a result, the broader aggregates would be largely unaffected.

In the years after Krugman wrote the paper, major central banks did inject large quantities of base money into their economies on a number of occasions, and in many cases, these injections had relatively little impact on inflation or the broader money supply. Instead, the extra base money was mostly held as excess reserves, just as Krugman predicted."

https://www.themoneyillusion.com/wp-content/uploads/2023/03/Sumner_AlternateApproachesMonetaryPolicy_v1a.pdf

Page 16

 

[Gordon Gekko]

What about all the young people who work for the multinationals?

Or the 500 young people that KPMG on its own took into its graduate programme this year?

 

[Right Winger]

... I agree that this heresy needs to be discussed.
...
Brendan

I would indeed discuss this heresy. And immediately dismiss it. That's not how successful societies have built wealth. McWilliams (this time, for once) is quite correct. Demand is outstripping supply and, yes, something has to give. But rather than choking off demand (and growth, investment, trade and employment in its wake) we'd be far better off expanding supply. This means infrastructure of all types, but mainly transport and housing. This isn't particularly hard, but it does require resources. Unfortunately, successive Irish governments are all too well able to extract personal taxes, and immediately fritter the cash away on current spending. Capital expenditure goes to the back of the queue and this has resulted in years of underspending and massive infrastructure deficits. In turn, this depresses economic activity, and tax revenue follows.

The obvious alternative is to cut current spending, expand infrastructure, grow economic activity and the taxbase will follow. This will generate sustainable tax revenue and allow useful current spending (and, politicians being what they are, useless spending too) and even more useful tax cuts, further stimulating yet more growth. But instead, the political system incentivises immediate spending at the cost of storing up long term problems. Which eventually come home to roost - as the housing shortage now is. Ironically, the favoured populist solution is more short term current spending!

We'll never learn

 

[Delboy]

... we'd be far better off expanding supply. This means infrastructure of all types, but mainly transport and housing. This isn't particularly hard, but it does require resources. Unfortunately, successive Irish governments are all too well able to extract personal taxes, and immediately fritter the cash away on current spending. Capital expenditure goes to the back of the queue and this has resulted in years of underspending and massive infrastructure deficits. In turn, this depresses economic activity, and tax revenue follows.

You can't just turn on a switch to increase supply. We're at full housing construction capacity and will build less this year than last.
We've not only to build 50k houses a year + 250k backlog but there's also construction workers needed for:
- Myca redress scheme where thousands of houses have to be knocked and rebuilt
- Tiger Apartments redress. Announced last year, thousands of apartments that don't meet fire and safety standards have to be reconfigured
- Retrofitting accomm with low BER ratings which aims to complete tens of thousands of homes per year
- Asylum Seeker accomm centres
- Infrastructure such as rail, road, schools, hospitals, green energy generation

There are no army of Eastern Europeans coming like in the Tiger days to boost the construction workforce here already. We're too expensive for them to live here plus they can get work at home now. And when the war eventually finishes in Ukraine and the West is throwing billions into that country to rebuild it, there'll be no end to the work available there on the doorstep of many Eastern European countries.

Very few young people here have an interest in working in construction or learning a trade. The lure of the non-productive industry along the Dublin quays in their shiny buildings with free food and inhouse Barristas is too strong.

We need to have a debate on where we want to go and how what we're prepared to put up with to get there