In yesterday’s post, I referred in passing to mathematically-challenged individuals who struggle to understand the difference between something which affects the average person and something which affects all people. The context was assessing economic success, but that isn’t the only example that I can think of. One which comes up regularly is the comparison of school spending per head between England and Wales. It’s true that the ‘average’ gap is around £600 per head, but that gap is regularly misrepresented as meaning that all Welsh pupils are suffering because the expenditure on them is £600 less than it would be in England.
This story (which has appeared in a variety of publications in one form or another) shows another example of the same problem. It is certainly true that, as people born in the ‘baby boom’ years (including myself, of course) reach retirement age, they are finding themselves better off, on average (that word again), than pensioners have ever been before. And it seems that that means that the average (or more accurately in this case, ‘median’, which is not the same thing although the principle is much the same) pensioner income, after housing costs are stripped out (a far from insignificant adjustment, as the BBC Reality Check team notes ) can outstrip that of working people. That in turn has led to some people calling for either increased taxation on pensioners, or at the least, an end to the ‘triple lock’ basis for increasing pensions each year.
But ‘average’ and ‘median’ are not the same as ‘all’. Whilst many newly-retiring people in the relevant age groups do indeed receive occupational pensions as well as the state pension, that isn’t true for all pensioners. There are still plenty, even amongst those retiring now, for whom the state pension will be their only, or main, source of income post retirement. And there are many still-living pensioners born before the relevant period who are still wholly dependent on their state pension. Using an ‘average’ or a ‘median’ for the population as a whole in deciding the future of the triple lock would disproportionately impact those groups most dependent on the state pension. It’s a poor basis for decision. (And, as an aside, it’s also worth remembering that, because of the power of compounding over the long term, the chief beneficiaries of the triple lock aren’t today’s pensioners, but those who are yet to retire in the future – the very people who are being encouraged to oppose it.)The organisation producing the latest report, the Resolution Foundation, describes itself as “a non-partisan and award-winning think-tank that works to improve the living standards of those in Britain on low to middle incomes”. It’s a worthy aim in principle, but I wonder whether how genuine they are in that objective. To me, an attempt to achieve that aim by reducing the rate of increase in the state pension looks like shifting income around between two groups of people in the low and middle income group, whilst ignoring the huge disparity between both of those groups, on the one hand, and the group with the highest incomes (regardless of age) on the other. Whose interests are really served by encouraging low and middle earners in employment to think that their problem is caused by the share of income going to low and middle income pensioners rather than by the share going to the very rich?