Intergenerational fairness is a long term issue, not a short term one

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The idea that providing a decent income to pensioners is an example of intergenerational unfairness depends in large measure on the assumption that people will take a very short term view of the economics. The argument starts from the assumption that working people lose out by having to pay for pensions of those who have retired. Even assuming that the economic basis of that (i.e. that all the wealth created in society belongs only to those in work and those who own the capital) were correct, it’s still far from true. If the triple lock means that pensioner purchasing power rises at a faster rate than the purchasing power of those still in work, the wonders of compound interest mean that those who benefit most from the triple lock will be those who have not yet retired and are unlikely to do so for some time. The corollary is equally simple: if the purchasing power of pensioners is allowed to progressively decline instead, the biggest losers won’t be today’s pensioners, but those who retire in the future. Anyone currently in work who falls for the argument for reducing the proportion of GDP spent on pensions will give them a boost in the here and now is implicitly accepting that their own position as pensioners will be even worse than the position of today’s pensioners.

The questions which the politicians and economists seem unwilling to debate are simple ones: what is the ‘right’ level of the state pension in relation to earnings, how do we get there, and what mechanism should be used to maintain the relationship thereafter? At the ‘right’ level, there should be no need for anything like the triple lock; a straightforward mechanism for maintaining parity will serve the needs of all current and future pensioners. The reason for avoiding the question of the ‘right’ level is also very simple: the answer is likely to be along the lines of ‘rather more than currently being paid’. To the extent that they are willing to debate the issue at all, the debate normally starts with a question about how much pensioners ‘need’ to live on. It’s a question which carries within it a whole series of subsidiary questions and assumptions about the life style pensioners should be ‘allowed’ to lead. And the supplementary question raised is ‘what about those pensioners who get other income on top of their state pension’, but that’s an issue which a progressive taxation regime should deal with.

A properly working economy, serving the needs of the society in which it operates, should be able to provide a decent standard of living for all, without forcing people to reduce their standard of living when they hit retirement age. It is the neoliberal economics of the UK’s main political parties which perpetually seeks to divert attention away from that. To know why, we have only to ask the question which Roman senators were encouraged to ask: “Cui bono?”