Keith Rankin: The Politics of Generation

Thursday, 15 September 2005, 10:22 am
Opinion: Keith Rankin

In this election campaign, Labour has been playing the politics of generation. Specifically, Labour seeks the votes of the young, those aged 18-35.

This is a dangerous game to play. Appealing to one generation alienates its predecessor generation. Labour's two key promises are interest-free student loans, and increased child tax credits to many working families. The student loan policy will most appeal to 18-25 year-olds. The policy of more generous tax credits will most appeal to people aged 25-35, who either have pre-school children or have yet to start their families. Many in this group would also substantially gain from the student loan windfall on offer.

The generation ahead of them, however has had it tough. Those born in the 1960s found that the top jobs had been taken by their elders, the classic baby boomers. Today's 40-somethings incurred huge debt-servicing costs in the 1980s, and, unlike their predecessors, did not get the windfall benefits that high inflation confers on debtors.

Those born in the 1960s died in larger numbers as young men. They were the main victims of the long recession of 1987-92. They depended on two-incomes, and they put off having children. Those with low incomes who had children, unlike their predecessors, had to pay market rents on state housing. Those born in the late 1960s and early 1970s were the first to incur substantial student loans.

The 1960s'-born faced the full force of the 1991 Employment Contracts Act, which meant that they generally experienced falling real wages. They were also disadvantaged by the introduction of GST (goods and services tax) in 1986 (raised in 1989), a substantial increase in average rates of income taxes paid by young workers from 1986 to 1996, and the 1991 benefit cuts.

Now, having paid off their student loans, it is the next generation which will pay no interest if Labour wins. The 1955-70 born generation generally received minimal assistance with childcare costs, and received no paid parental leave. The family support tax credits that they did get were heavily eroded by inflation. By now, while they still have children, gross family incomes will generally be too high for them to gain from Labour's "Working for Families" targeted tax-relief programme.

Not surprisingly, for this generation, many marriages and de facto partnerships broke up. They were caught by the 1991 Child Support Act, creating substantial additional financial burdens on 1960s'-born men. Fathers of this generation could often not afford to participate in the raising of their children, even if they had legal access. Access to children was increasingly denied to fathers of this generation, as society was increasingly sensitised to domestic violence. Reforms to the Family Court system will mainly benefit the post-1975 generation.

This post-1975 born generation, those now in their 20s, has had it much easier than their immediate elders. Today's 20-somethings will reap all of the policy benefits that, if introduced much earlier, would have been greatly appreciated by those now aged 35-50.

This new generation, sometimes called "generation-Y", has had it lucky so far, and will continue to find life a breeze. They will receive the benefits denied to the 1960s'-born. But that's not all. As a baby-bust generation, those in their 20s are low in numbers. They find it much easier to get a job than the 1960s'-born. And they find it much easier to negotiate wage increases.

There is a name for the general fluctuation in fortune faced by different generations: it is the "Easterlin effect", named after the American demographic historian Richard Easterlin. He hypothesised the members of large (ie boom) generations would be disadvantaged (eg longer work hours, more illness etc) throughout their lives because they would face heightened levels of competition from others in their age cohort. Conversely, members of bust generations (eg those in their 20s and those in their 70s) were favoured at all times of their life cycle.
Empirical evidence substantially supports Easterlin, but with one proviso. Leading edge baby-boomers tended to lead fortunate lives (eg those born in the 1940s), whereas trailing edge baby-boomers (in NZ the 1960s'-born) have been the most disadvantaged.

These natural generational inequalities are commonly reinforced, unintentionally, by government policies. Governments are forever fighting the last war. Today in New Zealand, the Labour Government is making a belated attempt to deal with the many socio-economic problems created by the foolish and unvoted-for policies that we now know as Rogernomics and Ruthenasia. In doing so, the compensation goes not to the victims of those policies, but to a new generation that was born lucky.

I accept that Labour's policies are not intended to be generationist. But they are highly discriminatory along generation lines, and Labour should have had the nous to see that. The long time lags between problem identification and policy implementation reinforce the generational cycle described by Easterlin, adding to the misery of unfavoured generations, and to the fortune of the favoured.

It's bad economic policy, and it's bad social policy. Worse for Labour, it's bad politics. There are 831,000 people in New Zealand aged between 20 and 35, 915,000 aged between 35 and 50, and 669,000 aged 50-65. Further, there are substantial numbers of 1960s'-born New Zealanders living overseas, many of whom can and will vote in this election. (The drought of men in their 30s in New Zealand was a major news story just a few weeks ago.)

The generation aged 35-50 is a relatively conservative, pragmatic, self-help generation. In 1975, as 18-20 year-olds, they helped to dump Labour and vote Muldoon. (This was the first election in which 18-year-olds could vote.) In 1984 they were strongly attracted to Bob Jones' NZ Party message. They gave Rogernomics the benefit of the doubt in 1987, but dumped on Labour big-time in 1990. They dumped on National equally big-time in 1993, casting a substantial majority of votes for the left-wing parties. They also dumped the misnamed "first-past-the-post" (FPP) voting system. (Today, people over 50 still go on about our MMP voting system as if it's something strange, exotic, hard to understand. But how would you explain FPP to a young person today? Do you start by telling them that the left won a huge victory in the popular vote in 1993, yet the right got 50 out of 99 seats?)

This generation – born between 1955 and 1970 – will once again decide an election. It's partly sheer weight of numbers. And it's partly that they do not, by and large, exhibit the party loyalty that their elders do.

Labour has miscalculated badly. If you want to play the generation game, in a democracy it is wise to play to the generations with the most votes. A generation that has done it the hard way will not support benefits which it does not, by and large, qualify for. National on the other hand is offering significant benefits – through its tax cut package – to families who have two incomes and school-age children. Labour offers them nothing.

© Scoop Media

Keith Rankin

Political Economist, Scoop Columnist

Keith Rankin taught economics at Unitec in Mt Albert since 1999. An economic historian by training, his research has included an analysis of labour supply in the Great Depression of the 1930s, and has included estimates of New Zealand's GNP going back to the 1850s.

Keith believes that many of the economic issues that beguile us cannot be understood by relying on the orthodox interpretations of our social science disciplines. Keith favours a critical approach that emphasises new perspectives rather than simply opposing those practices and policies that we don't like.

Keith retired in 2020 and lives with his family in Glen Eden, Auckland.

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