There is strength in numbers. Those born in the postwar baby boom have enjoyed political and economic clout, while supporting relatively few dependants. Millennials have no such luck. But the voting power of those born after 1980 will overtake that of older generations in a decade or so. If they opt to redress the balance, there will be financial consequences.
In many countries, young people have justifiable gripes. They disproportionately work in industries shuttered by the pandemic. Pay rates of 30-somethings have not recovered since the financial crisis, in the UK at least. Rising house prices put home ownership out of reach for many. The proportion of young adults living with their parents has soared in the US, Britain and elsewhere.
The under-40s own less than older people did at the same age. Britons born in the first half of the 1980s had 25 per cent less wealth in real terms at age 34 than those born 10 years earlier, says the Resolution Foundation. On top of financial inequality is the burden of climate change and massive government debt.
To be sure, the gap between old and young is not the full story. Divides are also big within generations. Some young people will inherit. Many pensioners are feeling the pinch, as the pandemic depresses dividend and interest income.
The gap could narrow, without specific policies. That might happen if economic growth increases the prosperity of working people, or — less harmoniously — by a fall in asset values. The latter might be a natural consequence of the elderly selling financial and property assets to fund their retirement, though the relationship between ageing and financial assets is not clear cut.
But if the gap persists, expect redistributive policies to make a comeback. By 2030, those born after 1980 will have as many votes as older citizens in G7 countries, Deutsche Bank calculates.
The investment implications of such a shift would not be confined to “silver economy” stalwarts such as cruise lines. A tolerance for higher inflation is a distinct possibility, along with higher wealth taxes. Then, as in the 1970s, real returns from equities and bonds might turn negative, though gold should outperform. Those who lived through that decade may not want to return to its policies. But a younger, worse-off generation would feel entitled to a different view.
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