F4 NatioNal iNstitute ecoNomic Review No. 227 FebRuaRy 2014 commentary: intergenerational and intragenerational equity Jonathan Portes* *National Institute of Economic and Social Research and Centre for Macroeconomics. I am grateful to Raquel Fernandez for very helpful comments and to various authors at the Institute for Fiscal Studies for permission to reproduce two of the charts. E-mail: j.portes@ niesr.ac.uk. The concept of ‘intergenerational fairness’ was introduced to the UK policy debate by David Willetts MP (now, somewhat ironically, the Minister for Universities and Science, and hence responsible for the new system of student finance) in his book, The Pinch: How the Baby Boomers stole their childrens’ future and how they can give it back (Willetts, 2010). But it has only taken off in political discussion over the past couple of years; the idea that somehow the old are getting a better deal than the young, both before the financial crisis and during the ensuing period of austerity, has gained popularity across the political spectrum. As Angus Hanton, Director of the Intergenerational Foundation, put it (Intergenerational Foundation, 2013): “Rising intergenerational unfairness should matter to everyone. The usual focus on inequality between rich and poor misses the important inequalities between generations. Poorer young people are increasingly and systematically financing richer older people. Urgent action must be taken as the Baby Boom cohort starts to retire.” But what does ‘intergenerational fairness’ (or its opposite) mean? And how would we know if it is ‘rising’? In practice, this discussion is bedevilled by confusion, both conceptual and empirical. The purpose of this article is to set out some of the possible meanings of the term ‘intergenerational fairness’ and, at a very stylised level, what the evidence suggests. I identify four different, and conceptually distinct, issues: a) The evolution of the relative incomes of different cohorts. Have older generations (and in particular pensioners) done particularly well by comparison to younger generations over the past twenty years or so? b) The burden of austerity: have the specific policy measures taken over the past few years to reduce the deficit hit the young particularly hard, while favouring the old? c) Are the young ‘subsidising’ the old via taxation and the provision of public services? d) Will this generation ‘be the first to be worse off than their parents’? What has happened to incomes? Have pensioners done better than non-pensioners? Fortunately, the ONS produces a very long series for household incomes. From 1977 to 2011, median equivalised disposable income (that is, adjusted for family size) for pensioner households rose from £7,090 to £19,250 (in 2011–12 prices). The rise for non- pensioner households was from £12,080 to £25,700 (ONS, 2013). So the incomes of pensioner households rose significantly faster on average than for non-pensioners. But there is no indication that this process accelerated in recent years; the pace of convergence was roughly the same by guest on February 28, 2016 ner.sagepub.com Downloaded from