Demography behind occupiers discontent

In cities around the world people have been occupying key streets to express frustration over a variety of issues.  Many protesters have commented on “growing inequality” as being one grievance.  But what if the real cause of this apparent phenomenon is demographic rather than a result of economic or financial systems, or something abstract like “corporate greed.”  The baby boomer cohort has been distorting aspects of the economy since they were born, and today is no exception.

Looking at urban housing issues provides a good window into how the bulge of humanity born between 1945 and 1960 has created many of the challenges our cities and countries face today (and I’m not blaming individuals here, it’s just the fact that there are so many more people in one age cohort than in others that is unusual in human history, and the issue here)

1. Those  who bought houses before the boomers have done really well.  Many people born in the 1920s through early 1940s who bought in the late 1960s or early 1970s achieved a real estate windfall upon retirement.  The reason? One the baby boomers hit the housing market, demand skyrocketed but the preference for detached single family homes meant that supply could not increase in the best locations, and so values went up owing to increased demand.  The only place supply could expand was the suburbs.

I know many people who bought a house for $20,000 in 1970 and without taking on much or any more debt ended up with homes in the $1 Million to $2 Million range at retirement in the mid-2000s. This is in Vancouver, but I am sure similar stories can be found in places like New York, Boston, San Francisco, Sydney, Melbourne, Seattle, etc.  The earlier one got in, the better.  So the oldest boomers have done okay as well.

In Canada, this pre-boomer and older boomer group still has their wealth, whether it’s in real estate or they sold it.  In the US, some likely ended up losing at least a portion (by buying a McMansion in suburbia only to have its value plummet, or from using their house as an ATM and borrowing too much) but I also get a real sense that this group has done okay.  It is hard for younger generations to imagine buying into the same types of homes they might have grown up in.  The younger boomers and gen xers got caught in the US housing crash, is my perception (but someone please give me stats to disprove this if I’m wrong).

2.  In Employment, a similar general  story exists.  The pre-boomers ended up with the plum management jobs supervising boomers, who then filled up all of the employment making life tougher on subsequent generations, especially gen x during the economic downturns of the 1990s (until the dot com boom put people who widdled away idle time in front of computers to work).  The youngest boomers and the “jones generation”(those born 1960-1967) did well in the computer revolution because they understood it, and then could put to work this lost generation x who couldn’t squeeze themselves into a lot of the companies and organizations that employed the boomers.

3. Millennials, those born after 1980, especially those born in the late 1980s are feeling a little squeezed out of both the job market (now full of boomers, gen xers, and the oldest millennials).Boomers have not exited either the employment or real estate markets. This makes jobs a bit scarce during these uncertain economic times (unless you live in Calgary) and real estate prices remain elevated in many high-demand locations.  The suburban housing crash in the US offers options in those locales, but this housing style has not been embraced by younger generations for reasons that have been suggested and explained elsewhere.

Being shut out of the good jobs, and for those with a good job an affordable house, undoubtedly feels unequal, and unfair for millennials.  And it might be nice to blame corporate greed on an unfair economic system for this situation.  But it might be mostly a demographic phenomenon and the situation will change over the next few years.

The good news on the job front is that boomers will be exiting the workforce, creating opportunities.  They will also eventually be selling houses at a fast rate.  This will create some opportunities for younger generations to improve their standard of living.

13 comments

  1. JoVE says:

    This is a good analysis and certainly a piece of a very complex picture. However, at the same time there has been a sustained attack on unions and the benefits that unionization brought, downward pressure on wages, and other systemic features that have meant that the distribution of wealth within the economy is very unequal.

    I don’t think it is corporate greed, per se, but a system that favours profit over all else and then concentrates that profit.

    Of course even if wages did not actually drop, the patterns you describe (very well) also mean that the standard of living a particular salary gets you has dropped. I’d add in some of the shifts in post-secondary education, including rising tuition rates and consequent rises in student loan debt at that early career stage.

  2. Wendy Waters says:

    Kevin e-mailed me separately to comment that baby boomers hold 2/3 of the wealth in Canada, which supports my argument here.

    JoVE, on unions, in Canada the situation is more complex since public sector union pension funds actually hold a lot of the corporate shares (as well as real estate as mentioned in my previous post).

    It`s interesting that on twitter after my post about the unions owning financial districts a few people commented that this was a reason to trash them (or at least not a reason not to do this). they resented the wealth held by the boomers and pre-boomer population via their pension funds. Presumably the tweeters felt they would never be eligible for such a pension.

    The intertwined nature of pension finds and corporations in Canada could be an interesting web to pull apart, and may be something that comes under more scrutiny as a younger generation starts to focus on reasons they feel shut out.

  3. 2/3 of the wealth not just in Canada. I think I was a world-wide figure.

    The other thing that ties in to this, especially in Ontario, is the money tied up in “cottages”. We’re doing some work looking at small towns in rural Ontario in places that are in “cottage country” have very different demographic and economic profiles and average housing values and incomes than similar places that are too far away from a major metro to be cottage destinations.

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  9. Marty says:

    As someone who turns 65 tomorrow, the message my cohort and I should take from Ms. Waters is to hurry up and die so that the demographic anomaly our collective births has caused will no longer encumber the quest for unlimited concentrations of wealth. EF Shumacher, the humanist economist, (yes, there are actually a few) said it best in the 1970s in the subtitle of his brilliant Small is Beautiful: Economics as Though People Mattered.

  10. Wendy Waters says:

    Marty,

    I never suggested such a thing (although I’ve read a few bitter comments on Twitter that do).

    I’m just pointing out some of what I believe are the demographic causes of feelings of “unfairness” among many of those occupying financial districts.

    My point is actually that it’s not a conspiracy of banks, or greed. It’s just demographics. (And dare I say Gen X had it a lot worse in the early 1990s, esp. in Canada)

    I suppose a part II of this would be to suggest to occupiers that they look for the opportunities in these circumstances rather than complaining.

    There will be a lot of good jobs in health care coming up, for example.

  11. JoVE says:

    I agree that the links between unions and corporations through pension funds are complex and worthy of closer inspection. I also think that the younger generation are right that they won’t have those pensions. Most of the recent labour unrest has been about pension changes, which are changing to models that will be less secure and probably pay out less.