David McWilliams: Only one side wins as the generation game plays out
Published 19/09/2012 | 17:00
IT is early morning at possibly the finest observational post in the rich cultural savannah that is Dublin Airport. The perch here at Butlers Cafe is to the social observer what the "hide" is to a bird watcher.
We are at a crucial intersection. Straight ahead, the relative civility of area B, where some of the remaining Aer Lingus flights still take off and other reasonably humane carriers cluster. To the right, past the last-minute panickers looking for travel adaptors, is Ryanair country, the long winding road that leads to a grim but cheap, efficient -- and, if you are organised, not too unbearable at the price -- experience known as low-fare air travel.
Here at the intersection of areas B and C, far from the swank of Terminal 2, all classes of humanity are on show, parading up and down in various stages of irritation.
Airport irritation is a spectrum from the one-off traveller to the weekly flyer at home in the airport -- the sort who has a routine and can't hide his annoyance at knots of elderly Yanks who shuffle aimlessly, holding up the flow.
This place is home from home to two of the more familiar Irish beast: the mortgage navvy and the accidental millionaire.
The mortgage navvy is a refugee from the crash, living and working in London Monday to Friday to service huge Irish mortgages and a cost of living that, by European standards, is still prohibitive. The mortgage navvy can't quite accept that middle age is fast approaching. He realises that he doesn't have the energy to keep doing this indefinitely. But the mortgage is for 25 years, the children are settled in school and he is a slave to the decisions he took in the boom. Stoically, he keeps the show on the road and if that means a bedsit in Clapham for the foreseeable future, so be it.
My flight is full of these men. They are tired, it's Monday and they know what they are facing into. They text their still sleeping kids to make sure they'll get up for school and brush their teeth. They are getting old and they will get older quicker if they keep this up.
Across the cafe are the other airport regulars. They are grey, sprightly, and they are going on a short break. They are Ireland's wealthy pensioners, the weekend break kings and queens, people with no mortgages and large pensions. They have savings, hugely positive equity and a lifestyle that would make the editors of 'Conde Nast' blush. They are rich and they are having fun.
In 2007, in 'The Generation Game', I foretold the coming great Irish property crash and sought to examine which generation would be affected most adversely by the resulting recession. The title alluded to the fact that the present and future wealth of the younger generation of first-time buyers and 30-something trader-uppers would be wiped out in the crash. They would be mired in negative equity, carrying huge debts, which would ultimately end up being defaulted on.
Their plight is in direct contrast to the people whose wealth was magically lifted up by the property bubble. Many of these lucky ones traded down in the boom and made a fortune; those who had bought their houses for a song in the 1980s, 1970s or 1960s are still in positive equity, the others are in debt.
As the price of houses raged rampantly upwards, the people who already owned their houses with small mortgages would become enormously wealthy. I called them in the book the accidental millionaires.
They got another gift when we joined the euro, as their savings in a weak currency were miraculously transformed into the euro, anchored by the solidity of the German mark. The purchasing power of their savings suddenly increased.
What's more, their wages went up dramatically in the boom and then, when it came to retirement, their handshakes, linked to their last wage, were substantial. Many ended up debt free and, if they were public-sector workers, with decent pensions. Some retired in order to take their pensions but then came back to work as consultants, blocking the prospects of younger workers.
Contrast this with the position of the younger generation born from the late 1960s to the early 1980s. These people -- hundreds of thousands -- are now in huge negative equity, they have no savings, they are the debtors of Ireland, their wages are being cut and their taxes are increasing but yet as their income falls, their debts remain fixed and crippling.
They are caught in what the 1930s American economist Irving Fischer called debt deflation, where the value of their assets is falling and so too are their wages but their debts are fixed and, therefore, more difficult to pay.
There is a generational divide playing out in Ireland. Many of the older generations are rich and many of the younger ones are poor and getting poorer as the debts mount.
A recent survey by Standard Life bears this out. The over 60s were the most financially secure with 60pc saying they felt secure, as opposed to only 46pc of those aged between 35 and 44.
We can see this income disparity again in survey results on changed spending patterns since the recession began. In the last quarterly national household survey, only 50pc of those over 55 said they had cut back on clothing and footwear spending in the recession, compared with 75pc of those aged 54 and under.
More than six out of 10 of those aged under 35 had cut back on grocery spending, compared with only four out of 10 for those over 55.
Changing attitudes of Ireland's accidental millionaires are captured in an interesting study carried out two years ago by silvercircle.ie -- a company that offers lifestyle tips and discounts for the over 55s.
Some 81pc of people between 55 and 64 believe that old age begins at 80 and eight out of 10 believe that retirement is "time for an adventurous new life, rather than for relaxing and resting".
While young Irish couples are mired in debt and have seen their houses become destroyers, not repositories, of wealth, research compiled by The Business of Ageing Partnership reveals those aged over 65 in Ireland have a declared income of €6.6bn. Most of them have paid off their mortgage, with research showing that 63pc of 55 to 70-year-olds are in owner-occupied homes without a mortgage.
Is it any wonder, therefore, that many of us roll our eyes when we hear of the travails of some of those older than us? Don't get me wrong, I am aware that there are many thousands of old people on the breadline, who need and deserve every bit of help we can give them, but there isn't a coherent block called "the elderly" or "the retired". Like any society, there are huge differences within the age groups, but in Ireland too much debt to put a roof over young families has led to a massive generational divide.
To rebalance this, future benefits to the accidental millionaires should be means tested. This is the only fair way to disentangle need from entitlement.