The Corner

Baby Boomers and the Looming Class War

Over the years, there have been a number of thinkers who’ve endeavored to explain how baby boomers have disadvantaged succeeding generations. Jim Tankersley, writing in the Washington Post, offers the latest iteration of what is by now a familiar argument:

Boomers soaked up a lot of economic opportunity without bothering to preserve much for the generations to come. They burned a lot of cheap fossil fuels, filled the atmosphere with heat-trapping gases, and will probably never pay the costs of averting catastrophic climate change or helping their grandchildren adapt to a warmer world. They took control of Washington at the turn of the millennium, and they used it to rack up a lot of federal debt, even before the Great Recession hit.

If anyone deserves to pay more to shore up the federal safety net, either through higher taxes or lower benefits, it’s boomers — the generation that was born into some of the strongest job growth in the history of America, gobbled up the best parts, and left its children and grandchildren with some bones to pick through and a big bill to pay. Politicians shouldn’t be talking about holding that generation harmless. They should be asking how future workers can claw back some of the spoils that the “Me Generation” hoarded for itself.

To make his case, Tankersley draws on the work of Robert J. Shapiro:

Earlier this year, in a paper for the Brookings Institution, economist Robert Shapiro tracked the lifetime earnings paths for Americans who entered the labor market in the 1970s, 1980s, 1990s and early 2000s. He found a sharp generational divide. The typical U.S. household headed by someone who was 25 to 29 years old in 1975 saw its real income increase by 60 percent until it peaked and began to slowly decline before retirement. For a similar household in 1982, lifetime income peaked 70 percent higher than its starting point. Those are both boomer cohorts.

The groups that came after fared worse. Workers who were 25 to 29 in 1991 saw median earnings peak 50 percent above where they started. For the 2001 group, the peak was just over 20 percent higher. (Though there’s still time, theoretically, for their earnings to rise again.) For both those groups, the high point came much earlier in their working lives than it did for the boomers.

According to Tankersley, baby boomers deserve blame for having failed to pay sufficiently high taxes and for not spending enough on publicly-funded research and development, job training programs, among other things. Not surprisingly, Tankersley believes that boomers should pay higher taxes and embrace higher social expenditures to “repent of their economic sins.” What Tankersley never mentions, however, is that one of the chief differences between the baby boom cohort and those that have followed is that baby boomers are far less likely to be immigrants. Immigration is hardly the sole explanation for economic and social differences across cohorts, but there is no question that it has had an impact, particularly at the lower end of the household income distribution. 

Why does the fact that Gen Xers are more likely to be immigrants matter? Immigrants represent a large and growing share of U.S. workers who do not have a high school diploma. As of 2013, 44 percent of the U.S. workforce with no high school diploma was foreign-born. Suffice it to say, workers without a high school education have faced wage pressure in the U.S. and in all affluent market democracies. Moreover, many immigrants with higher levels of educational attainment are disadvantaged by the fact that, as Eric Hanushek and Ludger Woessman carefully document in The Knowledge Capital of Nations, the quality of instruction varies dramatically across countries, just as it varies across U.S. states. College-educated immigrants tend to have lower levels of (English-language) literacy and numeracy than college-educated natives, in part because the educational institutions in some countries (often but not always poor countries) are less effective at translating instructional hours into meaningful cognitive skills than those in other countries (often but not always better-off countries). 

Moreover, immigrants and the children of immigrants often face challenges in the labor market that other U.S. workers do not, even when they are educated in the U.S. To successfully navigate the labor market, people tend to rely on their social networks, and in particular on their families. Parents transmit capital, whether economic, social, or cultural, to their children. Immigrants with strong cognitive skills and high household incomes often belong to robust social networks, and they are in a position to give their children a leg up in the labor market. Less-skilled immigrants tend to belong to social networks dominated by other less-skilled immigrants, which can make it difficult for them to enter high-wage occupations. This is part of why households headed by immigrants are so much more likely to access means-tested safety net benefits like SNAP and Medicaid than natives: on average, immigrant-headed households are much poorer than native-headed households. The native-born children of less-skilled immigrants benefit from the extensive government assistance provided to their families in many important respects, yet government assistance can’t provide poor children with the skills and social connections they need to thrive in the labor market, nor can it provide them with much in the way of an inheritance.

In the decades to come, “selfish” boomers will transfer roughly $30 trillion to their heirs. Naturally, it will be the most affluent boomers who will be passing on the bulk of this wealth. And as a general rule, it will be native-born boomers passing substantial amounts of wealth to their native-born children. For these boomers, the investments they’ve made in the next generation are the investments they’ve made in their own children, in the form of help with college tuition, which Tankersley briefly references, and, in some cases, in the form of help with down payments on homes, and more. Because boomers, particularly college-educated boomers, have generally had small families, this parental assistance is in many cases quite substantial. What this means is that the wealth gap between young people with affluent boomer parents and those without them will likely widen. In contrast, most second-generation children are unlikely to receive much in the way of financial help. They’ll receive love and support, I’m sure, but financial help is no small thing. Might some of these asset-poor second-generation Americans resent their counterparts who will have inherited the wealth built up by their native-born boomer parents? Might politicians try to exploit this resentment? We’ve heard a great deal about populist anger on the right this election cycle. Soon we will hear much more about populist anger on the left, and it won’t come from angry white men. 

I would argue that the real economic sin of the boomer elite is the fact that they’ve presided over an immigration policy that has lowered the cost of restaurant meals, child care, and other labor-intensive services for upper-middle-class professionals while giving little thought to whether the children of their servers, nannies, and gardeners would be in a position to thrive. Instead, they comforted themselves with the illusion that low-wage immigrants would feed their children with pluck and determination rather than the EITC and SNAP. 


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