High art and triple whammies

One of the themes of the ALP spin on the budget is that the tax cuts don’t make up for the ‘triple whammy’ of higher fuel prices, interest rates and lower wages from the new IR legislation.

There’s another triple whammy (silly expression isn’t it?). In fact, in the spirit of the Grammy Awards, perhaps we should have the Whammy Awards and give one to the Government. If we have the Granny awards we’d give them to the Government as well. Because the other triple whammy is an intergenerational one.

First there was the once in a generation rise in house prices which has made it very difficult for 20 and 30 somethings to get into their first house. Second the labour market has been awful for younger people. In a remarkable pair of diagrams on Bob Gregory’s site (pdf) we see that the full time wages of younger age-groups have stagnated whilst the growth in the economy has slid steadily into the pockets of those over 35.

And then we have this week’s Budget. That part of the budget designed to improve savings was well how do you put it? Exquisite is the only word I can think of. Supporting saving from government is usually difficult because the most direct way for governments to increase saving is to build up surpluses. Another way is to add to compulsory super which doesn’t please those who have to fund it (and anyone else who fancies those contributions might be robbing them of higher wages).

But this government doesn’t fancy this path. Instead it’s about giving the money away. So how could tax cuts most directly increase saving? Well you’d imagine by lightening the tax burden on savings going into the superannuation system thus increasing the amount of money that ends up being locked away. That’s what Nick Minchin suggested. That would also be a bit of a hand to the struggling Gen X and Y’ers.

But that would be too difficult. It would be tax cuts without instant gratification. So instead we cut tax on money coming out of the super system. Well in theory that increases incentives to save. But who knows what the exit tax will be in 20 or 30 years time? So while it’s politically marketed as pro-saving, it’s immediate effect is to assist people consuming, not in increasing their saving. And it hands money to those who already have quite a bit of money (exit tax is currently progressive not being levied on small amounts of super).

Anyway, the Howard Government has at least got art on its side. I’d put this up there with kids overboard, but whereas that was tawdry, this well I can’t think of a more exquisite piece of work by this Government, appearing to do one thing, while doing the other. Its hard not to admire the artistry.

I wonder when some mainstream politician will get serious about how younger generations are getting screwed over.

PS – apologies for the image which is too small to read. I’m hoping Ken can fix it for me. The two lines at the bottom of each graph track the real full time incomes of the youngies – the 19-34 year olds and the two lines at the top of each graph track the real full time earnings of the oldies 35-54.

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Ken Parish
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Ken Parish(@ken-parish)
15 years ago

The only way I can make it larger without overlapping the sidebar is to make it a clickable thumbnail, and I hate using thumbnails. It’s fairly legible now, I think.

Ken Parish
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Ken Parish(@ken-parish)
15 years ago

Well, actually I could post it full size if you’re happy with it being “over the fold”, because the post page template is wider than the front page. I’ll do it and see what you reckon.

Ken Parish
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Ken Parish(@ken-parish)
15 years ago

I was going to comment that maybe the graph explains why Paul Watson is so obsessively hostile towards baby boomers, until I noticed that the 35-44 age group (in which he is pretty much at the median) have done almost as well. It’s the Gen Y and younger group who’ve fallen behind. Moreover, although I accept that this is excessively inequitable, I doubt that those age groups are likely to save much even if the superannuation system is reformed to deliver them greater incentives. Most of us tend instinctively to believe we’re immortal until we hit our mid 30s.

Jennifer
15 years ago

And not only have wages and salaries stagnated, house prices have emphatically not. Yet another explanation why Gens X and Y have much lower rates of home ownership than their parents did at the same ages.

(disclosure: I just sneak into the 35-44 age group)

meika
15 years ago

Being a couple of years younger than Paul I can only add that more schooling, especially slow degrees which end up finishing in the HECS era, means you’re more like the younger cohorts, in fact using a non-specific age thingo for graduates, and using the HECS Goyder line as a digital threshold would provide a more interesting graph.

I’m forty, and got $87 dollars in super. Superannuation paying jobs avoid me like the plague.

An added factor would be that the lower the hours worked the more likely that you get no super at all for any work (i forget what the hours per month are to avoid this for casuals and parttimers).

People who do not have HECS will find Micallef funny, people who have HECS will find Hughsie funny.

Paul Watson
15 years ago

Interesting figures and analysis, Nicholas.

Re Ken’s point, that people in my age cohort (I turn 42 next month) may be (surprise!) honorary boomers in the intergenerational equity stakes. The “male”

Paul Watson
15 years ago

Also, look at the “male”

Patrick
Patrick
15 years ago

Yes, but now do a graph showing just the quantities in each decile, and extrapolate. Inasmuch as this is an incentive to extremely able-bodied and able-minded 60 and 70 year-olds to keep working, even if part-time, then that is a really positive step in and of itself.

Although they could just make all super contributions tax free if you earn less than, say, 70,000 a year.

Kris
Kris
15 years ago

I’ve got a HECS debt and find Micallef far funnier than Dave Hughes, and I didn’t even go to a private school!

Robert Merkel
15 years ago

It’s even worse if you’re not breeding. Breeders get family tax benefits and the like. The childless get SFA.

Of course, the only place they represent a big voting bloc is in the inner cities in safe seats, one way or the other. Though Bennelong might be very interesting next time around the way things are going… (though that may have been exaggerated by Andrew Wilkie’s high-profile campaign in Bennelong).

Paul Watson
15 years ago

Nicholas,

I apologise re the above, if it’s my swear-word (sorta) that’s got your goat.

Otherwise, I stand by what I said, with the qualification (in case it’s needed) that what I’m talking about is the relative lifetime experiences of middle-classers born in Australia c. 1920 vs those born c. 1965.

Also, I am not talking about “post [1961-born] generations”, at large. On present indications, the post-1978-born appear to have it as good as boomers have had since childhood (and continue to have).

More generally, I’d prefer not to engage in stats-war to make my point about my generation’s disadvantage. Here then, are two recent, more-anecdotal pieces (not written by me!) about Living on the Xer Edge:
http://www.theage.com.au/news/Opinion/Generation-X-all-grown-up-and-nowhere-to-go/2005/04/26/1114462036687.html

http://www.theage.com.au/news/opinion/so-where-are-the-debtfree/2006/05/12/1146940731658.html?page=fullpage#contentSwap1

Paul Watson
15 years ago

Nicholas,

I still think that you’re overestimating the privations suffered by the parents-of-boomers generation (born c.1920) and underestimating those of GenX (*not* “Y”

Mark Upcher
Mark Upcher
15 years ago

Nicholas,

Are these real or nominal FTE?

You also have to be careful in interpreting these charts. By converting the chart to an index it makes it look as if all age groups were getting paid the same at the start of the period and then a big gap opened up. Younger workers have always been paid substantially less than older workers.

It is also interesting that the gap appears to have opened up by just as much during the Labor Accord as during the later period when labour markets became more deregulated. And during the Accord, according to this chart, FTE for younger workers fell (hence my query abour whether the measure is real and nominal).

The charts also tells me that a 24 year old that was doing relatively badly in 1990 is a relatively prosperous 38 year old in 2004.