The best economic factor working in favor of many baby boomers now entering a reluctant middle age may turn out to be their parents’ frugality. The older generation, children of the Depression, received little from their own parents except character and a determination not to be poor. They married early, worked at the same job for years, had children, saved, and are now retiring on what are known as “defined-benefit pensions,” which usually enable the recipients to maintain a comfortable life.
Raising children in the 90s is more expensive for the boomers than it was for their parents in the postwar years. Housing and education prices are far greater now. We’re supposed to be happy to learn that college costs are going up only 8 percent next year, rather than 20 percent as in recent years–but even at 8 percent, they’re increasing at nearly double the inflation rate.
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How bad will the squeeze on national resources be? Jackson has developed two scenarios. In one he poses a fairly rosy projection of national productivity increases that will provide an annual per-capita “dividend” for 2025 amounting to $19,450 more in income than what is available now ($26,350 in constant 1982 dollars). Generously assuming no expansion of general government-spending commitments in the coming 35 years, no increase in health-care costs, and no further entitlements for the elderly, more than half of the new GNP from now until 2035 will nonetheless have to be dedicated to the elderly if current standards of living are to be maintained. In other words, less than half of the money added to our economy in the coming three and a half decades will be available for all of society’s other needs.
What steps can be taken now, according to Jackson, to prevent an impoverished old age for the baby boom generation?
Most important, pension programs need to be reviewed and probably reformed.
What a national investment house calls the “miracle of compound interest” can still ignite the economic growth baby boomers need to retire on and give individuals the means to take advantage of it. But producing that miracle requires an appreciation for delayed gratification, hardly the baby boomer’s strength. In collective middle age, perhaps there is still time to learn that virtuous trait and to translate it into collective political action.
