The FT has reported this morning that:
The earnings of recent English graduates have deteriorated so rapidly since the financial crisis that the latest class is earning 12 per cent less than their pre-crash counterparts at the same stage in their careers. They also owe about 60 per cent more in student debt.
And as they added:
Tuition fees in England almost tripled last year to a maximum £9,000 a year.
This worries me, a lot. I worry for those in this situation. I worry about what it does for their sense of well-being. I worry about it economically.
But as much I worry for the sheer economic illiteracy of this. Currently student debt belongs to the government: no state cash has really been saved by imposing massive burdens on the young: it has just been an additional tax on them. But in the process something as important - what I call the fundamental pension contract - has been ignored. I wrote about this a couple of years or so ago in a report called 'Making Pensions Work', where I said politicians had:
ignored the fundamental pension contract that should exist within any society. This is that one generation, the older one, will through its own efforts create capital assets and infrastructure in both the state and private sectors which the following younger generation can use in the course of their work. In exchange for their subsequent use of these assets for their own benefit that succeeding younger generation will, in effect, meet the income needs of the older generation when they are in retirement. Unless this fundamental compact that underpins all pensions is honoured any pension system will fail.
As I then argued of private pensions:
This compact is ignored in the existing pension system that does not even recognise that it exists. Our state subsidised saving for pensions makes no link between that activity and the necessary investment in new capital goods, infrastructure, job creation and skills that we need as a country. As a result state subsidy is being given with no return to the state appearing to arise as a consequence, precisely because this is a subsidy for saving which does not generate any new wealth. This is the fundamental economic problem and malaise in our current pension arrangement.
I remain convinced that this is true. Baby boomers will ultimately pay for this. As the FT notes:
These are the young people to whom the country will turn over the next 20 years to fund the retirement of the “baby boomer” generation. Britain’s ageing population is forecast to put the country’s public finances under increasing strain.
The trouble is we have shafted them. What's to stop them returning the compliment?