Selfish Generations? How Welfare States Grow Old

By David Thomson, The White Horse Press
(Revised Edition, 1996)

Ann Reeves
Social Policy Agency

I agreed to review this work mainly to encourage myself to read a book I thought I ought to read, but expected to dislike intensely.

I had read reviews and heard report of the earlier edition of Thomson's book and from these sources had gained the impression that it was a vicious attack on my parents' generation. To add to my discomfort is the fact that Thomson has publicly criticized the extent to which taxpayers fund the government Superannuation Scheme, in which I have invested most of my savings for my retirement. These savings are meagre because, like many women of my generation, I took time away from the workforce while my children were young. Reading his work has not helped me to feel secure about my savings. In fact Thomson debunks the theory that switching to private savings schemes will ensure the sustainability of superannuation provision for the future.

I had also expected, perhaps hoped, to find Thomson's analysis incomplete, surely he had overlooked the effect of war, depression, economic conditions and wider welfare issues such as health, education and housing in his analysis of the welfare state and the aims and losses of different generations.

I was wrong. Firstly, the book does not attack any generation. It simply records the gradual shift in State assistance from a focus on children and young families, with minimal assistance to older people, through a stage where assistance to young and old was fairly evenly balanced, to the present focus on older people while assistance to those with young children has progressively been whittled away. Thomson notes that this has systematically benefited those he calls the "welfare generation", born in the 1920s, 1930s or early 1940s, while those who follow have faced cuts to current or prospective forms of support for themselves or their families. However, he acquits the "welfare generation" of greed or event intent in this.

To a person who has not read the earlier edition, the book unfolds like a well-written detective novel. Detailed, careful comparisons of the circumstances facing different generations in terms of taxes, welfare provisions, housing assistance, employment protection and schooling are also placed in the economic and social context in which those generations grew up; worked and planned for their retirement. Layer by layer, the case builds up. Sometimes the data are startling. For example, Thomson notes that all of the money spent in New Zealand by the 1990s on DPB, unemployment and sickness benefits still did not match the fractions of national income given by the earlier welfare state to young adults by way of family allowances and family tax relief.

From time to time one perceives a potential flaw in the argument, or an avenue for further analysis. However, Thomson has taken on many of the criticisms he has heard, often re-working his data to show the effect of accepting the criticism. His conclusions appear robust.

Those who have read the earlier version will find that New Zealand's experience has been updated and placed in an international context, largely by drawing on British data with occasional reference to Europe and the USA. Thomson also shows the effects of the relentless criticism that his work has evoked. He makes frequent references to "my critics" and there is a test tone throughout much of the book. He answers the criticisms sometimes with openness and patience. At other times he attacks not just the criticism, but also the group, community, science or country, from which the criticism has emerged. He accuses groups variously of personal abuse, squeamishness, ignorance and more. It would be easy to take offence at these criticisms and they detract from the detailed study which is the major part of this work.

Thomson is clearly impatient with the continuing criticism of the basis for his work, or even his right to have undertaken such work, rather than having his calls heeded for more studies to help knowledge accumulate in this field. There are numerous pointers in the book to further work which could be undertaken. For example, he acknowledges that the analysis in the book focuses mainly on white male perspectives. Feminist or ethnic group analysis could be illuminating, and Thomason urges others to take up these issues.

I must be allowed one quibble. Thomson frequently criticises "grandparenting" of provisions, by which is meant continuance of existing provisions, following a policy change for those currently receiving entitlement, while those newly eligible face reduced levels of entitlement. He sees no justification for protecting the advantage of one group of people while denying this advantage to all who follow. I do not agree with him "behind the syrupy appeal to non-thinking that is encouraged by the language of grandparenting lies a cynical disregard for successors".

I would argue that some forms of grandparenting can be useful to ease the transition when there is a policy change. For example, freezing an allowance received by one group rather than putting it to a new, lower, level allows those who have been on the old regime to gradually adjust to the level faced by those who follow, rather than facing a stark contrast from one day to the next. Eventually the new provisions catch up and from then on the grandparented group share the same regime as those who have followed.

I have my own concerns about grandparenting, since it masks the reality of change. It can make policy change less visible and more publicly acceptable since no one loses dramatically overnight, and there is only the "might have been" for new people. To that extent I can appreciate Thomson's views. However, I do think that grandparenting is a useful tool in some circumstances and should not be ruled out of order arbitrarily, particularly when painful change is deemed necessary and people need time to adjust. This is particularly pertinent when one contemplates the solutions that Thomson proposes to address the situation he has identified.

Thomson draws an interesting analogy between the welfare state and the common. He suggests the modern welfare state should be seen as "a peculiar form of the common, in which large portions of all resources have been taken out of private control and placed in an ill-defined collective pool". He points out that many of the requirements for good commons management are lacking in the welfare state. These include awareness and acceptance of the rules of participation and reciprocation, reiterated goals, resource sharing amongst only a few, and well-recognised boundaries. Thomson concludes that the ageing of the welfare state is what we should expect from an ill-managed common.

Thomson sees a looming crisis. He talks of "ruinous implications". A drastic solution is proffered. He offers his own generation as a "sacrifice generation" on which to pivot a change back to a focus on youth, with those in their middle years paying more to support these policies and those in older age also expected to give up a little.

Thomson's generation is also my generation since, like him, I was born in 1953. We were born in the middle of the post-war baby boom, which lasted longer in New Zealand than in many other countries. The consequential crowding that we have faced throughout our life experiences may lead my generation to read this suggestion with a heavy sense of inevitability. Many of my peers do not expect to receive the same level of state superannuation provision that is currently available to older people. There is an uneasy sense amongst us that the future will be bleak. Perhaps our cynicism deserves to be rewarded with the reality we expect and sooner than we expect it.

Yet my own generation has been privileged compared to those who follow. My teenage children and their peers are angry at the bleak prospects that face them when they leave school: student loans, if they can find a place in a tertiary institution, to buy uncertain gains in employment prospects versus low lifetime employment prospects. Forget housing purchase and family formation. School leavers in the 1970s faced very different choices; we debated which job to take and many changed jobs several times before fixing on a career choice. Tertiary education was an optional asset rather than a requirement for employment. At least we started our working lives at a time of full employment.

My children compare their prospects with those of my generation and see a widening gap. I do not think that the younger generation need to read Thomson's book to be convinced that they are facing inequity; they are already aware of it. Thomson's suggestion that the balance of state support should once again shift toward children, an investment in the future, would be welcomed by them. At this point they would not take kindly to a suggestion that further sacrifice will be required of them to maintain my generation in our old age. Nor can I see any prospect of them viewing the needs of my generation in a more compassionate light when we do enter our retirement unless they receive more sympathetic treatment themselves from the State. My own generation's cynicism is amplified in those that come after us. They will not believe promises of future benefit for current sacrifice; they will want the evidence immediately.

I am reluctant to concede impending crisis, but the anger and pain of the young must be addressed. Thomson does well to expose the differing generational impact of changes to the welfare state, however uneasy this knowledge makes us. The issues Thomson has opened up need to be debated. We may be reluctant to grapple with them, but they will not go away.