Inter-Generational Wealth

[KDave]

No not that kind of inter-generational wealth, more the wealth of the generations still alive over time;

It does make one wonder what happened? What will the next generation wealth accumulation look like?

[blindguy]

i was born in 1959 so i am a baby boomer. i started working at the age of 12 cutting pulp wood to go to the paper mills. most of my life i worked two jobs to get ahead and two be where i am today. because of a stroke in my eyes i can not work any more but my wife still works at the post office.  here at the post office where she works they are allways short staffed. the younger people just do not seem to want to work for $20 an hour. the last two or three people they hired under age 30 lasted less than a year. the younger foke seem to want to get paid and do not want to have to work hard. i know not all are like that but most who went on to school and got a degree seem to be afaid to work and get their hands dirty  if you like to work hard and get paid well try the post office in the mid west and western states.  jim

[DarkChameleon]

30 minutes ago, blindguy said:

i was born in 1959 so i am a baby boomer. i started working at the age of 12 cutting pulp wood to go to the paper mills. most of my life i worked two jobs to get ahead and two be where i am today. because of a stroke in my eyes i can not work any more but my wife still works at the post office.  here at the post office where she works they are allways short staffed. the younger people just do not seem to want to work for $20 an hour. the last two or three people they hired under age 30 lasted less than a year. the younger foke seem to want to get paid and do not want to have to work hard. i know not all are like that but most who went on to school and got a degree seem to be afaid to work and get their hands dirty  if you like to work hard and get paid well try the post office in the mid west and western states.  jim

I worked with granite, cutting and shaping for the affluent, we never advertized, each good job would bring others but the worst thing i found out was the same thing, the young did nkt want to work, it was shocking, they wanted twice the wage which was equal to 20 year veterans from day 1 and then would spend more time moaning on then learning the job...they couldnt handle weight and their work was shoddy at best, one reason the job is one of the jobs you can get a work visa to enter the states on...the americans dont want to know, even when you can crack $30hr with experience and skill and nothing more then a high school education.

[Martlet]

What does the wealth look like for previous generations side by side?  I think this is more important, as most the wealth will be inherited anyway and pass through to generation X then to millennial.  The millennial today has an awful lot higher standard of living than the boomer had in their 20-30s.

[DarkChameleon]

26 minutes ago, Martlet said:

What does the wealth look like for previous generations side by side?  I think this is more important, as most the wealth will be inherited anyway and pass through to generation X then to millennial.  The millennial today has an awful lot higher standard of living than the boomer had in their 20-30s.

I wouldnt say standard, id say expectation.

[KDave]

I could tell you stories of how hard I worked at 12 setting up the market stalls in all weather did that before and after school, plus every other weekend because that was where the money was, and how my wife and I have grafted throughout our 20's while raising a family, to be in the 10% of household income, but at 32 still have less wealth, certainly less property wealth than my parents did at 25 who both worked minimum wage equivalent jobs, bought their house at 21 and they managed to raise 3 kids to our 2. I certainly did not want for as a kid! 

Also I will say is I have met plenty of boomer generation shirkers and chancers. Clearly it is not generational attitude or work ethic.

24 minutes ago, Martlet said:

What does the wealth look like for previous generations side by side?  I think this is more important, as most the wealth will be inherited anyway and pass through to generation X then to millennial.  The millennial today has an awful lot higher standard of living than the boomer had in their 20-30s.

I have a chart for wages, I think this has something to do with the disparity. Put the two charts together and I get the feeling what has happened but can't put my finger on it.

[Roy]

@KDave, I'm not too good with charts. What is the relevance of those dates please? Chart 1.

[Martlet]

24 minutes ago, KDave said:

I could tell you stories...

Im sure, my comment is on generalities not specific individuals.  

[Kman]

Just looking up some stats

Apparently in 1960 1/5th of your annual wage was enough for a 10% deposit on a house, now it's at least 2 years wages 

"My father’s 1963-64 tax return shows income tax paid of just £28 and 14 shillings (£28.70). In other words, his effective tax rate was just 2.1%. This was largely because in the early 1960s the tax allowances given to parents with children were, relatively speaking, huge"

2.1% tax.. wow 

[Roy]

I think it was more like 35%

[KDave]

1 minute ago, Martlet said:

Im sure, my comment is on generalities not specific individuals.  

Yes the first part of my reply was addressing earlier comments, the point of it being that the idea of work ethic and attitude is the wrong approach, there are the productive and there are the unproductive in every generation, nothing has changed in that regard, so why should one generation acquire such a disproportionate amount of wealth compared to the later generations who have ever decreasing amount of earned wealth, or seen another way, a society that sees its workers have an ever decreasing return on input over time.  

 

[blindguy]

could the difference between then and now be the size of govt and all the social programs?

[Martlet]

5 minutes ago, KDave said:

Yes the first part of my reply was addressing earlier comments, the point of it being that the idea of work ethic and attitude is the wrong approach, there are the productive and there are the unproductive in every generation, nothing has changed in that regard, so why should one generation acquire such a disproportionate amount of wealth compared to the later generations who have ever decreasing amount of earned wealth, or seen another way, a society that sees its workers have an ever decreasing return on input over time.  

 

That generation happened to live through a period of substantial growth.  If you want to compare to say the generation before them or before that, the current generation is still doing very well for wealth, especially in distribution.  And can look forward to the boomer wealth being passed down.  

[KDave]

19 minutes ago, Roy said:

@KDave, I'm not too good with charts. What is the relevance of those dates please? Chart 1.

Apologies Roy the dates are related to wealth gained over the 29 year period 1990 to 2019, or in the case of millennial 2008 to 2019 as before this they held an insignificant amount of wealth, the first of the cohort started to enter the workforce arguably in 1997. The chart takes that into account for boomer who start at 20% accumulated in the years prior to 1990. 

Ideally I wish to see generational wealth prior to this date to include the great/silent generation as well, including the generations before if such a thing exists, I will see what I can find. 

[Martlet]

4 minutes ago, blindguy said:

could the difference between then and now be the size of govt and all the social programs?

Yes in part, also many labour saving devices, technologies that go missing in the raw data analysis.

[KDave]

6 minutes ago, blindguy said:

could the difference between then and now be the size of govt and all the social programs?

Possibly deficit spending is part of it. I believe it is heavily related to the second chart more than anything else which labour compensation per unit of production since 1971, which coincides with the ending of Breton woods and change in the monetary system to fiat. 

If you look at the price of assets (wealth) overtime particularly housing, this has benefited disproportionately from the monetary system and consolidated generational wealth into those that owned the assets. This was compounded again over the last decade, assets benefited while wages stagnated and in some cases fell in real terms. 

[KDave]

39 minutes ago, Martlet said:

That generation happened to live through a period of substantial growth.  If you want to compare to say the generation before them or before that, the current generation is still doing very well for wealth, especially in distribution.  And can look forward to the boomer wealth being passed down.  

Yes I think given the monetary system the only path to wealth is indeed inheritance of assets as exchange of labour/work does not pay enough to acquire assets/shares of production. I think the worst part of it is the affect this has had on society, I am certain high house prices is in part to blame for the decrease in native birth rates, the increase in high time preference behaviour and the break down of the social contract and increasingly atomised society. I believe a change in monetary system towards a low time preference form of money (high interest rates would do it), or avenues for asset acquisition beyond inheritance would produce a much healthier society. 

[vand]

Haha. Millenials are so fuxored.

[KDave]

4 minutes ago, vand said:

Haha. Millenials are so fuxored.

Yes.

Well not all of them, but the vast majority will be poor as hell in retirement. I see collectivist/re-distributive government on the horizon in a couple of decades time. 

[AuricGoldfinger]

I definitely think attitudes towards wealth are different now. Lower interest rates have helped to fuel this. In the 90s people who live with their parents weren’t getting a brand new Mercedes on finance every 2 years - it would have been laughable. Or travelling the world. Or fine dining at weekends. Or first homes being 4 bed detached. People think it’s their god given right to have these things now. Not everyone but A LOT of the younger generation want to put the horse before the cart and there’s definitely an expectation and a sense of self entitlement. 

[KDave]

3 hours ago, AuricGoldfinger said:

I definitely think attitudes towards wealth are different now. Lower interest rates have helped to fuel this. In the 90s people who live with their parents weren’t getting a brand new Mercedes on finance every 2 years - it would have been laughable. Or travelling the world. Or fine dining at weekends. Or first homes being 4 bed detached. People think it’s their god given right to have these things now. Not everyone but A LOT of the younger generation want to put the horse before the cart and there’s definitely an expectation and a sense of self entitlement. 

Yes all true I think I can explain a couple of points;

High time preference - want things right now. Personally not willing to sacrifice for future gain (grasshopper) or the environment rewards this behaviour, encouraging ant to act like grasshopper.

Low time preference - willing to wait. Personally willing to sacrifice for future gain (ant) or the environment rewards this behaviour, encouraging grasshopper to act like ant.

We have had low interest rates since 2008 to bail out those who held the assets. This made any previous savings devalue over time and future saving much less attractive. The advent of help to buy ISA's followed by direct government investment in housing under Help To Buy deposits are examples of trying to reverse the damage to saving (and to protect future asset prices). Low interest rates also made easy availability of credit, helped through those with the assets/money to lend building up an entire lending industry around vehicles and housing, you can get interest free finance on near anything.

This encourages high time preference behaviour, it is environmentally induced. When saving is pointless and the government is willing to give you a deposit with only 5% of your own - this is indicative that something has gone very wrong systemically - blame the people in part, many are as you say, they would act this way regardless, but the vast majority are this way because the environment allows them to be, and they know no better. In fact they are rewarded for this behaviour, and have seen what happens when it goes wrong - who got bailed out last time after all?

The second part about housing - buying the biggest house you can afford is the right thing to do, again due to environmental factors. Wages have been decreasing against productivity since the 1970's and there is no inflation to help reduce the debt load and pay off your house as there was in the boomer generation. House prices are either rising or stagnant, making housing one of the few places to actually get a return on your excess wages - saving has been diverted into assets - we have said why that is and who benefits. Buying a house now, with gradually falling wages, house prices rising increasing the real terms gap between moving from a small house to a larger one - and interests rates being historically tiny - all adds up to making the house you buy now likely the only one you will ever own. 

Travelling the world and fine dining now - high time preference behaviour. All of the social degeneracy we see, without being specific and getting told off - it is due to high time preference behaviour and the welfare state. A deadly combination - you can be high time preference AND have no consequences/be bailed out if it goes wrong. Society was set up this way by those who came before. It is only in part the fault of the generation that adapts to the environment, and the rest of the blame lies with the lack of stewardship of the previous generation.

[Roy]

3 hours ago, KDave said:

Society was set up this way by those who came before. It is only in part the fault of the generation that adapts to the environment, and the rest of the blame lies with the lack of stewardship of the previous generation.

I'm getting lost in generations!

Who, when, what? 😊

[KDave]

19 minutes ago, Roy said:

I'm getting lost in generations!

Who, when, what? 😊

An example that will not upset anyone is the generation that led the expansion of credit in the 1920's easy monetary conditions, this led to high time preference behaviour in all regards and social degeneracy in the youth not seen again until recent times. My argument is the monetary conditions that suit one generation will have an effect on the next and so on. I think the recent times are very similar to the 1920's in this regard.  

In line with some other work I have seen I think we can expect a reintroduction of a form of hard money fiat in the coming years, via the raising of interest rates and the falling of wages in real terms. I think this will be forced on us, which is a common theme of history - change is always made too late and to the benefit of the people at the time, unless their hand is forced. These conditions will create a generation that have a completely different outlook and behaviour in regards to money, and in turn I expect them to be far more socially conservative, perhaps it will go all the way and look like the 1930's in some places both economically and socially.

[Roy]

So you're not blaming my generation then? 😀

[KDave]

3 minutes ago, Roy said:

So you're not blaming my generation then? 😀

Its a waste of time to blame, I think there are lessons to be learned so that my generation does not develop a similar graph to the above for my grandchildren. If this was deliberate or not though I don't know, it depends on whether they knew this would happen in 1971 when we came off the gold standard and went ahead anyway, what has happened since 2008 was known to be coming and was done anyway, but then we can't blame human self interest really.