Europe’s Generational War

As populations in Europe and Japan age, the demographic pyramid is rapidly inverting, and a clash of generations is emerging, with the middle-aged and elderly protecting their interests at the expense of the younger and future generations. Labor mobility can help, but what will happen when opportunities abroad are depleted as well?

PRINCETON – Throughout the industrialized world, governments are rushing to hand out money to the elderly. Germany’s government has not only reversed an increase in the retirement age intended to make pensions more affordable; it has recently announced a 5% increase in benefits, the largest such rise since 1993 (when, unlike today, Germany was actually experiencing inflation). Poland’s Law and Justice government, in one of its first moves after taking power last year, decreased the pension age and increased payments.

At a time when public budgets are strained, this trend may seem counter-intuitive. And, in fact, the United Kingdom’s government has moved in the opposite direction, cutting disability benefits (though a cabinet minister resigned in protest). But the overarching trend toward increased benefits for the elderly has a simple explanation: politics.

As populations in Europe and Japan age, the demographic pyramid is rapidly inverting – and a war of generations, rather than of classes, is emerging. The war is fought primarily at the ballot box – old people win elections, while young people stay home – and the spoils lie in the national budget, in the balance among education, pension, health-care, and tax regimes. With this clash, the intergenerational pact that long underpinned social and political stability has been broken.

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