Baby Boom Proves Economic Power

Baby Boom Proves Economic Power

The first of the Baby Boomers are turning 60 this year - and the BBC is running a series of articles and interviews to mark the milestone. Here the BBC News website's business editor Steve Schifferes considers the generation as an economic force. Mr Clinton and President Bush are both baby boomers The baby boom generation had a profound effect on the US economy - and was itself a product of a remarkable economic boom. The baby boom began at the end of World War II, when returning veterans turned to marriage and raising families. But its origins were as much to do with economics as with the end of the war. Millions of Americans had postponed marriage and families during the Depression decade of the 1930s, when at its peak a quarter of the workforce was unemployed and home ownership fell by 10%. But during the war the US economy boomed, with economic output doubling on the back of huge war orders. When the war ended, there was a backlog of older Americans seeking to start families. And more and more, younger people shared their optimistic outlook that prosperity was here to stay. They began marrying younger, and having children at earlier ages, than ever before. As a result, the US population rose by 30 million in the 1960s (from 150 million to 180 million) despite relatively restrictive immigration policies - the biggest increase in its history. The consumer boom The rush to set up families sparked a consumer-led boom in the 1950s. Higher marriage rates sparked a housing boom Suburban house-building boomed, with an associated rise in the ownership of cars and other consumer durables such as televisions. Education also expanded, first at the elementary level and then at high school and university level, with enrolments tripling in higher education. And new markets grew up - especially in the group increasingly differentiated as teenagers, with its own tastes in clothes, music, and dance. Overall, the US economy grew by 4% in the 1950s, as productivity rose along with population. Low unemployment and rising wages brought the promise of prosperity to other groups previously excluded from economic growth, such as blacks and the rural poor. Into the Sixties The baby boomers came of age in the 1960s, when the expectations of an ever-expanding economy bumped up against the reality of clashes over civil rights and the Vietnam War. The large youth cohort - now increasingly based in the universities - were the champions of the "rights revolution", which demanded the expansion of economic benefits and personal freedom across the spectrum. The war in Vietnam was a target of many protests It was a generation which took prosperity for granted, but looked beyond to other values. Typical of this was the preface to the 1962 Port Huron statement: the opening manifesto of the radical Students for a Democratic Society (SDS), who were to lead the student revolt against Vietnam. "We are people of this generation, bred in at least modest comfort, housed now in universities, looking uncomfortably to the world we inherit," it read. For many others, it was wholesale cultural change - and, of course, the sexual revolution - which seemed to promise something more than the prosperity of the 1950s. Despite the tendency for politicians on the right of today's political spectrum to blame the 1960s for society's ills, at the time the new attitude towards personal freedom was shared by left and right. Both rejected conformity, styling themselves as rebels on the one hand or libertarians on the other. This generational change in values was characterised by Ronald Inglehart, professor of political science at the University of Michigan, as "post-materialism" - and it had profound social and political consequences. The biggest change was the attitude of women, who increasingly embraced equality both at work and at home. As women's employment rose, birth rates fell dramatically and the age of marriage rose. According to Oxford economic history professor Avner Offer, "commitment strategies" that kept families together were weakening. In his view, this development also corresponded to a preference for immediate spending over savings. And it reduced support for public investment, which had a long-term negative effect on prosperity. Slowdown By the 1970s, the US economy was slowing down, with a growing balance-of-payments problem and a widely-held perception that it was becoming less competitive than its rivals in Europe and Japan. By the 1970s baby boomers had put a lot into property The baby boom generation entered the workforce at a time when job market was softening amid an over-supply of skilled graduates. And growth in individual real wages in the US slackened sharply from the sharp gains seen in the 1950s and 1960s - a trend which was to remain unchanged to the present day, with household income rising mainly because more women were entering the workforce. Similarly, the gains in income equality across society were being reversed, with a sharp increase in income at the top of the income scale, and stagnation elsewhere. Nevertheless, the accumulation of asset-based wealth, particularly in houses, was greater among this generation than any time in history. The Pensions Crisis Starting in 2010, the baby boom generation will reach 65 and start to retire. Over the next 20 years, the number of people reaching retirement age is set to rise dramatically. Not only are more people retiring, they are also living longer. And this bulge now poses an enormous problem to pension systems not just in the US, but in many other developed countries where the baby boom started later. In the US state pension system, Social Security is coming under increasing pressure as its accumulated surplus is running down. The official estimate is that it will run out of money - unless taxes are raised - some time between 2030 and 2040. And spending on healthcare is under even more strain, with spending on the US Medicare system rising even faster. The younger, smaller cohort will have to fund the costs of retirement for the baby boom generation, leading to a relative reduction in their living standards. And with this older generation disproportionately likely to vote - and influence the electoral system - social security is likely to be at the top of the political agenda. The baby boomers will be having their final revenge on the system against which they initially rebelled.