Generation X are disappearing

Hugo Rifkind had an article in The Times today about being a Xennial (too old to be a Millennial, too young for Generation X), and I sent him the following tweet as a reply:

Hugo and 77 other people (so far) were kind enough to like it, so I thought I’d elaborate a bit on my theory.

A lot of the stuff about the Baby Boomers, Generation X and the Millennials can be traced back to Howe and Strauss’s Generations from 1991. This book examined earlier American generations and claimed to identify a four-generation cycle. They then defined the new generations that were emerging at the time and tried to predict their future very roughly. In particular, they expected a huge crisis once the Baby-Boomers had started to retire (perhaps around 2020), which Generation X would sort out and then hand over power to the Millennials.

This is clearly not what happened – the crises (9/11 + the financial crash) happened much sooner than they expected, while the Baby-Boomers were still in office. They actually mentioned this possibility briefly on page 382:

What happens if the crisis comes early? What if the Millennium – the year 2000 or soon thereafter – provides Boomers with the occasion to impose their “millennial” visions on the nation and world? The generation cycle suggests that the risk of cataclysm would be very high.

Furthermore, in their historical analysis they clearly don’t assign a standard length to generations, so they would themselves have expected the generational boundaries in the 20th century to require some tweaking once the big defining events had taken place. It’s therefore completely in their spirit to revisit the definitions they suggested more than 25 years ago.

They actually don’t even stick to four generations per cycle all the time. What they call the Civil War Cycle contains only three. As they write on page 192:

[It is] America’s only three-part cycle – the one whose crisis came too soon, too hard, and with too much ghastly devastation. This cycle is no aberration. Rather, it demonstrates how events can turn out badly – and, from a generational perspective, what happens when they do.

I’m postulating that this has happened again. The crisis came so soon that at least half of Generation X hadn’t yet managed to get high enough up the housing ladder (or build up assets in other ways) to allow them to benefit from the asset boom that was a result of the financial crash. As a result we now have a huge split in most western societies: On the one hand, older people (Baby Boomers and older X’ers) often are asset-rich and have paid off most of their house, as well as having a good pension. Other members of this generation are less rich, but they might at least have a cheap council house that is affordable on their salary or their pension. On the other hand, younger people (Millennials and younger X’ers) don’t tend to have much wealth: They’re either renting in the private sector, or they’ve paid so much money for their house that a crazy amount of their salary is spent on the mortgage. They don’t have decent pensions, and they don’t really expect ever to be able to retire comfortably. They also typically grew up being told to expect a great and prosperous life, and they weren’t expecting things to turn out like this.

I was born in 1972, so right in the middle of Generation X, and I think we felt different from both the Baby Boomers and the Millennials before the financial crash. However, I now feel more and more similar to the Millennials, and further and further removed from the Boomers. So I think we might have to redefine the Baby Boomer generation as stretching all the way to the late 1960s, and the Millennials starting immediately afterwards. (I don’t believe it’s a clean break – whether somebody belongs in one generation or the other ultimately depends on whether they had enough assets when the economy collapsed.)

I think we can now also tell when the Millennial generation ended: The youngsters who don’t remember the time before the financial crash have a different mindset because they didn’t spend their childhood expecting a rich and easy life. They also happen to be the smartphone generation.

So to finish this blog post, let me redefine the generations as follows:

  • The Baby Boomers (too young to remember WWII, and old enough to have built up their wealth before the financial crash): Roughly 1940–1969.
  • The Car-Crash Generation (grew up expecting an easy life, but suddenly the rug got pulled away from under they feet): Roughly 1970–1999.
  • The Smartphone Generation (they don’t remember the easy years, and they live their lives through their smartphones): Roughly 2000–.

The generation that got lost

Generation Y
Generation Y, a photo by dalechumbley on Flickr.
I’ve written about Howe and Strauss’s Generations before. It’s basically a theory that there are four basic types of generations that repeat in a cycle of about 80 years. For instance, today’s Generation Y (those born after 1982 or so) are supposed to exhibit many similarities to the generation born between 1900 and 1925.

They later produced a sequel called Millennials Rising. Written in 2000, it’s attempting to describe exactly this generation, and it’s failing miserably in many respects, because they’re basically describing a successful, heroic generation, something which doesn’t ring true when you look at all those youngsters saddled with student debt, living with their parents and trying to find a job in a world with sky-high youth unemployment.

I’ve been trying to figure out what went wrong, and I think the basic problem was that the Baby Boomers started running countries much earlier than Howe and Strauss expected (from 1990 to 2010 in the UK and from 1993 to 2008 in the US, rather than the projected 2000-2020). The effect was that they treated 9/11 as if this was a big, once-in-a-century cataclysmic event (although it could — and perhaps should — have been treated simply as a horrible act of terrorism, rather than the beginning of World War III).

As a result, when the Great Recession hit us in 2008, we were already sick and tired of the “Bomb, bomb, bomb!” Baby Boomers, and we duly elected Generation X leaders — such as Obama and Cameron — instead.

The result is drastic for Generation Y (called the Millennials by Howe and Strauss):

The Millennials’ Civic peer personality is not preordained. If the crisis comes too soon or (worse) unfolds badly, the Millennials will mirror the Progressives, a smart but hobbled generation that was later unable to realize the agenda of its Idealist elders. [p. 421]

Of course, the crisis didn’t really come too soon (unless one considers 9/11 to be the cyclic crisis called a turning by Howe and Strauss, rather than the Great Recession), but the fact that the Baby Boomers have been forced into retirement means that Generation Y cannot realise the agenda of the Boomers, so the effect is the same.

In effect, the Millennials are now a useless generation. Instead of being the willing soldiers for greying Baby Boomer leaders during the recession (and crises like Syria), they’re stuck with a frozen housing market (because Generation Y are risk-averse and won’t puncture the bubble), huge youth unemployment (which doesn’t bother Generation Y overly because most of us have got jobs and our kids aren’t looking for jobs yet) and many other problems.

Of course the Baby Boomers will eventually start dying off and vacating their expensive houses, but that could take another decade, and by then it could be too late for Generation Y. They will become the generation that never really got a good career and who never got to own their homes.

It’s good news, on the other hand, for the post-Y generation (let’s call them Generation Z). They were originally forecast to be a somewhat jaded generation, a bit like the generation preceding the Baby Boomers (the ones who were too young to fight in World War II but old enough to remember it), but now I predict they’ll be the new Baby Boomers: They’ll grow up with cheap houses and plenty of jobs, and with sharper elbows than Generation Y who thought participating was all that mattered. (As a parent, I’m already seeing signs that the schools are starting to toughen up a bit, but that’s perhaps better discussed in a separate blog post.)

Generation Y are starting to attract a lot of attention. Below, I’ve assembled some excerpts from various blog posts and newspapers articles.

Firstly, here are some comments from the London Evening Standard:

If you’re renting in Mile End, another surge in house prices is likely to fill you with despair, not elation. A teenager on a zero-hours contract in Enfield may wonder what he’s supposed to do with a 0.7 per cent rise in GDP, just as an unemployed history graduate in Woolwich will struggle to see how a new car plant in Solihull will help her job prospects. Meanwhile, a retiree in Richmond whose experiment with the buy-to-let market is paying off very nicely, thank you, may wonder what all this recession business is about.

To put it another way, any economic forecast is a generalisation that conceals huge inequalities and inequities. Generation Y (those born 1980-2000) have very good reason to feel that Osborne is describing a country to which they don’t belong.

After all, it is Britain’s young who are most likely to be trapped in the over-heated rental market, most likely to be on a zero-hours contract, most likely to use payday loan companies, most likely to have slaved under an unlawful “Workfare” scheme, and most likely to be unemployed even now.

According to the most recent statistics, there are 973,000 young people (16-24) still out of work. The figure rose by 15,000 in the last quarter, even as Osborne talks of a “game-changing” year for employment. And let’s not forget that four out of five jobs created during the Great Recession are in the lowest pay bracket. As the economy returns to “normal”, normal for this generation has shifted to something very different from their parents’ definition of the word.

The most striking shifts, however, are in attitudes. Iain Duncan Smith has persistently argued that this is an “X Factor generation” of “job-snobs” who believe that “success is not related to effort or work”. As Ed Howker and Shiv Malik note in their new edition of their book, The Jilted Generation, it seems that the young believe him. Surveys published this week show that Generation Y are more suspicious of welfare claimants than their parents — even though they are the most likely to be welfare claimants themselves. They are also more sympathetic to pensioners than to jobseekers — despite the fact that today’s pensioners are the richest ever to have lived.

The lessons Generation Y have drawn from the recession is that they are on their own. Their failures are their fault. Their successes need not be shared. Is this what Osborne had in mind all along?

Here’s an American commentator:

So what are millennials known for, so far? Well, to start with the obvious, we’re fucked financially. Anecdotes abound of millennials slaving away as unpaid interns and underpaid assistants, or slacking off as overqualified retail reps and baristas. “Generation Screwed,” Joel Kotkin called us in a thoroughly depressing July 2012 Newsweek feature that laid out the various headwinds holding us back: staggering levels of student debt (at least $25,000 on average, according to the latest reports); a 13.1 percent unemployment rate for 18- to 29-year-olds, compared to 7.9 percent nationally; and “a mountain of boomer- and senior-incurred debt … a toxic legacy handed over to offspring who will have to pay it off in at least three ways: through higher taxes, less infrastructure and social spending, and, fatefully, the prospect of painfully slow growth for the foreseeable future.”

And an article from the New York Times:

The millennials have developed a reputation for a certain materialism. In a Pew Research Center survey in which different generations were asked what made them unique, baby boomers responded with qualities like “work ethic”; millennials offered “clothes.” But, according to new data, even though the recession is over, this generation is not looking to gorge; instead, they are the kind of hungry that cannot stop thinking about food. “Call it materialism if you want,” said Neil Howe, an author of the 1991 book “Generations.” It seems more like financial melancholy. “They look at the house their parents live in and say, ‘I could work for 100 years and I couldn’t afford this place,’ ” Howe said. “If that doesn’t make you focus on money, what would? Millennials have a very conventional notion of the American dream — a spouse, a house, a kid — but it is not going to be easy for them to get those things.”

This condition is becoming particularly severe for the group that economists call younger millennials: the young adults who entered the job market in the wake of the recession, a period in which the unemployment rate among 20- to 24-year-olds reached 17 percent, when graduate school competition grew more fierce and credit standards tightened. Many also saw their parents struggle through a pay cut, a job loss or another economic disruption during the recession.


The millennials, in other polls, remain optimistic about their futures. Economists are less so. There is a persistent fear that they have entered a permanently lower earnings and savings trajectory. Even if the generation recovers, even if it ends up wealthier than the one before it, the scars will be deep and long-lasting. Kahn has started comparing recent graduates during the recent recession with recent graduates in the 1981-82 recession. She said the initial wage losses were comparable, and the trend looks set to repeat. “My inclination is pessimism,” Kahn said. “If anything, these guys might experience something worse.”

Other economists also envisioned a future in which millennials would spend less and save less. “I was talking with a mom who has a son in his mid-20s and told her the generation is not on the same wealth-building path,” said Signe-Mary McKernan, one of the authors of the Urban Institute study. “She had this look of terror on her face; our children are in trouble, and that’s such a worry for a parent. I told her, ‘Maybe this generation won’t have a worse life, but just a different life.’ ” And that may be true. Millennials are the best-educated generation ever. Their challenge may just be to preserve that advantage for their own children.

And finally:

Right now, most of the permanent underclass feels politically frozen: When one missed paycheck means descending into poverty without a safety net, unions and political activism seem like a low priority. Educated young people are frozen, too—caught in the privileged-poor paradox. Our meager (or nonexistent) paychecks incite righteous anger—especially when we think of our middle class parents’ luck at their age—but they also choke our very ability to organize, create, and take risks. As our wages fall, our degrees lose value, prices of food and rent rise, and workdays expand, we have less and less time to read a book, to join a rally in the next town over, to hop a bus to Washington, to even have a hours-long discussion about politics with our friends. Most Millennials aren’t starving, Great Depression-style, but they are starved for a low cost of living and a baseline of economic freedom.

It’ll be interesting to follow Generation Y over the next few years.

Historic Scotland and large families

Leon and Anna as King and Queen of Scots in Stirling.
Leon and Anna as King and Queen of Scots in Stirling., a photo by viralbus on Flickr.
We often feel modern companies are on a mission to punish large families. Cinemas, budget airlines and many others charge almost as much for kids as for adults, and the result is that a family with five kids have to pay almost seven times as much as a single person, although they are likely to have more or less the same income.

So it was an absolutely pleasure to join Historic Scotland today. The yearly membership fee for a family with an unlimited number of kids (up to 15 years old) is £84.55, which compares very favourably with the £45.60 that an individual would have to pay.

Historic Scotland is really worth joining, by the way. It gives you free access to lots of famous castles such as Stirling, Edinburgh, Linlithgow and Urquhart, plus a long list of other places and events.

We decided to go to Stirling Castle first, and if you haven’t been, it’s definitely worth seeing. It’s huge, and there are many things to interest the kids, too.

Simplifying taxation through personal companies

Berkshire Hathaway Shareholders Meeting
Berkshire Hathaway Shareholders Meeting, a photo by timbu on Flickr.
Companies have lots of advantages compared to real people. Amongst other things, they generally only pay taxes on their profits, not on their income (revenue), and lots of companies are registered for VAT, which means they don’t pay any VAT on what they buy.

Companies have these advantages to encourage investment and promote growth.

However, one might argue that this should apply to individuals, too.

Imagine if every individual automatically owned a “personal” company (i.e., at birth I would have been made sole director of Thomas Widmann Ltd.), and all their work took place through their company (it would be illegal for companies to employ people rather than other companies). In this scenario, everybody would need to decide when to take profits out of their personal company instead of investing the money (which would be tax-free).

With the move away from direct employment towards self-employment, this is increasingly becoming a reality for a large number of people, so perhaps it would be worthwhile making this approach universal.

After this change, it would be possible to completely abolish income tax, because employment would then always an issue between two companies, and all that would be needed would be company taxation and taxes on withdrawing profits. I guess many people would let their personal companies own their house and their car and let their personal company provide free meals to its employee in order to minimise tax and VAT, but that would be a good thing as it would just be levelling out the playing field (which is currently distorted in favour of companies and rich people).

At the moment, most rich people have companies (or charities) to lower their tax bill, so giving everybody a VAT-registered company would basically just give normal people the benefits that the rich currently enjoy.

Why Brown sold the gold so cheaply

gold cast bar
gold cast bar, a photo by hto2008 on Flickr.
I must have overlooked this very interesting blog post by The Telegraph’s Thomas Pascoe (probably because the Scottish holidays had already started at the time).

He’s arguing that Gordon Brown wasn’t an innumerate idiot when he sold most of the UK’s gold reserves at a ridiculously low price, as most people had assumed.

What he really did was trying to salvage the banking system:

It seemed almost as if the Treasury was trying to achieve the lowest price possible for the public’s gold. It was.


Faced with the prospect of a global collapse in the banking system, the Chancellor took the decision to bail out the banks by dumping Britain’s gold, forcing the price down and allowing the banks to buy back gold at a profit, thus meeting their borrowing obligations.

If true, this puts the gold sale in a completely different light. It was perhaps after all the right thing to do at the time (although I wonder whether bailing out a few banks would actually have cost more than the value of all that gold today), but why didn’t Gordon Brown afterwards try to strengthen the banking system instead of letting them continue their merry games until the system finally crashed in 2007?

German salaries should go up by 20%

Euro, a photo by aranjuez1404 on Flickr.
After the introduction of the euro, the German politicians got worried that Germany wasn’t the best place to run a business any more (the “Standort Deutschland” discussion). As a result of this, salaries and other labour costs were lowered. This reform was a success, insomuch as the German economy subsequently boomed.

However, one might argue that this reform was partly responsible for the current euro crisis.

In any area using one currency there will necessarily be areas doing well and other areas doing badly. Normally one would expect the rich areas to have higher salaries, pensions and prices, so that the poorer areas can compete through lower costs.

However, by ruthlessly cutting the costs of doing business, Germany and several other countries in northern Europe have made it almost impossible for southern Europe to compete. In the old days, they would from time to time have devalued their currencies, but now that they can’t do that, they have a real problem. Cutting salaries and pensions (as for instance Greece is doing at the moment) is hardly a great solution, because it makes the local economy grind to a standstill.

I believe Germany (and other high performers in the Eurozone) should accept that they’re benefiting a lot from the euro. If it didn’t exist, lots of European countries would have devalued their currencies drastically, and businesses would be leaving Germany in huge numbers.

I’m half German, so I think I’ve got the right to say that Germany — because of what happened there in the 1930s — has a moral obligation to prevent other countries from sinking into the kind of situation that leads to the emergence of fascism.

My preferred solution would be putting up German salaries and pensions (perhaps by 20% or so). This could be very popular in Germany (“you’ve worked hard, so we think you deserve a pay rise”), and it would immediately make it much more attractive to place a business in Greece or Spain instead of Germany. However, the markets would probably immediately react by lowering the exchange rate of the euro by approximately the same amount, so it’s likely that German products wouldn’t actually get any dearer outwith the EU, which means that unemployment probably wouldn’t rise too much in Germany.

An alternative would be creating eurobonds, as suggested by George Soros and others.

I don’t really care what Germany does, but I’m sick and tired of hearing Merkel lecturing the southern Europeans to become Schwäbische Hausfrauen. I have tons of Swabian housewives in my family, and while they’re absolutely wonderful people, I really don’t think the solution to the Eurozone’s troubles is to turn Greece into a Mediterranean Schwabenland.