Monday, June 27, 2005

Boomers Should Pay

Several people have asked me to post this opinion piece I wrote for the Dominion last week. They changed it around a little. The point I was trying to get across wasn't that the baby boomers should work longer, but that student debt was going to hit all of society... it was lost a little I guess...

Boomers Should Pay

I remember quite distinctly towards the end of my seventh-form year, the school’s deputy principal talking to our class about the importance of the exams we were about to sit. Our entire future was on the line, he said. If we did not commit ourselves now, we would get to middle age and regret it.

He continued on to talk about how much the system had changed since he went to university. In his day, if you got an above-average mark, you were not only guaranteed entry into university, but your bursary paid your way. And, chances are, you were lucky enough to get paid a small income while you studied.

Our generation was not going to be that lucky: an A or B bursary would equate to about the same as the cost of a first year text book (if that), only the best and brightest few would win scholarships, and only those from low income families would be eligible for an allowance.

This memory came to mind a few weeks ago when I was talking to a graduate friend of mine. He talked about how unfair the current system was: student debt was spiralling out of control, fees were going up, access to student allowances was falling, and a supposedly left-wing government appeared unwilling to do anything about it. Student leaders are always very good at making demands and accusations, claiming free education and a universal allowance are the answer to all the countries problems, but not so good at actually following this up with workable solutions. But he had a plan.

Student debt is effectively intergenerational debt. The baby boomer generation had benefited from free education, and then, during the 1980’s, cut taxes so they could save for their retirement, which effectively meant that free education was going to be out of reach for our generation. We would instead be crippled with student debt, making it difficult for us to buy a house, have children, or, eventually, save for our retirement.

Several solutions to student debt have been mooted recently. Using the government surplus to “pay off” student debt is one. Dr Cullen has said this is out of the question, and who could blame him? It would hardly make good fiscal sense not to be economically prepared to support the baby boomer generation in their dotage, would it? The Green Party has proposed using the Super Fund instead. This raises the same problem. With such a large demographic about to head into retirement, it is little wonder Grey Power were more than a little concerned about this.

The other edge of the sward is that as student debt gets larger, it’s going to hit society in general, with no exception given to the elderly. This is a group in society that is more dependent on our healthcare system than any other. With the average doctor’s debt estimated to be around, $65,000 they could be forgiven for charging more for their services, or heading overseas where the pay is considerably better. This translates into longer waiting lists for vital operations (like hip transplants) or forking out a greater chunk of their pension to go to a private health provider. Where’s the quality of life in that? Aren’t your golden years supposed to be just that, not spent living on a waiting list or off the smell of an oily rag?

My friend had one simple solution to curing the issue of inter generational debt: gradually raising the retirement age, over time, to 67. This would save the government enough money to give most students an allowance, to lower tuition fees to just over $1000, and to make student loans interest free, assisting those students who have already graduated. As life expectancy goes up, it would be fully plausible to work for a slightly larger length of time before you were eligible for superannuation. This is especially pertinent with a larger demographic heading towards retirement; less workers supporting more retirees, who are going to live longer is hardly a sustainable situation to be in without raising taxes or cutting the pension – two options which recent opinion polls suggest are political suicide.

I know what you’re thinking: it’s very easy for someone in their early twenties to talk about raising the retirement age. Yes; it’s going to be some time before retirement even enters my mind. But student debt is a societal problem that, left unfixed, is going to hit everyone in the next few years. That is why the system needs to be overhauled, and a sustainable solution instituted before it gets out of control.

Listed on BlogShares