‘The old rich and young poor’
Sir, – David McWilliams’s views on intergenerational wealth inequality (“The old rich and young poor”, Opinion, News Review, March 17th) are difficult to argue against, only because they are so wrong that one hardly knows where to begin. He thinks it both strange and wrong that those over 70 and those under 35 – while each representing 20 per cent of the population – hold highly divergent percentages of our net worth, 4 per cent and 33 per cent, respectively.
He does not seem to realise that to generate net worth, it is necessary for most of us earn money that we don’t spend, and then to invest it as sensibly as we can, and for most of us that investment takes the form of our housing.
The longer the period over which you have earned and saved, the higher will be your net worth, other things being equal. David McWilliams’s surprise is itself surprising.
He then contrasts the 13 per cent of net worth held by the quarter of the population in the 35-year-old to 44-year-old category with that of over-70s, finding it “not normal” and believing that it implies that “the single most important attribute for wealth creation is patience, not energy”. Those in the younger cohort who are at all prudent will clearly be seeking to build their net worth at this stage and are obviously doing so, but the greater part of their earnings would now properly be directed to consumption.
The consumption by those over 70, on the other hand, is being financed by the savings they generated in their own more energetic years: their earlier prudence and sacrifice of consumption now take the form of the level of net worth that David McWilliams finds objectionable, yet it seems eminently normal that a person’s net worth would be at its highest at the point in his life when he must rely on it to avoid being a burden to others.
More generally, your contributor’s objections to the passing on of what might remain of a person’s net worth at his death as problematic for society and the economy appear to assume that, faced with taxes that limit our ability to accumulate a net worth over time and that largely confiscate it at death, those who are now foregoing consumption will continue cheerfully to do so when the personal rewards have been seriously reduced.
It seems rather more likely that the result would more consumption – a temporary benefit, of course, for the economy – but both a corresponding reduction in investment and a diversion of that investment by both the State and private companies into unproductive areas, such as housing, rather than into those likely to provide a future for our children. – Yours, etc,
Ranelagh, Dublin 6.
Sir, – Property ownership is not an automatic sign of wealth. Many older people are on fixed incomes, bought their properties a long time ago in a different era and struggle to maintain them. They do not necessarily have sufficient income to do so. They are certainly not wealthy by any stretch of the imagination. Likewise, property ownership is a poor investment unless one has the resources to make multiple purchases. How does one access the property’s value unless one is obliged to sell and downsize? That prospect is an undesirable trauma for many older people, adding to their anxieties at a time in their lives when they merit and expect tranquillity and security. And if one cannot realise value by selling the property, that asset has no value.
And last but not least, we do have a substantial property tax in place, the proceeds of which, raised mainly from urban areas in Leinster where 55 per cent of our population resides, finances local government nationwide. It is older people, living in established neighbourhoods, who are paying more than their fair share of that inequitable tax. – Yours, etc,
Dalkey, Co Dublin.