Welcome to this little series about the different generations that make up Australia.
As I mentioned in last week’s column, the Baby Boomers are always defined first when researchers try to organise the population into generations.
After the Second World War, the economy kicked into gear nicely, people were confident about the future, and there was pent-up demand for babies as many young husbands were unavailable for such duties during their deployments.
This all resulted in the fertility rate climbing from 2.5 kids per woman before the war to 3.5 kids per woman in the late 1950s (today this is as low as 1.7). So, 1946 obviously demarcated a new generation. Counting 18 years forward we can define the Baby Boomers as being born between 1946 and 1963.
This is only a short column rather than PhD thesis so we will summarise the life a Baby Boomer in two simple charts.
Born in the mid-1950s, a median Baby Boomer started their working life in the mid-1970s – maybe after grabbing a free university degree on the way. They might have started their first ‘real’ job during the short 1974/75 recession. In 1982 and 1991 two more recessions followed.
From 1991 to their retirement just before the pandemic, our median Baby Boomer lived through three decades of uninterrupted economic growth. That’s as good a macroeconomic environment as you can hope for. A few challenges to strengthen their resolve to succeed, followed by 30 years of rising tides.
At some point in the early 1980s the median Baby Boomer purchased their first home.
Comparing house prices over a long stretch of time is a nightmare. The value of the dollar, wages, land sizes, quality of the house, and other factors change so much that economists and academics use indexed data. The OECD, for example, divides the nominal house price by the nominal disposable income per head. The result is a squiggly line that roughly indicates housing affordability.
Our Baby Boomer purchased their home on a 10 to 12 per cent mortgage. Yikes! Considering the future development of property prices that was still a great deal. The Boomers didn’t have access to a crystal ball of course. They worked hard to pay off the loan. Baby Boomers forwent time with the family to earn money for the family. An increasing number of women entered the workforce, creating double-income households.
This injection of wealth provided material comforts and ensured their Millennial kids grew up in financial comfort. This obsession with work might have been one reason why Baby Boomers have the highest rate of divorce.
As house prices continued to rise, many Baby Boomers acquired more wealth each year by seeing their homes go up in value than by pocketing their pay checks.
That’s the long way of saying Baby Boomers managed through hard work (aided by a favourable macroeconomic environment) to become a high-net-worth generation. I didn’t call them rich because plenty of older Baby Boomers don’t feel rich. Their cash flows aren’t great – they do, however, own a family home in a middle-suburb of a capital city that’s worth a million or two.
Enough of the past – what does the future hold for the Baby Boomers?
Currently aged between 58 and 75, half of the generation already has been of retirement age for a few years while the other half is nearing retirement. We are already seeing how the Baby Boomers are re-imagining retirement.
Since Baby Boomers are more likely than previous generations to work in highly skilled knowledge jobs (that don’t require hard physical labour) it’s easier to work longer, to retire later. In fact, many Boomers don’t really retire at all, they just slowly slide into retirement over a number of years by scaling back work commitments. No more, “Here is your golden watch and please never return to work.”
This creates a fantastic cohort from a marketing perspective. Their kids are finally financially independent, the mortgage is paid off, they are still earning some sort of income while having a lot of time to spare. This is the only stage of the life cycle where you have both time and money. Usually, you are only granted one of the two at a time.
As a whole, the Baby Boomer generation is still a decade away from being really concerned about old age, from suffering dramatic health setbacks. The most pressing concern for the recently retired Baby Boomers is that they feel cheated out of two special years because of the COVID lockdowns.
This is their time to travel, to visit the grandchildren, to reap the benefits of decades of hard work. They now feel a pressing sense of urgency and want to catch up on the retirement pleasures that were taken away from them.
The intellectual argument that Baby Boomers should downsize in their late-60s and early-70s remains strong. Sell the family home at a high point in the market, buy a smaller house or apartment (ready for the ‘lock it and leave it’ lifestyle). The profits are reinvested into super or handed to their Millennial children as a loan (gift) from the bank of mum and dad.
Sounds great in theory, but in practice Australians only downsize at scale when the family home becomes a nuisance to manage or a physical hazard. Even the oldest Baby Boomers still have about a decade before their health forces them to downsize. The decade of mass downsizing will be the 2030s.
It’s hard to imagine that such a driven generation will sit idly by and retire in the peaceful and quiet ways of their parents. I think Baby Boomers will rethink, re-imagine, and re-invent retirement. The coming wave of Baby Boomer retirees is a great opportunity for community organisations to grab highly skilled and capable volunteers.
As a society we can’t afford to let so much talent just sit around. We must appeal to their idealism and allow them to find self-fulfilment, we must give them a stage on which to shine in retirement.