Intergenerational Solidarity: A Two-Way Street that Needs New Paving

Abstract

The EU's demographic structure will change fundamentally in the coming decades. Intergenerational solidarity as it exists today is more than ever expected to be under great pressure. One may even wonder whether the traditional relationship of mutual solidarity between young and old can be upheld in the public sphere. This article claims that a new definition of intergenerational solidarity is necessary in the light of existing demographic projections. Through practical suggestions, a new definition of intergenerational solidarity is presented. The principle of the duty to care, following the Christian Democratic line of empowering people, is central to this proposal. It revolves around the sharing of experience between young and old, resulting in greater societal involvement.

Introduction

Europe is often referred to as the ‘Old Continent’. In times of economic turmoil and challenging financial markets, the term may indicate that questions are arising regarding Europe's relevance in the competitive world economy, in comparison to booming economic markets such as Brazil, India or China. The current crisis has shown that not only has the European project come under pressure, but that the economic survival of the fittest has laid bare deficiencies in the robustness of European companies in comparison to those in the Brazilian, Indian or Chinese markets. However, when discussing the Old Continent, we should avoid losing ourselves in only solving short-term economic problems. The economic turmoil may too easily lead us to neglect reflecting upon the bigger picture: the Old Continent has a more fundamental problem to address, that of its ageing population. The concept of intergenerational solidarity is crucial in this regard. In general it refers to the understandings, rights and duties of older and younger people living together in society, and the solidarity that exists between the two. In this article, reflections are put forward on how the concept does not solely encompass the claims of future generations towards older generations. Instead, the article seeks to develop an argument about why intergenerational solidarity is a two-way street in which equal efforts are required from the young and the elderly alike and how these efforts can be integrated in further theoretical explanations in the light of demographic changes.

Demographic changes and their effects on the age structure

The EU has recently published its findings of a long-term budgetary projection (European Commission 2012). When studying the figures on life expectancy in the EU, one notes a projected increase of 8 years for men, from 76.7 in 2010 to 84.6 in 2060. For women, an increase of 6.5 years is expected, with life expectancy rising from 82.5 in 2010 to 89.1 in 2060 (European Commission 2012, 25). The first general observation is that we as Europeans are tending to live longer. If we maintain today's pension ages and demographic development throughout the EU, it follows that fewer and fewer active people will contribute to Europe's social security systems–-while, at the same time, the number of retired people will increase. On the positive side, a modest increase in the European total fertility rate is in evidence, from 1.59 in 2010 to 1.71 in 2060 (European Commission 2012, 24). This means that, to a limited extent, this ageing effect is being palliated by a growth in the active population. However, this growth in fertility is insufficient to counter the effects of the rise in life expectancy and the consequent ageing of the population. The Commission's research suggests that the population will therefore see a decline in total numbers after 2040, with the population being 2% smaller in 2060 than it is today. Europe's population is ageing rapidly and at the same time slowly shrinking.

Thus, demographic developments are leading to significant changes in Europe's age structure. The 15-64-year-old age group is expected to decrease by 14%. At the same time, the number of those 65 or older is expected to nearly double, increasing from 87.5 million in 2010 to 152.6 million in 2060. Consequently, as one might expect, this will lead to a doubling of the old-age dependency ratio in the EU, from 26% to 52.5%. This means that instead of there being 4 working people for each person aged 65 or older, there will only be 2 working people for every elderly person (European Commission 2012, 27). The projected evolution until 2060 would thus require substantial shifts in the labour market as well as in the organisation of health care across the EU. The results show that fewer people will be able to contribute to social security systems that uphold health care and pensions for the older generation.

On the positive side, one may expect overall participation rates to increase over time among workers aged 55-64. Moreover, the total employment rate for people 20-64 is also expected to increase from 68.5% in 2010 to 74% in 2060. It follows that European social security systems will have to provide for the health care and pensions of fewer non-active persons. This is a consequence of the ongoing pension reforms in several EU countries.

On the other hand, the ratio of elderly non-workers to workers is still expected to grow exponentially. According to the EU's budgetary projection, the ratio of those inactive on the labour market (people 65 or older) to the working population (between 15 and 64) will rise from 39% in 2010 to 71% in 2060. In Poland, Hungary, Slovakia and Romania this ratio is even expected to rise to 90% (European Commission 2012, 30). This is further evidence that Europe's demographic structure will be marked by an ageing population in the decades to come. At the same time, the exponential rate at which the population is ageing should lead us to expect consequences for intergenerational solidarity.

Reasons for commitment deficiency

The concept of intergenerational solidarity has both a public and a private dimension. The latter dimension revolves around the understanding of what is due to and from different generations within a family. In the public sphere, the concept comprises understandings of what older and younger generations owe one another (Timonen et al. 2013,1). The present article limits itself to the public dimension. Deiteren and Maréchal (2012) offer an overview of the extent to which commitments pertaining to the public dimension of intergenerational solidarity are currently being fulfilled. In their criticism of the current developments, they define intergenerational solidarity in the public sphere as a concept referring to a set of established explicit and implicit understandings, rights and duties of different age cohorts (2012, 10). They point to two specific principles that are Christian Democratic in nature and that constitute the core of intergenerational solidarity. They define it as a two-way street. The older generation has an obligation to the younger generation to educate them and provide them with the opportunities and guidance that the younger generation needs to be able to lead successful lives as adults. In return, the younger generation is expected to contribute to a transfer of public means from the active generation to the retired generation for the payment of pensions and health care.

Given the current demographic developments in Europe, it seems clear that this two-way-street principle will inevitably come under pressure if the ‘classic’ understanding of intergenerational solidarity is maintained. The classic definition is best understood as a perfectly equitable division of solidarity between active and non-active populations. It presupposes that a system will be maintained in which the active population can both sustain the costs of pensions and health care for the non-active population and provide education and guidance for the younger generation. The spectacular changes in the old-age dependency ratio are expected to put great pressure on health care spending. In the reference scenario used by the Economic Policy Committee's Working Group on Ageing Populations, there is a projected increase of health care expenditures from 7.1% of gross domestic product (GDP) in 2010 to 8.3% of GDP in 2060. More importantly, public spending on long-term care is expected to double from 1.8% of GDP in 2010 to 3.4% of GDP in 2060 (European Commission 2012). This will unavoidably have consequences for the active generation responsible for the resources that finance long-term care, as their contribution would drastically increase in a scenario of exponentially rising health care costs.

Whereas older generations can still fulfil their commitment to prepare the younger generation for future adult life, younger generations will become unable to fulfil their commitments vis-à-vis the elderly. Moreover, aside from the demographic conditions that are not in favour of equitable intergenerational solidarity, younger generations are also expected to bear the consequences of insufficiently stringent policy decisions in the past, decisions that could have prepared the EU for such drastic changes in age structures. This policy failure is to a certain extent worsened by the fact that several EU Member States have accumulated considerable state debts. The European economic and financial crisis has shown that dealing with such debts requires a strict, but smart fiscal consolidation policy in the middle-long term–-and even such a policy can, at best, merely palliate the situation.

Call for a new definition of intergenerational solidarity

Young Europeans might easily get caught up in a ‘blame game’ when considering the arguments put forward above. The general claim that they will be the first generation in recent times to live in conditions worse than those experienced by previous generations is justifiable and, in fact, already a future reality when considering the 2060 expectations of the Commission. It is clear what the consequence will be of the doubling of the old-age dependency ratio–-meaning that only 2 instead of 4 members of the active population will bear the costs of 1 non-active person older than 65. When the system is held constant, that is, public expenditure continues at the same rate and contributions from the active population continue at the same rate, the two-way-street concept of solidarity cannot be maintained in the modified demographic context. Of course, the system is also expected to develop in line with the rate at which the population is ageing. As has been demonstrated, expenditures on long-term care are expected to double by 2060, reaching 3.4% of GDP. It is not rocket science to understand that the two-way-street concept, involving balanced contributions from both the older and the younger generations, cannot be maintained.

When redefining the concept of intergenerational solidarity with the projections for the year 2060 in mind, it must be asked whether it is still logical to conceive it as a two-way street. Financially speaking, it is justifiable to claim that the two-way-street concept of solidarity may have disappeared by 2060. Through bearing the increased health care costs in the new situation regarding the old-age dependency ratio, the future active generation might become unable to afford the education costs and other investments in the development of their future children. Thus, it follows that the active generation will be forced to abandon the two-way-street principle in financial terms. This means that, as an older generation, they will either no longer be able to fulfil their obligations to the younger generation to educate them and provide them with opportunities and support, or they will not be able to contribute sufficiently to the transfer of public means for the payment of pensions and health care in accordance with the traditional conceptualisation of intergenerational solidarity (Deiteren and Marechal 2012, 10).

Although demanding a continuation of traditional solidarity is my duty as a representative of the younger generation, I feel it might prove a more worthwhile exercise to offer reflections on how intergenerational relations could take shape in the light of the evolving demographic structure. Academic work on the concept of intergenerational solidarity has so far offered few new insights in this regard. Although several authors have applied the concept (Mangen et al. 1988; Daatland and Lowenstein 2005; Timonen et al. 2013), only a few have addressed the problem posed by the drastic changes in age structures or the repercussions these changes could have for a potential redefinition of intergenerational solidarity in the public sphere.

Duty to care

The underlying principle of the traditional definition deserves to be maintained: the duty to care for other generations. Intergenerational relations cannot exist without the acceptance of this principle. As the strict, financial interpretation of this principle cannot be upheld, we need to consider other avenues.

The dimension of the duty to care which the older generation has towards the younger generation concerns education and guidance. It is the government's task to provide for education of sufficient quality. A new definition of intergenerational solidarity must include the reasonable requirement that the cost of education be affordable. But it must also include intergenerational planning, featuring, for example, the construction of new school buildings and the timely renovation of existing ones, and the development and testing of new schooling methods, such as smart boards, tablet education and new ways of using classrooms. Rather than concentrating exclusively on the financial aspects of the issue, future intergenerational solidarity should comprise practical long-term commitments that will eventually fulfil the duty to care to the same extent that it is being fulfilled today. Construction projects or schooling technique inventions should not only be dependent on governmental financial resources but could well become projects in which citizens are called upon to share financial means, or offer in-kind contributions.

Therefore, the new definition of the duty to care should be dissociated from a purely financial perspective, with a view to reinforcing and acknowledging more societal involvement. In this way, the older generation can still engage in providing education and guidance for the young, making it possible for them to grow successfully into adulthood.

The other dimension of the duty to care, that is, the one that the active generation has towards the generation that is no longer active, is a more complex matter as it encompasses two aspects. The first aspect is the same as the one discussed above. The financial constraints faced by the active generation in caring for the non-active generation force us to revert to non-financial forms of care. Since the contributions to a transfer system of public means to pay for pensions and health care are projected to decrease over time, the current active generation is expected to manage personal savings to top-up pensions much more attentively. Governments should therefore encourage personal pension saving systems, for example, by making them more attractive from a taxation perspective. In Belgium, as in other EU countries, this is already the case. The transfer system of public means will have to be redefined, with a focus on contributions to society. The need for greater societal involvement to provide a helping hand has already been mentioned. Beyond this, one must also reflect on how the non-active generation could still be financed in addition to existing pension systems–-with a view to discouraging unreported employment. One idea might be to create a legislative framework for occasionally calling upon the experience of the non-active population, by issuing, for example, ‘65+ activity cheques’. These could be used to pay a non-active person for services delivered that are particular to this generation. This could include crafts training, or the upholding of traditions and rites in education. In this way, the principle that the older generation should show solidarity with the younger generation is upheld, as is, in part, the principle that the active generation should show solidarity with the non-active generation.

The second aspect of the duty to care that the active generation has towards the non-active generation concerns the practical consequences of the ageing population: the increased need for homes for the elderly, more accessible public transport, care systems and so on. As is commonly said, images of society in 2060 will show a greater number of older people walking in the streets, more grey hair in bars and restaurants, and more homes for elderly people. Today, when intergenerational solidarity is clearly financially unsustainable, it is the duty of decision-makers to reflect on how the consequences of the ageing population can be accommodated. When undertaking this exercise, decision-makers should also reflect upon the future consequences of today's responses to the changing demographic situation. This means that, at a later stage, there might be too many homes for the elderly or care systems may have become overdeveloped compared to the needs of the smaller population group that is now becoming the active generation. Thus, decision-makers should also reflect upon how the systems set up for a large group of those who are non-active can later be readapted for a smaller non-active population, and potentially for a larger active group. Such planning would be an example of successful intergenerational solidarity.

Conclusion

In this article, a plea has been made for a new definition of intergenerational solidarity. At present, the traditional image of a two-way street, in which older and younger generations have commitments and rights vis-à-vis the other, is often interpreted in a very objectivised, financial manner. Figures clearly show that, due to demographic changes and consequent shifts in the old-age dependency ratio, the active generation will at a certain point be unable to meet its commitments to the younger and older generations. On the basis of this perspective, it is argued that a new definition of intergenerational solidarity should be developed. This contribution has sought to feed the debate on a new definition by proposing an increased role for solidarity among citizens, in view of reaching better solutions together. The fundamentally Christian Democratic viewpoint of building a society in which everyone is able to reinforce each other should be, in my opinion, a crucial principle in this new definition. As the article has shown, this principle can be integrated in both the practical planning of future education and in the strategic overcoming of the challenges posed by an ageing population.

Certainly, this attempt to redefine intergenerational solidarity has shortcomings and might be overly idealistic. Nevertheless, the underlying theme of the article, written by a representative of today's young generation, is that it is useless to spend time blaming those who have arguably done wrong in the older generation and that the need to reflect on how to deal with an ageing population is indeed pressing. In this contribution, a number of practical suggestions have been made to illustrate the new perspectives on intergenerational solidarity. Future research could fruitfully investigate further avenues through which an increased societal role in maintaining intergenerational relations could see the light.