British lifespans are longer now than they used to be. The portion of life spent in retirement has - on average of course - more than doubled since the 1970s. Therefore household wealth has increased over that period. Any analysis of household wealth in the UK over time which ignores this simple and obvious point is simply not doing economics.
Which is what we need to know about the TU’s latest report - it’s not economics. From The Guardian:
Meanwhile, the rocketing value of property, private pensions and shares have helped the UK’s wealth to grow by 70% since 2010, with most of the gains going to the top 10% richest households. Since 1979, household wealth adjusted for inflation has almost trebled, gaining £7tn.
Yes, obviously, and why wouldn’t we want this to be so?
1970s lifespans were around 72 years. Today they’re more like 81. Given a static retirement age of 65 (which is about right for private, if not state, pensions) that means lifespan in retirement has gone from 7 to 16 years, a more than doubling.
Rational people provide for their retirement. As that quote states pensions wealth has risen. In fact, around and about, pensions are some half of household wealth. Further, from the ONS:
Median wealth was highest for households whose head was aged 55 years to under State Pension age (£553,400); the wealth of this group was 25 times higher than those aged 16 to 24 years.
Across that age distribution wealth is highest where the mortgage is paid off (well, likely to be so) and the pension pot is still being topped off before retirement and drawdown.
Pensions and household wealth interact in what are called lifecycle effects. Any analysis of household wealth which does not include lifecycle effects is not doing economics. The TUC does not include such effects in its analysis. The TUC is not doing economics. QED.
Note what we are not saying here - that if these lifestyle effects are included then everything is peachy. We also do not insist that they explain everything. We agree there are problems in the British economy, we even have some useful ideas of how to solve them. But what we do insist is that any analysis of wealth that does not include lengthening lifespans and pensions wealth is so incomplete as to be wrong.
We have other complaints as well - the conclusion to the report seems to be that at a time of galloping inflation and labour shortages therefore more government spending is required for the joys of the stimulatory effect of such spending. No, just no, really.
Whatever we do decide to do about the economy we must at least start from a useful economic analysis. This is not what the TUC is providing here - it’s not good economics, barely economics at all.