MANY suspect governments of protecting increasingly wrinkly electorates over the young within the big austerity packages imposed since the financial crisis and recession. While youths have undeniably had a particularly rough ride within labour markets, the overall effects of the response to the crisis are a bit more complicated.

MANY suspect governments of protecting increasingly wrinkly electorates over the young within the big austerity packages imposed since the financial crisis and recession. While youths have had a particularly rough ride within labour markets, the overall effects of the response to the crisis are a bit more complicated. A new issue of Fiscal Studies, an economic journal, published today compares the austerity packages implemented in six European countries (Britain, Italy, France, Spain, Ireland and Germany) and would seem to provide fodder for those who think the young have been given a raw deal. First, look at investment. When there is a hole to be plugged, governments might be tempted to slash investment spending and maintain current spending. This is politically easier; current benefit claimants will squawk more loudly than those who might have used the now-cancelled roads. The papers show that in all countries other than France and Germany investment spending was cut more quickly than current spending--future generations are the main losers of this prioritisation.

Next, look at the packages of tax-and-benefit changes that governments used to curtail borrowing. The collection of papers compare net household incomes in 2014 with what they would have been if no policy changes had been made after the recession (2015 for Britain). They find that in France, Ireland and Britain, on average working-age household incomes were squeezed harder than pensioner incomes. In Ireland, where pensioners saw net income cuts of over 5%, one-earner households saw average cuts of 12.1%. The government protected the main pensioner benefit, opting to hike property taxes, introduce water charges and slash working-age benefits instead.

Only in Italy and Germany did working-age incomes fare better than pensioner incomes at the hands of the axe of austerity. But here one has to be careful. Germany doesn't really count--it hardly implemented any austerity. That is because the financial crisis did not blow a hole in the government’s public finances as it did with the others; in the run-up to the crisis its public finances were not buoyed as much by fickle revenues from things like the financial sector or property. And in Italy, though pensioner households saw cuts of 4.6%, compared to 1.9% for working-age households with children, and 2.7% for those without, the authors of the paper note that the reforms only marginally rebalanced a system that was already biased towards the elderly.

Looking at the snapshot effects of reforms to date could give a misleading picture of intergenerational redistribution. Savings in Italy were made by changing the rules for indexing pensions, which shows up as a cut to pensioner incomes in the short run, but cumulates in the long run into bigger cuts to the pension promises of younger generations. In other words, while the effect now is likely to be larger on the currently retired, over their lifetimes the picture looks less rosy for younger generations. Hopefully future generations will be so filthy rich that financing their parents’ pensions will be a breeze. Hopefully.

The other thing people point to support the idea that the young have been particularly hard done by is the huge accumulation of public sector debt over the financial crisis (see blog from Simon Wren-Lewis from Oxford University on this here). While it is possible for the debt burden to take its toll on future generations disproportionately, the alternative where governments had avoided taking on debt, and instead had slammed the brakes on borrowing even more quickly would likely have wreaked even more havoc on younger generations through the spill-over effects on the macroeconomy. As usual, the answer to whether younger generations have been screwed is "it’s complicated".