WASPInomics and the magic avocado tree

Why boomers struggle to make sense of the millennial world.

Jeremy Corbyn has launched a new populist party¹, and one of the first topics raised in his pitch was compensation for WASPIs. These are the Women Against State Pension Inequality, a cohort of women who feel they were hard done by when the state pension ages for men and women were equalised. The merits and demerits of their campaign have been discussed at length, but I want to talk about a belief system that I believe lurks behind that campaign: avocadoism.

Photo by Bakd&Raw by Karolin Baitinger on Unsplash

Avocadoism is the idea that the reason millennials can’t buy houses is because they spend too much money on expensive luxuries like avocado on toast and fancy coffee. It sprang from the mind of an Australian millionaire with a penchant for making dumb statements for attention, but it captures a core belief - that millennials are actually well-off but profligate - that I would argue is common among Brits of a certain age, and subtly manifests in a range of topics from the triple-lock to the winter fuel allowance to the WASPI campaign itself.

There are different flavours of WASPI, which makes it hard to avoid straw-manning. It’s true that the official campaign focuses narrowly on the perceived lack of notice received by a specific cohort of women, but it’s clear from the WASPI forums that grievances run much deeper than that. Many demand - even expect - a reduction of the state pension age for women to 60 and tens of thousands in compensation, on the basis that this was their expected retirement age when they started work².

However you slice it, most WASPIs believe - whether they realise it or not - that millennial (and gen X/Z) taxpayers should compensate them because they feel uniquely hard done by. A core premise required to sustain that belief, consciously or otherwise, is that millennials are actually quite well off and can afford it. Which to many of you will sound ridiculous.

In this post I’m going to argue that they’re right.

Well, sort of. Because the past isn’t a foreign country, it’s an alien planet. Once you understand that, a whole swathe of boomer discourse makes a lot more sense.

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Let’s compare two 30-year-old women, mother and daughter, living in their different eras. Each earns the average household income for their time. Linda, a WASPI, is thirty in 1985; Jess, her millennial daughter, in 2015. To make this easy we’ll pretend they’re single women (as a proxy for households³), and convert all prices to 2025 pounds, adjusting for inflation. All data is from the ONS⁴.

At first glance, Jess is far richer than her WASPI mother.

At the age of 30, Jess takes home £26,300 after taxes compared to Linda’s £14,200. That’s roughly £35k to £19k gross⁵ - a huge difference. Not only does Jess earn much more, many goods are similar or cheaper in price. A box of tea bags and a pint of milk would have cost Linda £3.72 in 1985, but for Jess it’s now £3.20. Sure, some things are a little more - loaf of bread has risen by 11p and a dozen eggs by 50p - but this is insignificant when Jess has nearly twice as much income as her mother. The difference for electrical goods is even more stark: a basic colour TV costs Linda £900, and a microwave oven £600, multiple times what Jess would need to pay.

When it comes to income and day-to-day spending, Jess lives like royalty compared to her mother. She earns more money, the price of food is effectively halved relative to her income, and the range of food available is unimaginable to someone in 1985. Jess’s clothes are cheaper and her house is filled with better appliances⁶. Her electricity bill is slightly higher at £773 to Linda’s £640 but again that’s nothing compared to the rise in income. So far, Jess is on a completely different level.

Until we get to housing.

For Linda, an average house costs £86k. To secure a mortgage on that house she would need a 5% deposit, which comes to £4,300. You may be thinking I’ve slipped into 1985 prices by mistake, but I haven’t, these are still adjusted for inflation. Yeah I know.

Having saved the deposit, Linda needs to borrow £81k. Which is fine because it’s only 4.2x her salary, well within range for most lenders. Saving £4,300 on a salary of £19k is not quite easy but it’s extremely doable. It’s the kind of money you could save in 1985 by not buying that TV or microwave, and saving a tenner per week on the food bill for a few years.

For Jess, that exact same house costs a staggering £264k. In theory, a 5% deposit would come to £13,200, which doesn’t sound too bad, but in reality no lender would give her a mortgage that big given her £35k salary. The maximum she could borrow at a 4.5x multiplier would be around £157k, which means the deposit she needs to find - unless she can double her salary - isn’t £4,300, or even £13,200 - it’s a staggering £107,000. Linda’s deposit is basically a rounding error in comparison.

Now, 1980s Linda would correctly point out that Jess is taking home £12k more than her. Sure, a hundred grand sounds like a lot of money, but if Jess banked that extra income instead of frittering it away on fast fashion and fancy foods, she’d make it up in around 8 years. That’s annoying, but it’s not impossible, so why isn’t she doing it? It’s a classic Linda argument.

But Linda’s rent is £2,900 per year in today’s prices, while Jess pays a whopping £10,500. So that £12k difference is now a £5k difference, and that’s before you consider that the cost of a train fare to work is 380% of what it was, or that Jess had to go to university and rack up five figures of debt in order to secure the same entry-level office job that Linda or her husband walked into at 18 with a couple of A-levels.

There are too many variables to factor everything in, but even if Jess is a few thousand per year better off, and even if she banks all of that in savings, it would take her perhaps another 25-30 years to save up a deposit for that average home. In that time, Linda will have paid off her mortgage and seen the asset she owns rise by more than £170k in value. Suddenly Linda, with her crappy salary and miserable 1980s diet, is richer than Jess can imagine. The WASPI tortoise has outraced the millennial hare.

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Compared to boomers, millennials are both rich and poor at the same time, and I think it’s this duality that explains avocadoism, and makes inter-generational discourse so frustrating. It’s not as simple as ‘housing got more expensive’; the ratios between prices have completely altered in a way that makes the economics of a modern young household utterly incomprehensible to retired homeowners.

The idea that millennials could afford houses if only they cut back on avocados makes complete sense to people who needed £4,000 for a deposit in 2025 money, for whom food prices were effectively twice what they are today once you account for their lower income. Boomers bought houses at a time when saving a couple of pounds per day taking a packed lunch to work would give you a house deposit in eight years. For a millennial this would take two centuries.

Ultimately, if Linda gets her way it is Jess who will pay her compensation. Government money does not grow on a magic tree, and there is no convenient pool of rich people big enough to balance the books, refloat services and pay extra benefits to everyone who feels aggrieved by generational injustice. The billions that WASPIs are asking for would have to be paid for by ordinary people working today; either directly through broad-based taxes, or through worse public services, or through greater interest on a larger national debt.

But it turns out that Jess has already paid that compensation. She paid it when she bought that house for £264k, handing a cool £150k to Linda - or some other boomer household - in profit. Assuming a 5% deposit and 2015 interest rates, if house prices had remained at 1985 levels (adjusted for inflation) - Jess’s monthly mortgage payments would have been around £389. At 2015 levels, the same mortgage would cost £1190. That’s an £800 pound per month drag - £9,600 per year - and far more than someone on that salary pays in income tax and NIC combined.

If nothing else, it shows what an absolute catastrophe Britain’s housing policy has been for the last four decades, how much it’s eaten away at our living standards and our ability to fund services through broad-based taxation. And now Linda and her peers, having collectively won the housing lottery and captured vast wealth from future generations as a result, want to come back to their sons and daughters for more. Sons and daughters who will never see a state pension at 65 like they did.

It’s an incredibly… selective understanding of generational inequality, but then most of the money Linda makes will remain locked-up in her house, waiting to fund unsexy things like care or retirement. She never got to have avocados for breakfast.

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A quick disclaimer: it’s hard to pull together precise numbers for most of this stuff and I haven’t tried to turn this into an exercise in precision, most numbers will be debatable or slightly off. If anything is massively off do please raise it in the comments. The choice of dates is fairly arbitrary - an average WASPI vs 30 years later - and obviously I’ve used the women as a proxy for their households for clarity of writing. The point in all of this is the order of magnitude and the fact that ratios themselves have profoundly changed, and short of massive errors - which are entirely possible and if you find one please comment! - the point should stand. I’d be fascinating to see others do the same working and see what they come up with.

Don’t forget to check out this week’s pod:

Can Jeremy Corbyn save HS3?

1. I could try to clarify the details and machinations involved or even what it’s supposed to be called but let’s be honest, none of us want that.

2. Apparently they did not get the memo about what the ‘I’ stands for.

3. Obviously a lot of women in 1985 would be in households with a husband bringing in some/all of the income, but it doesn’t really matter to the point, and I didn’t want to keep writing “Linda’s household…. but Jess’s household…” because it just makes it harder to read.

4. Largely retail price index, rental index, housing index. Ultimately some of these figures will be off and you can never make a perfect comparison, but I think the overall point and orders of magnitude far outweigh any minor inaccuracies here and there.

5. I’ll be honest, it’s very hard to work out what £14,200 net would correspond to in gross salary in 1985, but I assume it’s with a grand or two of £19k - it doesn’t really matter here.

6. But not an air fryer yet.