Pensioners, voting & interests

Mark Carney says, correctly, that economic policy has made things "extremely difficult" for pensioners and savers.This highlights the fact that many people don't vote in their own rational self-interest.

What I mean is that there is an obvious alternative to the current economic policy. A looser fiscal policy would benefit pensioners by raising interest rates. This isn't because bond markets would take fright, but simply because such a policy, in tending to strengthen the economy, would reduce the need for QE, reduce investors' demand for safe assets, and bring forward the time when short-term rates would rise. In this way, annuity rates and savings rates would be higher, to the benefit of pensioners and near-pensioners.

You'd expect, therefore, older people to be more hostile to present policy than younger ones - because whilst many older folk have savings and are hurt by a tight fiscal/loose monetary policy mix, younger people with mortgages gain from such a mix.

But this is not so. A recent poll (pdf) found that over-60s split 37-34 in favour of Tories over Labour whilst 25%-49% year-olds split 33%-47%. And slightly more over-60s think the government is managing the economy well than do 25-49 year-olds: 35% against 31%.

It seems, then, that the government's attack upon the living standards of older people has not provoked the sort of hostility which you'd expect from a rational selfish electorate. (Sure, some older richer people are switching to UKIP - but I'm not sure this undermines my point.)

Why not? One reason is that narrow economics isn't everything; people support political parties for all sorts of reasons.

But I suspect something else is at work - a corrollary of the availablity heuristic.

Although the link between fiscal austerity and nugatory savings rates is obvious to economists, and to anyone else to whom it is pointed out, I suspect it is not so to many voters. And the Labour party is not drawing attention to it: Ed Balls is not touring the country saying "my policy would raise interest rates" even though, if it is any use at all, it would do so. The fact that the Tories are exacerbating the squeeze on many pensioners' incomes is, therefore, simply not available or salient to many voters. And so it is underweighted in their minds.This helps sustain Tory support among older folk.

It's a commonplace - to we Marxists at least - that ideology prevents (some, many) workers from seeing where their interests lie. But maybe ideology doesn't distort only workers' perceptions. 

Comments

[Britmouse]

"A looser fiscal policy would benefit pensioners by raising interest rates"

Just like all the "loose fiscal policy" which Japan tried? Those deficits sure got interest rates up!

[Britmouse]

I may have said "interest rates" when I meant "the public sector debt burden" in that last comment - forgive me.

;)

[Shinsei1967]

Surely the reason more pensioners don't make a fuss is because they realise their kids (and thus their grandkids) are struggling with mortgages at current low rates, plus higher weekly food, energy and petrol bills.

Not really in their extended family's interest for mortgage rates to double.

[chris]

@Sinsei1967 - I'm not sure about that. If it were so, you'd expect younger people - who have more to lose from rising mortgage rates - to be more supportive of govt policy, and more hostile to Labour. This is not so.

[Lurker]

Plenty of pensioners are skint and don't have savings- some even have mortgages. Not that I'm disagreeing with your thesis- but some pensioners might wish for a looser fiscal policy in the hope of generous benefits.

Indeed, arguably pensiobners are the only group continuing to benefit from government largesse- NHS spending sustained, winter fuel and bus passes retained. Maybe if the government cut those pensioners would be less keen on the government's "economic" policy.

[Chris Purnell]

OAP's will get 2.5% increase on their pensions & all their 'perks' are now inalienable rights. Poor pensioners are also uneffected by the additional living space rule, nor are they effected by council tax payments (unlike the working poor). Pensioners are a protected breed and they do vote, and think, rationally.

[Blissex]

Oh please the argument that low interest rates punish pensioners is ridiculous!

The entire rationale of a low interest rate, low wage policy practiced by the Coalition is to keep house prices as high as possible, and indeed instead of collapsing to realistic level they have merely decreased a bit.

About 60-70% of voters are landlords, and while there are few pensioners with mortgages, the vast majority of pensioners own the majority of equity in their houses and sit on massive tax free capital gains, as long as house prices stay high.

As long as house prices stay high, rents will be high, and currently pensioners can get 8-12% on the current price of their properties from rent, a current price that is probably 3-4 times the inflation adjusted price they paid, which means that rents represent a 25-35% return on the real prices they paid.

The pensioners who read the Telegraph and the Daily Mail are mostly in that category, they are the core Tory voters, and they are entirely focuses on ever higher house prices and rents and ever lower wages.

Even more interestingly politically the majority of property owners is middle aged or retired female voters, many because they are divorcees and widows, and middle aged and older female voters are critical "aspirational", "striver" swing blocks in most marginal constituencies, and the Tories are desperate to please that block of swing voters, at any cost to useless nobodies like the disabled and the unemployed or renters, which are overwhelmingly male and northerners.

PS: In ToryNewlabourSpeak "aspirational" "strivers" means "petty bourgeoisie of property speculators who got a windfall of massive tax free capital gains or expect to inherit such a windfall".

[gexton]

I may have said "interest rates" when I meant "the public sector debt burden" in that last comment - forgive me thankyou

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