Austerity Distorts the Common Economic Interests between Generations

austerity political economy is a platform for justifying cuts in the social wage, which is any tax-financed expenditures on health, education, housing, and social welfare (Gough 1979; Shaikh and Tonak 1987). Raising the social wage raises nonlabor income, living standards for working families, and makes retirement -- and other forms of paid nonwork -- possible. A higher social wage increases the relative bargaining power of workers in the labor market. It is not a surprise that advocates for cutting social spending expenditures attempt to divide the interests and political strength of working families. Austerity political economics argues for cuts in benefits to achieve intergenerational equity. But cutting programs will hurt both the elderly and children. Evidence suggests that raising spending on the elderly will help children through a political process that distributes resources to working families and because old-age programs help promote economic growth by stabilizing the business cycle. Human societies do not create programs and rules to eat their young. Adapted from the source document.