...In Chapter 4 we noted that intergenerational unfairness might occur if a cohort withdrew more from the welfare state than it contributed (...) Using historic levels of tax and spending for a series of cohorts each spanning 5 years, John Hills produced the data in Figure 8, which shows that “British people born between 1901 and 1921 are estimated to have taken out of the welfare state between 115% and 122% what they put in.” This net withdrawal falls dramatically for those born between 1921 and 1936 before rising again until “the cohort... born between 1956 and 1961, are forecast to get out from the welfare state 118% of what [they] put in.”
The expansion of government welfare support in the 20th century helped those who hadn’t already contributed; for example, we noted in Chapter 2 that the first cohort to receive the state pension did not contribute to it.
Figure 9 shows the results of two studies: Cardarelli, Sefton and Kotlikoff (2000)68 and McCarthy, Sefton and Wheale (2011). Both find the same basic pattern: younger and future taxpayers paying in more than they will take out, in contrast to their predecessors. The difference between the 1997 and 2008 calculations may suggest that changes over the intervening decade—not least the expansion of the public debt—have turned even those who were previously expected to be in surplus into a burden on future generations.
Source of the text and charts: Intergenerational fairness: What is it? Does it matter? Tom Papworth with Adam Corlett