Older, wiser, richer . . . 'better than all the rest'

Forget left and right, haves and have-nots. A seismic shift is taking place that will create a new central social divide - old and young

A vast amount of guff has been written in recent months about ageing as a problem: the discrimination older people face in the workforce, the difficulties of funding pension liabilities, the burden on health care, and so on.

Much less attention is paid to the positive changes in those three areas which will result from this rebalancing of our population. And the problems of ageing are nothing compared with the problems we would face if our society were not ageing. Were our society not ageing, more middle-aged and young people would be dying, something which would rightly make us all pretty miserable.

It is business school jargon to retitle all problems as opportunities, but the process of a country's ageing is, in a sense, an opportunity. Handling this well will not only make its citizens happier and more fulfilled; it will also increase the country's comparative economic advantage in the world.

People are just beginning to talk about the social changes that will result from an older society. On Tuesday, the Carnegie Trust attracted the deputy governor of the Bank of England, no less, to its conference in London to do just that.

Fred Edwards, chairman of the Carnegie Third Age Programme, pointed to personal characteristics that would be reflected more in an ageing population. Older people would bring more wisdom, and they were less ambitious and less self-centred than the young. They showed more concern for the environment, and were more likely to provide services on a voluntary basis. He could have added that they committed hardly any crime.

Insofar as grand societal changes are affected by the age distribution of the population (and of course that is only one of many factors at work) it would seem sensible to expect developed countries over the next generation to become calmer, less materialistic, maybe less selfish, and certainly more law-abiding. Many people would surely welcome this.

Politics: one of the oddities of our present political debate is that intergenerational issues feature rarely. It is not just that the retired - one quarter of voters - are not an organised lobby. You hardly ever hear their interests advanced. When interest rates are cut, there is general rejoicing because of the help this gives to young home-buyers; there is no squeak of concern for the resulting losses to older savers. When last week the Labour Party dropped its commitment to link state pensions with earnings rather than (as at present) with prices, this was hailed as a sign of its fiscal responsibility. Quite right, for it was. But you would have expected the down-grading of the interests of the pensioners to have aroused some protest. There was hardly any.

Yet public finance is one of the frontiers where the interests of the young and the old are in greatest potential conflict. Large budget deficits are deferred taxation, transferring the burden of current spending on to the young and the unborn. That is what is happening at the moment. The surge in inflation of the 1970s and 1980s, on the other hand, transferred resources from the old to the young through the housing market.

As people come to appreciate the scale of these wealth transfers, the issue of fairness between the generations will become a hotter political issue. It may even be that the next great divide in politics will not be between left and right but between young and old.

But it is the third issue, economics, where the real crunch comes. The harsh statistic is the dependency ratio, the number of people of working age against the number of children and old people, which over the next generation deteriorates for every developed country. The plain fact is that increasing living standards is going to depend more and more on keeping older people in the workforce.

Here is the tragedy. Just at the time when sound economics suggests that people should be encouraged to carry on working for longer, something has happened in the labour market which is pushing in the opposite direction. Howard Davies, who as well as being deputy governor of the Bank is also president of Age Concern, pointed out that one-third of men aged 50 to 60 were now no longer in the workforce, either unemployed or inactive. On the Continent, it is generally worse. The burden of downsizing has been carried disproportionately by the fiftysomethings, forced into early retirement.

This is nuts. Howard Davies noted that for an economy to prosper it needed the best possible labour force and that cutting out the 50-year-olds removed skills that companies needed. Professor Tim Congdon, one of the Treasury's panel of "wise people", goes further. He believes that the exclusion of these skills is an important reason why the supply side improvements to the economy of the 1980s have not yet greatly increased the growth potential of the British economy.

When you get economics pointing one way and companies doing the opposite, there has to be an explanation. I think there are several. One is the way our system of pensions makes it prohibitively expensive for companies to employ older workers and advantageous to encourage early retirement. Another is actual discrimination, for it is still legal to specify an age in a job advertisement. A third is the lingering concept of an age- defined corporate hierarchy: that it is quite difficult to move older workers out of full-time, senior jobs into part-time, less senior ones without upsetting pay structures and pension rights. A fourth is the very concept of an arbitrary retirement age, invented more than 100 years ago when life expectancy was much less.

But this is changing. More people are becoming self-employed and so can carry on as long as they want to. Performers - not just actors and writers, but anyone whose pay is related precisely to his or her output - can carry on very successfully beyond conventional retirement age. And companies are learning to bring back retired executives part-time as consultants.

Using older workers efficiently may become a key to corporate success in the future - particularly since companies will increasingly find themselves selling to older customers too.

The customers, for their part, will have to be persuaded that it is actually worth carrying on some kind of work. There is a powerful argument for not taxing the earnings of retired people at the top rate that they at present attract because of their other income from pensions and savings. It is in society's interest that the old should be as economically active as possible.

It is the age of the aged. Older people will increasingly have the money, all the more so if they are encouraged to carry on in some kind of paid work. Expect to hear more about grey values; expect more attention to grey politics; but above all, expect more power from grey chequebooks.