Retirees are outpacing and getting richer: The generational gap in Spain in five charts.

The crises of the 21st century are unevenly affecting different age groups, and at the same time, there is a growing imbalance in the size of generations due to declining birth rates and increasing life expectancy. The number of people who must support pensions for the elderly through their labor is decreasing, while their wealth and incomes are at a lower level compared to older generations. This transformation did not exist before the financial crisis and became entrenched after the pandemic, despite the fact that the causes of both recessions and the political responses to them were different.

People over 65 years old in Spain

They already outnumber children under 20 and have a better socioeconomic status compared to other age groups. Since 2012, they have surpassed all worker groups in income, reaching the largest gap in 2020, the worst year of the pandemic. Data published on Monday by the National Institute of Statistics of Spain in the Survey on Living Conditions (ECV) quantitatively defines the income gap: in 2022, the average net income of people over 65 was 26.2% higher than that of youth aged 16 to 29. They also outpaced the income of young adults (aged 30 to 44) by 15% and the income of people aged 45 to 64 by 6.1%. Although the gap has slightly narrowed compared to 2019, it still exists.

Older people were guaranteed income.

In the years following the financial crisis, workers had to face job losses and wage cuts. Subsequently, pensions were revalued over several years, even exceeding inflation (in 2014, 2015, 2016, 2019, and 2020), which led to an increase in purchasing power. In 2021 and 2022, pensions for key sectors were raised in accordance with the consumer price index, or there was an additional compensation payment for insufficient growth.

Public benefits account for 77.9% of income.

For people aged 65 to 85, according to Fedea, while for youth aged 17 to 30, it is only 26.1%. In fact, old-age pensions have almost consumed all the increase in social protection spending over the past 10 years, which is due not only to the political decision to raise their value but also to the fact that the retiring cohorts are becoming larger and have higher pensions.

New retirees receive more.

Those who have been working for many years have a more successful career trajectory, which developed during Spain's economic opening after the autarky phase during the dictatorship. This contrasts with the intermittent employment relationships and low wages faced by young people born after the 1980s. Although these characteristics still exist, they have improved following the labor law reform in 2022, particularly after the reduction of temporary contracts. This, along with strong job creation after the pandemic, has reduced the generational income gap when comparing 2022 to 2019.

In addition to a successful career, older people also tend to have more real estate and financial assets.

What provides them with high incomes and wealth.

This means that the demand for rental properties is increasing, and ownership of these rentals is also becoming more concentrated among older people, as shown by the Financial Survey of Households by the Bank of Spain. The wealth of those over 65 in other real estate, apart from their primary residence, increased by 22% between 2008 and 2020 in real terms (i.e., adjusted for inflation). They are the wealthiest group due to this factor, which was not characteristic of 2008, let alone 2002.

The same trend is observed in financial assets, where the value of assets held by individuals over 65 nearly tripled between 2008 and 2020, making them the age group with the highest wealth in this category. These two factors, along with pensions, contribute to them being the wealthiest segment of the population. As a result, the current generation of retirees is very different from previous ones: they lead in income and wealth after decades of economic growth and are less susceptible to the crises of this century. In fact, there is a whole business shift aimed at capitalizing on the purchasing power of older consumers, which did not exist several decades ago (the so-called silver economy).

All of the above confirms that people of retirement age experience less poverty. According to the Survey on Living Conditions, 20.9% of people over 65 were at risk of poverty or social exclusion in 2022, the lowest figure since 2019. This percentage is 34.3% for children under 16 and has been continuously and monotonously increasing since 2019. As a result, Spain ranks first in the EU for child poverty and has attracted the attention of organizations such as the OECD. This rate affects the fact that households with children were the most affected by inflation in 2022. Their incomes decreased by 7% in real terms for single parents, by 0.2% for families with two adults and children, and by 1.4% for other families with minor children.