Issue 202

SAVING MONEY ON AGE SPENDING – ESSENTIAL BUT DIFFICULT

Who is going to need us, who is going to feed us, when we’re 74?

Stone the crows! The Treasurer is softening us up for a higher age threshold for the pension. Labor has already increased it to 67 in 2023 and Mr Hockey says a 70 start may not be far behind.[i]

Fair enough too. The aged will be a big burden on taxpayers through the middle of the century. The Harmer pension review warned the percentage of Australians aged over 65 will grow from 13 per cent or so now, to 25 per cent in 35 years. And while compulsory superannuation will increase the number of part pensioners, the number of older Australians relying on the state for all or some of their income “will only decline slightly.” [ii]

John Daley makes the point that contemporary cost increases in age welfare have more to do with the generosity of John Howard’s concessions to the old than an increase in their numbers.[iii] Even so, a doubling in the pension population, even receiving a more modest amount, will not be cheap.

But surely there is a more fundamental point – people who live fitter for longer have a moral obligation to provide for themselves.

A decade back, Agnes Walker argued that with increased pension ages and flexible labour conditions half a million 65-70 years olds would work 15 hours a week, saving the state $4 billion in 2018.[iv] This good news is born out by Productivity Commission estimates that the labour market participation rate for 65-70 year old men will rise from 24 per cent in 2010 to 29 per cent in 2020, where it will stay to mid century. For women the 2010 figure of 11 per cent will increase to 18 per cent by 2050.[v]

But being keen to work and being in work are different things. It is just about universally assumed that people unemployed at 50 will never work again, certainly not at the pay grade of their last job. As Nationals Seniors’ Michael O’Neill points out, people aged 55 and over who lose their jobs take 72 weeks to find another one.[vi]  There are 150,000 unemployed people between 50 and 64, generally sitting in poverty waiting to qualify for the relative luxury of the aged pension.[vii]

Optimists suggest this will change as demand for workers exceeds supply with the participation rate among prime age and older workers not growing.[viii] But the decline in the growth of the labour supply, as the number of people leaving the workforce grows faster than the increase in new entrants, is not consistent across the country.

There will be more younger workers in capital cities – which is where the jobs growth will be.[ix]  And prejudice against old workers is so strong now that it may not diminish just because employers have trouble finding people they prefer. As Age Discrimination Commissioner Susan Ryan puts it, “We urgently need to address the structural, attitudinal and social problems that make businesses believe they should not employ older people or retain them in their workforce – we need to address age discrimination.”[x]

Ryan adds that employment discrimination against older workers costs the country $10 billion: “If people are in the workforce, they’re earning, they’re paying taxes, they’re saving superannuation, they’re out consuming things, they’re buying things. Now, all of these are big positives for the budget.”[xi]  (The Crows have no clue where the $10 billion comes from either).

Perhaps the federal government’s fall back is that if the boomers are not working they will be on unemployment not the pension. This would certainly save a bomb, the (single rate) unemployment benefit is $250 a week while the comparable pension is $380.[xii] If so, the Abbott Government should give the idea away while they are ahead.

Today’s unemployed are politically powerless, subsisting in mute misery. In contrast, the single parent lobby has made an enormous noise about Labor switching them to unemployment once their youngest child turns eight. And the boomers will howl much louder (there are a lot more of them) and longer (they assume the pension is theirs by right) if anybody tries to move thousands of 67 year olds onto the dole.[xiii]

That the government must save money on age spending is beyond debate, but this will be a very had sell. This leaves changes to the asset test and thresholds for part pensions as a source of savings – which the Abbott Government appears to think is too hard.[xiv]

 

This is no surprise – the boomers are easier to bribe than fight. And age and cunning ensures they are way too smart to surprise.

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Cases made, opinions explained, arguments sold.

 

Stephen Matchett 0417469093, stephen4@hotkey.net.au

 

ENDNOTES



[i] Rick Morton, “Prepare for a retirement age of 70” The Australian April 10

[ii] Department of Social Services, “Pension review background paper,” @ http://goo.gl/3oxWKB recovered on April 20

[iii] John Daley, “Budget pressures on Australian governments,” Grattan Institute, April 2013 @ http://goo.gl/PloEUb recovered on April 20

[iv] Agnes Walker Impact of health on the ability of older to stay in the workforce – with possible contributions to economic sustainability ANU 2004 @ https://digitalcollections.anu.edu.au/handle/1885/43183 recovered on April 20

[v] Productivity Commission, Economy-wide modelling of impact of COAG reforms: business regulation and VET, chap nine, Labour market 2012 @ http://goo.gl/04xFgv recovered on April 20

[vi] Sid Maher, “Tony Abbott urged to spare the poor, hit rich retirees,” The Australian, April 15

[vii] Norman Hermant, “Older Australians struggling one Newstart await better life on aged pension,” ABC October 29, 2013 @ http://goo.gl/zqP10d recovered on April 20

[viii] Peter McDonald, “Demand for workers will outstrip fear about resources, The Australian, May 10 2010

[ix] National Seniors Productive Ageing Centre, “Past, present and future of mature age labour force participation in Australia,” April 2014 @ http://goo.gl/tHooUk recovered on April 20

[x] Australian Human Rights Commission, “Raising the pension age will not work if older people are already pushed out of work,” April 11 @ http://goo.gl/ica3ZY recovered on April 20

[xi] Pat McGrath, “Pension age increase must be met with training for older workers: age discrimination commissioner,” ABC Radio, The World Today, April 14 @ http://goo.gl/PSpCQ4 recovered on April 20

[xii] Department of Human Services, Newstart benefit, @ http://goo.gl/huqU2, recovered on April 20, Department of Human Services, Payment rates for age pension @ http://goo.gl/Biiw0I recovered on April 20

[xiii] Department of Human Services, Changes to parenting payment, @ http://goo.gl/tlFFbU recovered on April 20

[xiv] Patricia Karvelas and Stefanie Balogh, “Pension asset test safe from PM’s axe,” The Australian, April 21

 

'2012