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Australia's coming of age

Date

Tim Colebatch is The Age's economic editor.

View more articles from Tim Colebatch

It is economically imperative that we retire later as our lifespans continue to increase.

Illustration: John Spooner.

Illustration: John Spooner.

SOMETHING odd is happening to our labour market. Since December 2010, the adult population has grown by 386,000, while we have added only a net 95,000 jobs. You might think that means 291,000 more people are now unemployed. But no: the figures say there are only 21,000 more people unemployed now than at the end of 2010.

Then where are the other 270,000 people? It's a big question, with two big answers. One is that detailed figures show that our jobs market has deteriorated far more than our relatively benign unemployment rate suggests. That is now fairly well known, and well accepted by officials. I won't labour that point here, except in passing.

An ageing society is welcome: it shows we have achieved success where it matters. 

The second reason is not well known, but is even more crucial. Australia has passed a vital demographic turning point. Until recently, we were in what economist Chris Richardson called a ''demographic sweet spot'': the number of Australians of working age (taken as 15 to 64) kept growing faster than the number outside working age. That meant every year more of us were potential workers, relatively fewer were dependants, and this was good for growth.

Now we have passed that sweet spot. The population of Australians 65 and over is growing rapidly. That too has two reasons. First, the oldest baby boomers are now 66, making that swollen cohort eligible for all the incentives to retire early: taking our superannuation at 55 at low tax rates, taking it tax-free at 60, taking the pension at 65, and getting all the fringe benefits of concessions, free health care, lower tax rates, etc.

Second, the rapid advance of medical knowledge and treatment means Australians now live far longer after they stop work. The International Monetary Fund points out that the life expectancy of Australians aged 60 is rising at the rate of nine years every half-century. The life expectancy of 80-year-olds has risen by three years since the 1970s. That's great for us, but not for growth.

An ageing society is welcome: it shows we have achieved success where it matters. But it's a problem if we think we can afford to spend all those extra years in retirement. That implies a rapidly growing number of retirees will be supported by a relatively shrinking workforce of younger people. It can't work like that.

Labor, under Keating and Rudd, made modest shifts to adapt policy to the new reality of longer lifespans. By next July, women will finally have the same pension age as men. From 2014, the preservation age for superannuation will start inching up from 55 to reach 60 by 2024. And between 2017 and 2023, the pension age for men and women will inch up from 65 to 67. Is that enough to deal with the problem?

Let's look at the data. Who are the 270,000 people who have moved outside the workforce since the end of 2010?

First, 133,000 of them are people aged 15 to 64, the traditional working age. Two-thirds of them are male, and the number of working-age men not in jobs or looking for them grew by almost 8 per cent in 19 months.

There are some good reasons for this. A quarter are aged 15 to 19, and would once have had a part-time job. If full-time students now want to focus on study rather than seek part-time jobs, that's no problem. We also know from other data that more people over 25 are now studying full-time. And with each year, more men are joining the pioneering band of house husbands, who are the main caregivers for their children while their wives earn the bread. Cool!

Still, that leaves tens of thousands of working-age Australians, especially aged 45 to 59, who seem to have just dropped out of the workforce. That doesn't happen when the economy is strong. In the past decade, particularly among the over-45s, workforce participation rates mostly rose, not fell. It's another warning that the real economy is weaker than some of the data suggests.

But the main reason why so many more Australians not in work are not looking for work is the over-65s. On the (flawed) population figures used in the labour force data, since December 2010 more than half the growth in the adult population has been among people aged 65 and over. If that is right, the number of Australians of ''retirement age'' is now outgrowing the number of ''working age''.

That probably exaggerates the reality, but not by much: if it's not true now, it soon will be. On these figures, between the three months to December 2010 and the three months to July 2011, the number of Australians over 15 grew by 361,500 - and of them, 188,500 were over 65.

The good news is that many Australians aged over 65 don't see that as a reason to stop work. In the five years to July, the number of people aged 65 to 69 and still in work shot up by 117,000 or 72 per cent. The number retired grew by just 99,000 or 15 per cent. These are dramatic changes. On these trends, by 2014 full-time workers aged 65 to 69 will outnumber those aged 15 to 19.

Even among those over 70, in the past five years the number of them still in work has jumped by 32,000 or 40 per cent. One in every 100 workers in Australia is now over 70, and that will grow enormously in coming years.

Our changing attitudes should embolden our politicians to be more brave. We should start now to raise the pension age, and the age of tax-free super, to meet the crest of the wave of baby boomers, rather than moving after they've passed us. If 90 is to be the new human lifespan, surely 70 should become our new retirement age.

Tim Colebatch is economics editor.

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46 comments

  • Welcome to New Australia, annoying weekends have now been eliminated by the replacement of Saturday and Sunday with new work days of Juliaday and Swanday.

    A new calendar fridge magnet will soon arrive in your letter box, please ignore the public holidays, these were only included due to an unfortunate printing error.

    Minister Roxon has proscribed the wearing of individually tailored recreational
    apparel infavour of plain polyester overalls, a set of which will soon be
    issued to all worker-citizens under the WorkNow scheme.

    To encourage full participation in work related activities unhealthy injury inflicting
    sports will be banned on Juliaday and Swanday, a licence to smoke and drink
    will be available to citizens over the age of 95.

    Please enjoy the work of your day.

    Commenter
    SteveH.
    Date and time
    September 11, 2012, 8:34AM
    • Sorry SteveH - are you blaming a Labor Government for us all having to work longer and harder? I think you'll find that its Coalition Governments, in their never ending battle with organised labour over penalty rates, OH&S, holidays etc is the cause of this. Do you think that a Coalition Government would ever have mandated employer paid superannuation? It was LABOR governments who implemented pensions, veteran's benefits, medicare, gold cards etc etc. NOT, and never a Coalition Government who walk in lockstep with the employer peak bodies.

      It is also the case that we want a much higher standard of living than our parents or grandparents were willing to put up with. You cannot live comfortably on the pension, we want more - so we need to work harder and longer to sustain that lifestyle.

      I LOVE all your veiled references to a totalitarian state. Did the nasty Australian public not agree with your choice of government? Well, they must be an illegitmate dictactorship! They LIED, they COMPROMISED etc etc ad nauseum ad infinitum.

      I doubt that, apart from Howard middle class welfare, that a Coalition Government has ever introduced anything that benefits the working person. They might have done something by accident, but never design.

      Commenter
      Cadwallon
      Location
      Belgrave
      Date and time
      September 11, 2012, 10:54AM
    • SteveH: you've shot yourself in the foot on this one! If any party is going to tamper with weekend work and shift rates, it will be your mates the Coalition. This has been abundantly clear for a long time.

      Commenter
      Abbattoir
      Location
      Churchill
      Date and time
      September 11, 2012, 3:37PM
  • I am 50 and working 8 till 6 or later and already struggling to get through the week, especially when I am occasionally required to work till 10 and on weekends. And now Tim says I have to work another 20 years...I think I will conk out before 70!

    Any chance of allowing men a right to work part time? I know that part-time has been a women-only option but part-time would be a win for everyone. Very happy to take a 20% pay cut for a 20% hours cut but that's not something I would like to discuss in a job interview where everyone wants males to be available 24-7.

    Commenter
    Alan
    Location
    Melbourne
    Date and time
    September 11, 2012, 8:36AM
    • Sorry Alan - it looks like you will have to take much more than a 20% pay cut to get that part-time job!! Most women in part-time employment work in areas where low pay is the norm - think waitressing, retail, child care - all sectors where $15/hour is not such a bad rate (as far as I can tell by looking at seek.com.au). Luckily, I work in IT&T and get much more than that - at the price of being available 24/7. And with an added disadvantage - I look young enough to reproduce, so my stated willingness to work 18 hours days for the indefinite future is always met with a (very carefully worded) statement to the effect that, if - just if - maybe - I were to possibly fall pregnant...

      Commenter
      andilee
      Location
      Melbourne
      Date and time
      September 11, 2012, 1:00PM
    • Alan of Melbourne - 8:36 this morning - Pick your employer. I too am in my early 50s and I work for a major multi-national IT company. I also work part-time - 4 days a week - 80% workload for 80% of salary. The opportunities are there - you need to look and you need to be firm about not answering calls on your day off and not folding to pressure to work at home on days off (including week-ends). It may limit your chances of promotion but the life-style benefits are great.

      Commenter
      jme
      Location
      melbourne
      Date and time
      September 11, 2012, 5:16PM
  • Sorry Tim, all very good in theory, but where is the will of employers to employ these people who have to wait longer and longer for a pension? I was made redundant when I was 55 and now at 58 I've gone back to study and start my own small business because in 3 years of trying, I only started to get interviews when I totally deleted any reference to my age in my CV. I have held senior positions in charities and in the private sector and have plenty of experience, but employers don't want older workers (not even for call centres).

    Commenter
    John Holmes
    Date and time
    September 11, 2012, 8:56AM
    • For those of us (myself included) in physically undemanding work can work for much longer. Health permitting. If you work in the field, workshop or factory; your body is likely to give out much sooner.

      Even those of us IN office work are subject to the ravages of ill health too. There is no guarantee of health even in this age of wonders. A dear colleague of mine died at 51 last week after a long illness.

      Then there is the ravages of burnout, but that's a whole other story.

      Commenter
      Mark Harrison
      Location
      Brisbane
      Date and time
      September 11, 2012, 8:59AM
      • You make an important point. While I think Tim is right in general, there are some jobs that become quite difficult as you age. Not only physically demanding jobs but also emotionally intense/stressful jobs dealing with conflict and those that demand quick responses and alertness get harder as you get older, even if your health is good. Tim is probably right, but it needs to be thought through carefully. Hopefully the next generation will have enough super for the issue not to be as serious in the future as it will be for the next 20 or so years.

        Commenter
        dumb guy
        Location
        melbourne
        Date and time
        September 11, 2012, 9:45AM
    • The circumtsnace is not so much one of 'economics' as we seem to isolate the subject today but one of politics and economy. The true meaning of the subject matter.

      The truth being that the baby boomers, having made up the majority voting block in the past 30 years or so, have progressively voted themselves more and more at the expense of other generations.

      These 'nice' Mums and Dads who picture themselves as well mannered, purposeful people of some hitherto unachievable combination of intelligence and good grace are in fact the wrecking ball of history. Especially those who see themselves as middle class. They have voted themselves into negative gearing, superannuation handouts, health insurance scams, boom and bust speculative cycles, purpose driven inequity, private school hand outs and the wholesale corruption of Austarlian politics.They have encouraged politicians to simply search for the lowest common denominator 'law and order', 'border security', legislated gross invasions of privacy and so on. Politics is now not about real policy (like actually doing something about carbon emmissions and redeveloping a real education system (like the one that served the baby boomer so well, but which the 'aspirants' now seek to destroy)) - but simply the generation and maintennance of fear. Fear of the imagined scale of 'terror', fear of the refugees WE created, fear of the neighbour and fear of losing some illegitimate perk gained through the corrupt selling of their vote to a creep politician; that creep politician nurtured as a parasite off the back of the middle class baby boomers ceaseless greed and moral inadequacy.

      Commenter
      Boris Johnson
      Location
      Melbourne
      Date and time
      September 11, 2012, 9:01AM

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