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Setting the work bar higher

With the baby boomers getting older and dwindling numbers of younger workers to replace them, there has been a sudden interest in the ageing of Australia’s population. Not so much for purely social reasons but because the economic future of the country, its population and its government are at stake, as Gary Kleyn and Noel Dyson report.



ECONOMISTS estimate that, on average, half an economy’s growth comes as a result of an expanding workforce, while the remainder is attributed to a smarter, more efficient employment sector.

An Access Economics report, commissioned by the Positive Ageing Foundation of Australia, into possible solutions to the ageing issue concluded that a drop in the quantity and quality of the labour supply could put future economic growth at risk. This would, in turn, put more pressure on accelerating productivity improvements to deliver higher levels of growth.

Positive Ageing Foundation chief executive, and former Court Government minister, Rhonda Parker, said Australia had one of the earliest average retirement rates in the world.

“Australia first set the retirement age in 1909 at 65 years of age,” she said.

“At the time, the average life expectancy for the Australian male was 58.

“If public policy had kept pace with medical advances and the increase in life expectancy, by the year 2000 our retirement age would have been 81.”

Mrs Parker said her organisation, chaired by Dr John Hewson, was about changing community attitudes.

“Attitudes of older people about themselves, attitudes about older Australians, attitudes between generations and so on,” she said.

The Intergenerational Report released by the Federal Government in May estimated that the Australian economy would continue to track downward because of the ageing process.

The report says that, from average annual gross domestic productive growth of 3.4 per cent in the 1980s and 1990s, the 3.1 per cent expected in the current decade would fall to 2.3 per cent in the 2010s, and 1.9 per cent during the 2030s.

Access Economics believes 2002 represents a turning point for the workforce participation, which hovered between 62 per cent and 64 per cent during the 1990s. This year marks the peak year of baby boomer numbers reaching 55 and the start of the decline for workforce participation, particularly for females.

Instead of contributing toward economic growth, the ageing population will be a drain, the report says.

The report recommends the introduction of measures such as promoting better business appreciation of older Australians and making employers offer flexible employment arrangements, such as part-time or contract work.

“Removing financial incentives to retire early and retraining are important ingredients to increase mature age workforce participation,” the report says.

The report acknowledged that increasing the birth or fertility rate, or the immigration rate also could be methods employed by governments to tackle the problem.

However, it said it would be relatively ineffective and take too long to wash through and have any economic impact.

“Increasing the numbers of older Australians in the workforce is the most sustainable solution,” it says.

“Their increased participation offers substantial benefits, increasing available resources and averting a sustained period of demand out-stripping supply.”

Simply increasing the number of those above 55 years of age working by as little as 10 per cent could have a dramatic impact on the economy, eliminating any decline in economic activity. It will mean mature age workers would have more income to spend back into the economy.

In turn, the government would also be better stocked, with a reduction of $2.3 billion in funding requirements through pensions and health care by 2041-42.

May’s Intergenerational Report found that the total financing task would be $87 billion by 2041-42 if nothing was done to address the problem.

The increased wages bill may have an effect on company profits and reinvestment capabilities during the initial period, but within a short time the extra spending generated by the re-employed workers would encourage investment.

Mrs Parker said the benefits of encouraging people to work longer must be seen beyond just the economic numbers, however.

“There is also evidence to suggest that continued participation in the workforce has real social and health benefits – to remain an industrious, contributing, engaged member of society through work has both financial and health benefits,” she said.

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