Older workers have expertise based on years of experience and make an important contribution to the economy. Photo: James Alcock

I suspect if you were to ask many of those in their late 40s and older if ageism could hold Australia back, their answer would be “yes”. That disappointing view would invariably be based on their personal experiences in the workforce.

 Ageism will hold us back because, with an ageing population, we need to increase participation by older  workers in the workforce.The evidence over recent decades indicates older people are underemployed for longer periods than younger workers.  Australian Bureau of Statistics figures show more than 35 per cent of jobseekers aged 55 and over stopped looking for work because they believed potential employers thought they were too old.

As a society, we are discarding valuable older workers far too early. 

These older  people excluded from the workforce account for more than half the total number of jobseekers who gave up looking for work.

Older workers face ageist stereotypes and biases, especially in the workplace and in recruitment. These negative attitudes label them as too costly, too inflexible and too difficult to train.  As a society, we are discarding valuable older workers far too early.

To safeguard our way of life, we must maintain our incomes and keep people in jobs. In short, we need to keep the economy growing. One of the key drivers of long-term growth is widely recognised as having more people in the workforce.

Unfortunately, if we do not adjust our approach, the long-term outlook for Australia is lower economic growth. Why? Because our population and our economy are changing and that will impact heavily on our workforce participation.

 The government will soon launch the 2015 intergenerational report. The report is the most comprehensive examination of demography and current policy. It evaluates how these changes will affect the economy and government finances over the next 40 years.

 It will show there will be fewer people of traditional working age as a proportion of the population in the years to come. Over the next decade, the working population is expected to increase by 12 per cent, while the population over 65 is expected to increase by 36 per cent. That is, the number of people aged over 65 will grow three times faster than the traditional working-age population.

The number of people in the traditional workforce supporting those who have left the workforce will nearly halve over the next 40 years.

On the one hand, this a problem, because as the population ages and more people leave the workforce, tax revenues will struggle to fund the same level of government services we enjoy today. On the other hand, this is an opportunity to encourage greater workforce participation, especially among underappreciated and underutilised older people.

We must not fall into the trap of viewing an ageing population as a burden. Older  people will be critical to maintaining the economic growth that has underpinned the advances in our standards of living and quality of life.

According to the age discrimination commissioner: “As a society, we have been slow to recognise that millions of older Australians are locked out of the workforce by age discrimination. We are only now starting to understand what a terrible waste of human capital this situation represents; a loss to the national economy and to businesses large and small, and a loss to the individual who is pushed out of the workforce prematurely.”

Deloitte Access Economics estimates a 3 per cent increase in participation by the over 55s would generate a $33 billion annual boost to the national economy. A 5 per cent increase in participation, would see a $48 billion boost to the economy.

If Australia’s workforce participation rate for those aged over 65 increased to that of New Zealand over the next  10 years, this would result in a boost to Australia’s real gross domestic product of about $40 billion in 2024-25.

Older workers  contribute knowledge and skills based on years of experience and expertise. We need older  people working and contributing to our economic growth.

 Also, people who work longer accrue more superannuation savings and are less reliant on the pension during retirement.

There is a strong correlation between workforce participation and health status. Continuing to work  protects against physical ill-health and poor mental health. Data shows people staying in the workforce past retirement age tend to have better health compared with those not working.

Older workers also report the need for flexibility in their working hours or part-time arrangements so they can fit in caring responsibilities or manage sickness or disability.

The decline in participation rates of older workers only aggravates the problem of age dependency and rising social expenditures. Ignoring a pool of productive workers in the face of a falling participation rate will affect our economic growth.

If these trends continue, we as a society will be contributing to a decline in our standard of living. So let’s reverse the traditional attitudes, embrace a longer life and look for ways to redesign our lives so we can enjoy prosperity along the way.

Joe Hockey is the federal Treasurer.

Was I the only person in Australia who congratulated Treasurer Joe Hockey on his observation that the first person to live to 150 might already be born?

Not only have medical scientists confirmed the comment, the shock value of contemplating our 150^th birthdays should have had all economists, employers, business chiefs and mid-age individuals  focusing seriously on how to extend the working life of most Australians. Moving towards a stage where 70 rather than 60 becomes the average retirement age is what our economy needs, and what older people themselves are often seeking.

Health experts constantly remind us that the working older person is healthier than the non-working older person, and happier. These realities should provide a constructive context for the appearance of the Intergenerational Report. The IGRs, and we are up to our fourth, set out the long-term budget implications of ever-rising numbers of individuals living for more years on the age pension and public health, over a period where the proportion of the working population younger than 65 is declining.

The expenditures as predicted are unsustainable, but they are not inevitable. Obvious and realistic policy change would pull the figures into better balance, into “sustainability”. The objective of changing the ratios by increasing the numbers of older workers should be in this conversation from the beginning.

With past IGRs, positive policy opportunities have been drowned by waves of negativity about the unadorned outlook figures. The last Intergenerational Report spoke only of the “risks” and “challenges” of our ageing population, and the dramatic reduction of the proportion of those of working age to support those older than 65. It highlighted the pressures on health spending in relation to the ageing population.

It implied and was widely interpreted as insisting that all those older than 65 are in need of substantial and growing public support. It set up a dichotomy between younger/older as good/bad. It implied that ageing only meant illness, decline and burdening the public purse. The economic potential of older people was ignored. This approach perpetuates unhelpful stereotypes of older people and obstructs the development of a policy approach where younger and older generations can work co-operatively.

Why are individuals leaving paid work at 60, or often earlier, rather than 70? Even if they are more likely to live to 100 instead of 150, four decades without earned income and the satisfaction of work is too many. Age discrimination in employment is a huge barrier preventing older Australians from continuing in the workforce. One in five unemployed people older than 45 report that their main difficulty in finding work is that they are considered too old by employers. We know that one in 10 business respondents have an age above which they will not recruit – the average age is 50 years.

We also know that helping older people participate would boost our economy. Deloitte Access Economics research shows that increasing the number of Australians older than 55 in paid employment by 5% would result in a $48 billion impact on the national economy.

This can happen. The percentage of the people aged 55-64 in the workforce in Australia is 61.5 per cent, and has remained stable since 2012. Compare this to New Zealand, where the percentage is 74.4 per cent. Since 2012 Australia has dropped from 11^th to 13^th place for workforce participation of older workers among Organisation for Economic Co-operation and Development  countries.

The longer people work, the more superannuation they will have. The IGR is an opportunity to review the longer-term effects of the current application of tax benefits for super.

Like other “too hard basket” changes, this policy should be brought out of the basket and included in the discussion. Tax-favoured superannuation was originally introduced so that more people could achieve independence in retirement. What is the public policy purpose of continuing the provision of substantial tax benefits well beyond the point where individuals have achieved the means to support a high standard of living in retirement? Might not those tax benefits be better redirected to those whose retirement savings fall well below an adequate standard and who have only the age pension in prospect?

Providing age pension benefits to increasing numbers of individuals who possess well in excess of the means for a very comfortable retirement might not be best practice in targeting welfare dollars. Requiring high-net-worth individuals to make a larger contribution to the costs of their aged care could be in the interests of improved fairness and efficiency and improved quality of care.

I hope the Treasurer’s release of the IGR data will bring into focus some realistic and purposeful discussion around these policy directions.

I see this Intergenerational Report as an important opportunity to present what could happen if we stopped age discrimination and increased the participation of older workers. Rather than emphasising doom, gloom and negative stereotypes, I urge the Treasurer to show what would happen if we mitigated the worst-case scenario by leading the world in employment practices that embrace fairness and improved opportunity for older workers through flexibility, retraining, and intergenerational initiatives.

We all understand the population is ageing. Surely now we are ready to have a conversation about how to realise the economic and social potential this longevity represents.

Susan Ryan is Age Discrimination Commissioner.

Source:  SMH

Illustration: Glen Le Lievre.

The trouble with the way the media report developments in the labour market from one month to the next is that we don’t get a sense of the major shifts that occur over time.

So today let’s take a much longer view, examining the trends over, say, the two decades from 1993 to 2013. We’ll do so with help from an article by Professors Roger Wilkins and Mark Wooden, of the Melbourne Institute, published in the latest issue of the Australian Economic Review.

Note that this period covers most of the continuous economic upswing since the severe recession of the early 1990s. So most of the trends are reasonably good. It’s true, however, that we were knocked off track briefly by the global financial crisis of 2008-09 and in more recent years have suffered a slow deterioration in unemployment as the economy makes heavy weather of the end of the mining investment boom.

But that’s getting ahead of the story. Actually, it’s such a long story that today I’ll limit it to the side that gets least attention from the media, changes in the supply of labour. It’s best measured by changes in the “participation rate” – the proportion of the population of working age who are participating in the labour market by making their labour available, either by having a job or actively seeking one.

Taken overall, the “part rate” increased pretty strongly until 2008, when it began falling back. But all of this overall increase is explained by the increased participation of women, particularly those of prime age, 25 to 54.

There’s been a long-term slow decline in the participation of men. It’s explained partly by young males staying longer in the education system but mainly by older workers retiring earlier – voluntarily or otherwise.

But here’s where the story gets complicated. The trend to earlier retirement turned around at about the turn of the century, with participation by both men and women aged 55 and over rising significantly.

Got that? Now try this. Although more people are retiring later, the part rate reached a peak in 2008, has fallen since then and is likely to continue falling for years yet. Why? Because of the ageing of the population.

The trick is that even if the part rate is now rising in older age groups, population ageing means that an ever-rising proportion of the labour force is in those older age groups, whose rates of participation will always be a lot lower than the rates for people of prime age.

To show the significance of this ageing effect, the authors calculate that if the age structure of the population in 2013 was the same as in 1993, the overall part rate would be 2.2 percentage points higher than it actually is.

However, we do have some scope to moderate this demography-driven decline in participation. Wilkins and Wooden note that the rates of participation for 55 to 64-year-olds are between 7 and 14 percentage points higher in New Zealand than they are in Oz. If the Kiwis can do it, what’s to stop us doing it?

The part rate covers the quantity of people willing to supply their labour, but there’s also the question of changes in the quality of the labour being supplied.

The past 20 years have seen a big improvement in the skills – education and training – of the labour force, with the proportion of university graduates more than doubling from 12 per cent to 28 per cent. The proportion with any post-secondary qualification rose from less than 46 per cent to more than 62 per cent.

By the way, it’s likely that the continuing rise in women’s participation is largely explained by the dramatic increase in females’ academic attainment. The higher men and women’s level of education, the greater the likelihood they’ll be in the labour force – exploiting the commercial value of their skills – and the less the likelihood of them being unemployed.

Of course, another part of the labour supply story is immigrant workers. Immigration has long been a major source of additional labour and today accounts for more than a fifth of the labour force. What’s changed is that throughout the last century most migrants came on permanent visas, whereas today most come on temporary visas.

In March last year there were almost 900,000 people on temporary visas with work rights, including more than 200,000 on “457 visas” for skilled people and about 370,000 on student visas. If all these people actually participated they’d amount to 7 per cent of the labour force, the authors estimate.

Separate to this were almost 650,000 people on the special visas for New Zealanders, some of whom will prove to be only temporary residents. (Don’t forget Aussies have reciprocal rights to work in Kiwiland.)

We now grant about 125,000 457 visas a year and about 100,000 student visas a year. This compares with about 130,000 old-style permanent visas a year to skilled immigrants, many of which are given to people already here on temporary visas.

The authors observe that the shift towards temporary migration has probably had a big effect on the labour market.

“The availability of a flexible skilled immigrant workforce that can respond to changes in labour demand relatively quickly is likely to have improved the operation of the labour market, especially from an employer perspective,” they say.

Oh. Yes. To me the main drawback is not so much that employers may not try hard enough to find local workers to fill jobs, or that the availability of this external supply may limit to some extent the rise in skilled wages, but that it reduces employers’ incentive go to the bother of training young workers.

Still, we mustn’t forget that, these days, the economy is run for the benefit of business, not the rest of us.

Ross Gittins is the economics editor. Twitter: @1RossGittins

Source:  Sydney Morning Herald