I’m working on a longish piece on how to pay for the global financial crisis, and it seems like a good idea to deal with some side issues separately. One of the standard post-crisis responses of governments, i has been to increase the age at which people become eligible for public old age pensions. This change is likely to flow through to other policies, for example by shaping the presumptions around the tax treatment of private retirement income.
I want to step away from these financial positions and ask the question: does it make sense, in general, for people to retire at older ages than in the past? For those who want the “shorter” version, my answer, on balance, is “Yes, at least in Australia”.
There are two main factors that should influence the age at which we retire. First, improving productivity means that any given standard of living can be achieved with less work, and we would expect at least some of this benefit to take the form of an increase in leisure, including more years spent in retirement. Second, and going in the opposite direction, we are living longer and (because of higher education levels and increased difficulty of entry to the workforce) starting work later[1]. So, with a fixed retirement age, the number of years out of the workforce is increasing, while the number in the workforce is decreasing.
At least in the Australian context, the second of these factors is dominant. In the last 30 years, the expectancy of remaining life at 60 has risen from 18 years to 24. I’ll guess that average age of entry to the workforce has also risen by about 5 years, say from 17 to 22. That implies a “typical” 1980 life course for full-time workers retiring at 65 of 48 years with 30 years pre- and post-work. The comparable figures now are 43 and 41. So, a proportion of the productivity growth in this period has been used to reduce the proportion of lifetime years spent at work, from over 60 per cent to just over 50 per cent.
By contrast, at least for full-time workers, there has been no reduction in annual hours of work. Official full-time conditions were fixed in the early 1980s at 38 hours/week with four weeks annual leave + public holidays and some long-service leave. That hasn’t changed, but there was a big increase during the 1990s in people working longer hours, and that’s been . Given that prime-age adults also have responsibility for children, this doesn’t make a lot of sense.
Those who think employment conditions reflect voluntary bargaining might argue that this apparently unsatisfactory outcome must reflect the preferences of workers and employers. I don’t buy this, at least as far as workers are concerned. But even if it were true, preferences are affected by policy settings such as pension ages. Leaving the pension age unchanged when life expectancy changes pushes people to work harder since their required savings increase. This is, on the face of it, a bad outcome. So, it makes sense for public policy to encourage later retirement, and discourage ultra-long working hours.
fn1. This assumes that time spent at school/uni should not be regarded as “work”. There are some complex issues here I’ll try to discuss more.
John Quiggin 
A couple of years ago there was a provocative paper at an actuarial conference arguing that we should abolish retirement ages entirely, and instead strengthen disability benefits for people who can no longer work. In many ways that was the original of the original age pension – age being a much more impartial way of testing disability than invasive medical evidence. Their website is down at the moment, but I’ll come back and link to it if it comes back soon.
I am not sure about your argument here, John.
First, the justification usually given for extended education is economic. Education is an investment that benefits the nation. By implication, the extra cost is recovered over the shortened working life.
Secondly, alteration of the pension age would seem to me to have equity and distributional arguments that need to be discussed. For example, it assumes not just that work is available, but that people can do the work. I am not sure that this is true for those in occupations demanding physical strength or dexterity.
To a degree, the type of change (extended working life) that many argue for is happening already with the reduction/removal of compulsory retirement ages.
I think you have recognised the problem but how do you fix it? This issue seems to be causing a lot of problems with public finances of places like Greece and California.
It seems that public servants such as Police and Fireman are retiring at age 50 on 90% of their salary due to ‘stress’ and then under taking a second career. This is sending the governments broke.
What sort of policy setting would you use to address this problem?
If you reduced the pension by the amount earned in their new job there would be no incentive for them to continue working.
If you reduce the benefits you get into all sorts of problems with genuine early retirees who are not able to start a second career.
.
JQ there is of course the other major factor which is very hard to measure – work satisfaction and the work place environment. I am under sixty and have recently retired (self funded) and have no desire to resume full time work for anybody. The last few years where I worked in a very senior management position became very unpleasant for me personally, the final straw was being subjected to the ministrations of a lunatic CEO, a work place psychopath who as the CEO proceeded to set out to demoralise and destroy anybody who they felt may be a threat or would not be subservient to his views and ideas (no matter how wrongheaded), all of the senior management have now left and it is only a matter of time before the organisation is faced with a catastrophe. In that environment and my age I chose to retire, it has meant less future income and required a number of major readjustments but I made the right decision.
I will still work and keep very active studying for another university degree and we bought a farm some years ago as a bolt hole. When it rains again in good measure I may be able to start farming again which has been on hold now for several years – I thought very carefully about it all and the view I came to was the extra income and work place involvement did not tip the balance to not retiring. Still the law of unintended consequences remains and there is no amount of careful planning and thought can stop you being clobbered by mother nature and we won’t even mention what the GFC continues to play hell with my finances. Still no regret, if you can go early, go, you only have one life and working very long hours together with the stress of a crap work place is simply not worth it.
@Jennifer
taking the incrementalist approach to change I would favour getting rid of any compulsory retirement age and going down the disability route. That is, if you want to work and are able to then you should be supported in that decision – if you can’t find work or are unable to take work on then you shoud be supported as a member of the community.
However we desperately need cultural change to further the view that older people are actually capable. Ageism is the norm in Australia. Furthermore we need greater diversity in the economy to allow for greater diversity in economic roles. Whilst many 70+ have a great deal to offer, not a lot of them are going to be productive ‘down pit’. Similarly greater flexiblity in the workplace is needed – not the fake flexibility we have now, where people are employed part-time or causal but forced to work extended hours or not get re-employed, but real flexibility that acknowledges actual human capabilities and needs as primary, not as ‘costs’
Two minor notes – it may be the case that increased productivity can lead to increased leisure but that is not a necessary link. It may also be the case that years in education are extending but, in the main, those years coincide with work – often deep into highschool
Answer to thread heading.
NO. Its my super and Ill get it when I want to. I dont want anyone telling me if I can work past the old retirement age, when I started putting into super and when I was told the retirement age.
Ill sue them for breach of contract.
I want my money, when I was told I could have my super, some decades ago when I started paying super. Not when some new politician decides I canmt have then after all.
Thankyou – and they can get their hands off it…and so should everyone else. Any takers out their for a massive class action?
I dont give a damn what any do gooders think here about when people should work to. As if they know individual circumstances. As if they should.
I want to work to the retirement age I was told twenty years ago when I first started putting money into this slush fund they call super for governments and fund managers.
I think the question is not “should we retire later” but, for those of us under 50, “will we get the chance”? The inevitable change in retirement rules is going to be a massive source of inequity between baby booomers and those who come afterwards. Pensions and defined benefit super schemes are obvious pyramid schemes. Retirement age 65 was set when male life expectancy was no more than 70-72. Retirement at 55 is ridiculous when life expectancy is now closer to 80. The longer reform is put off, the greater the change needed, and the greater the inequity.
That being said, if we enjoy our jobs, it isn’t such a problem. If our jobs are a micro-managed hell, it will be quite painful for some, particularly when combined with rising working hours, rising obesity, and potentially declining life expectancy for many. So if we could get back to more reasonable working conditions, and a better work life balance, this sort of reform would be more acceptable.
Ever since I read David Foote’s “Boom, Bust and Echo” some years ago, I realised this question can only have one answer.
@Socrates
The only answer Socrates…is …for some the workplace is hell…for others they like it.
So give the people the choice. Simple. Dont dictate changes to retirement age and try to force it on all. Isnt that what we have now? In other words work past retirement age “if you want to.”
What is wrong with that? Nothing. If the government needs to save its fiscal budget – they can use the super profits tax, and the tax haven tax and the executive bonus tax, and the capital transfer out of Australia tax, and the corporate tax avoidance tax and there is a lot more I can think of.
Ill also bet a few libertarians in here arent in favour of giving people choice over their retirement age. Libertarians – yeah sure.
Alice, please stick to one comment/thread/day
You should retire whenever you want, if you can fund it yourself in its entireity.
Means tested pension should kick in between 67 and 70 or so.
We should, if anything, retire earlier.
Or at least have the option to do so.
Simply because life is better when retired [voluntarily].
I started work at age 13 [20-50 hours per week all year] whilst still at school and worked to put myself through uni and then worked full time until age 50 when a [moderate] package and some voluntary part time work and a high earning spouse got me to superannuation age at 55.
Then spouse joined me a few years later
Not high income but adequate for our purposes.
And a full and enjoyable decade or so it has been, hobbies, travel, the pursuit of things we love to do separately and together with a lot of unpaid voluntary community work thrown in.
I consider us contributing positively to our society both in the past and the present and currently enjoying life as we wish.
Why shouldn’t everyone have that choice if they so wish?
OK, how do we organize that becomes a major issue but it should at least be on the social agenda and it should not be assumed that the years of official ‘work’ must necessarily be extended in the future.
I think people should understand that when the old age pension was introduced in Australia in 1910 – 100 years ago this year – the average life expectancy of an Australian male was 58. For a child born today, the life expectancy is over 80 years – the details are in Australia’s Health, available as a download off the AIHW website (www.aihw.gov.au). The Healthy Average Life Expectancy (HALE) is something like 90% – or in other words, you will have something like 8 years of sickness and poor health in your later years.
So if we are living longer, and being able to participate in the workforce longer, we better get used to it. In my case, I’m coming up to 49. I’ve come back into a job at the age of 42 with a defined benefit super scheme, so it’s worth my retirement payout/pension to stay around till a minimum 65, and possibly 70, so that I can have a half decent retirement income, because based on the longevity of my parents and grandparents, I’ll be around into well into my 80s and likely into my 90s.
Although I started working fulltime when I was 18 and had my ups and downs, I look at my father who started fulltime work at the age of 12 in the 30s doing trades and hard physical labour – he’s a WW2 Digger just passed 88. Even I realised as teenager that my father was looking weary at the age of 60 in the early 80s, but I’ve come to the realisation that I’ll be powering on at the age of 60 in the early 2020s. My job is interesting (eHealth policy) and will keep me entertained for the next 10 years if I want to stay.
Everyone in my agegroup and situation (people starting over in their 40s) realise that the old age pension age will keep receding when we think we’re old enough to qualify.
@jquiggin
Yes sorry JQ – I post when I get home from work and I simply cant believe the rubbish people post when Im working about ideas for when other working people can access their super and should retire and they wonder why the green vote is rising. Ill keep to one comment per thread / day.
Australia has gone completely mad with some people telling other working people whats good for them (when it really isnt).
Many older Australians are today between the devil and the deep blue sea. They need to work but because they are over 45 they are “too old”. If they have managed to accumulate some savings they are too rich to access $234 a week Newstart benefits until they are down to their last $500. It can be a great relief to get a $330 a week Disability pension that comes with concession card and no job search requirements.
Like my mother and my sister I also haven’t worked since I was 52. Perhaps there is a use by date on technical skill sets.
In the 1960s factory workers and tradespeople started work at 14 or 15, clerical workers started work at 17 and graduates at age 21, about 5% of the population went to university. Today university graduates start a permanent job at age 25 after completing “internships” and a cocktail of part time jobs, kids can’t leave school until aged 17 – sheer torment for all.
Australia would be able to fund our old age if it wasn’t squandered on the superannuation products sold by unregulated cowboys that we are forced contribute to. Clean up the superannuation industry and use skilled managers rather than mediocre incompetent insurance company hacks.
As BB pointed out, our current superannuation system doesn’t cover people who work in multiple jobs, it’s still geared to having one employer for the last 25 years of your working life. Many people are sacked before they can access their pension. It’s definitely not geared to the older worker with multiple part time jobs and an SMSF
Changing the superannuation system by the simple expedient of a central clearing house for superannuation, abolishing employer based superannuation funds and the super contribution being taken out when PAYG tax is would go along way to reducing the ageism in the Australian work place.
I think living conditions are becoming harsher for most Australians and future generations just won’t live as long as those people born between 1918 and 1960.
While ‘work till you drop’ does have a certain ring to it, and those who remain healthy can often continue to engage in productive mental activity, and sometimes even into their second century, for those who earn their living in manual labour it is another matter. Even in developed countries, they can simply be worn out, and I think they do deserve the chance to retire. They, also, are not the ones who have the great life expectancy, or the expectancy of health in old age, so for those reasons also, they should get a retirement option.
As for the former group, still it is probably best to provide options for transitioning to a quazi-retirement, with some work but more recreation time, and planned downtime so the new components (hearts, livers, hips and so on) can be put in (and many would appreciate those options).
There has been a lot of modelling done on the implications of the demographic change, but a lot more things may be on the horizon than this issue alone, so it is far from clear exactly how much of a problem the demographics will end up being. The real risks are probably macro, with the old folks suddenly withdrawing on mass from super funds with asset price and exchange rate implications. With all the modelling of this, and the other impacts, I would think too many important details would be left out to really be confident about what may happen. I’d have to go with Yogi Berra on this one.
@JQ “There are two main factors that should influence the age at which we retire. First, improving productivity means that any given standard of living can be achieved with less work, and we would expect at least some of this benefit to take the form of an increase in leisure, including more years spent in retirement.”
I don’t know how old you are, JQ, but surely you remember the advent of computers which were going to provide the paperless office, enable us all to work from home, and increase our leisure time. Huh! What we have now is more working hours connected to the workplace through “advances” in technology.
In my final two years I was lucky enough to be able to adjust my hours to part-time work, and finally retired at 68. This was necessary to pay off my mortgage, but my health suffered badly and I definitely could not have held down a full-time job by that age. I am of the generation of women who have little superannuation.
I would suggest that real, not sham, flexibility must be built into all workplaces – not flexibility that only benefits employers, but one that allows mothers, the chronically ill, and the older workers to participate as fully as they can. I ran a small office and it worked well, making use of the best talents of people who were unable to contribute full-time, but gave of their best in a sympathetic environment. There are many older workers who are slightly limited in their physical strength, but whose mental capacity is unaffected.
No question, ageism is still pervasive. From the age of 60, I was regularly asked when I was going to retire. Just raising the retirement age will not change that attitude.
I have
JQ,
If the payment for the financial crisis (ie the conversion of privately generated debt into public debt) is not the issue for extending the pension age then I can’t see why there is a problem. The compulsory retirement age of 65 has been abolished. Hence those who want to and can find suitable work for longer periods are free to do so. Furthermore, if my memory serves me right, people who are likely to rely on the age pension are those who helped out during the Hawke government with wage restraints (‘Accord’), who were made to work under workplace agreements, introduced by the Keating government, and whose personal income taxes were not the first to be reduced during the Howard government. The workplace agreements provided the conditions for cases as described by MH; workchoices under Howard made the problem obvious for anybody to see. Not much has changed since then.
Surely people should be allowed to choose between ‘standard of living’ as recorded in the national account and ‘standard of living’ as assessed by the people themselves.
If we are to work to an older age the superannution laws need to allow people to contribute past the age of 75.
However there has to be a willingness to employ older people and older people in the workforce are often seen as a threat by younger, ambitious people. It can make life most unpleasant as bullying is often the management structure of choice. Ernestine is right there needs to be a level of flexibility in the age that retirement is taken.
The idea of an age pension is that having contributed taxes all your working life there comes a point where you are eligible based on age.
The Disability Pension on the other hand caters to a very different group and the two shouldn’t be mixed up because even if some elderly people become disabled they might just be older and weaker but quite capable of everyday functioning without assistance.
As someone with a chronic health issue – it cannot be fixed – and having just resumed some part-time work after an absence of three years, due to another health problem (work related stress leading to full-on chronic stress and anxiety, then a major depressive illness), and having blown a big chunk of the down payment for a house on the three years absence from work, I have some rather mixed views about the working later into the twilight years. I’ll add that in spite of the previously mentioned issues, my overall physical health was very good up until about 18 months ago, when I got temporarily flattened by side effects of a new medication – that stopped my fitness regime in its tracks. Now, I am a recovering lard-arse, thinking of attending lard-arse anonymous meetings (aka gym class). Anyway, back to the point I am meandering around…
On the one hand, if a person’s health is up to it, and they really want to keep working, then I am the last person to want to stop them. On the other hand, if the government wants to encourage a larger grouper of people to work on and on and on like the Energizer bunny, then they are going to have to address ways of setting up part-time initiatives and compromises around shorter working weeks. This is in some ways a delicate issue, not least because employers are understandably – if not acceptably – going to want their labour costs to be on the most productive per unit hour worked employees. While older people are generally able to hold their own through a combination of experience and strong working relationships, they are more visible due to age-related illnesses. My feeling is that age is slowly becoming less of an issue, but the fact that the bulk of aged people (let’s say 60+, sorry Dad!) have at least one age related illness, and probably it is a chronic one. This is just a fact of life, but employers are going to need a few carrots and a big stick to move towards workplaces that do not merely tolerate people with chronic illness, but go the extra yard to ensure that the workplace adapts to the extra needs of motivated, if physically a little more compromised, employees. After all, a retiree today has a good chance of another 20 years of golf and/or bowls, but it may take a hip replacement and cataract surgery and a bypass and diabetes treatment to do it. Modern medicine is extending the post-retirement life as is availibility of good food for those that choose to (or can afford to) buy it.
Workplaces have eventually adapted to women working in any job a man can do (thank goodness), and they have moved some way on realising that both men and women may have child responsibilities, so I’m optimistic that a shift in thinking on how to address the needs of aging employees is underway, and that it will usher in a more worker-friendly workplace.
The government could contribute here by smacking state governments about the ears on public transport systems. A youthful 60 year old might tolerate the current system, but a not-so-youthful 60 year old with a dodgy back and arthritic knees might need a better service if they wish to continue working.
Just some thoughts before catching the bus to work…
@Donald Oats
On “Just some thoughts before catching the bus to work…”
Where I live Don – there are only buses. They meander around numerous sharp bends like Spit Hill and numerous stops and starts. You are very lucky to actually get a seat travelling even from Dee Why in peak hour to get to work. The queues are very long. Now I defy even a spritely 60 year plus to hang on to the bars and swing round all those bends day in and day out to get to work and dont expect too many of youth, engrossed as they are in Ipods and with earpieces in…to pay enough attention and offer to give up their seat…(what an old fashioned notion now) Public transport as it is now in Sydney certainly doesnt accommodate the efficient?? and productive?? ideals of people working to 70 plus.
Trying to stabilise capitalism by increasing peoples’ working life is playing with mere symptoms.
The only benefit appears to be a reduction in retirement payments and therefore more funding for stimulating a capitalist economy.
A better proposal would be to switch our defence procurement from offshore purchases to domestic manufactures. Keeping these funds in Australia and providing high and medium tech jobs, would go a long way to stimulate economic activity without increasing debt.
Australia does not need American jets to defend our borders, when the real threat to our society is economic.
Capitalism only wants to employ people when their productivity is either in the training cycle or in the 30 to 55 year range. Most unemployed ‘over 55’s’ are not competitive in the labour market. Most people working after 55, are continuing in the same job or industry they occupied in the past.
So if you want to increase the retirement age beyond the age-point capitalism selects its labour, you have to indicate how you are going to guarantee jobs for all over- 55’s who need to or want to work.
There is always enough wealth-making work in any economy – the problem is its distribution and remuneration. If corporations take too much, then naturally nothing is left for retirement incomes. Demanding that people surrender retirement is a complete misunderstanding of the problem.
It is thick-headed jingoism.
It is unfortunate that pension eligibility ages are to rise.
In Australia, there are so many tax concessions for superannuation that the middle class and rich will enjoy a better standard of living in retirement that while working!
Might be better to reduce all these middle class tax concessions and let people decide for themselves.
Where I live, there were no tax concessions for retirement savings. Alas, many subsidies were recently introduced big-time as middle class welfare by a labour party.
Less is now left-over to pre-fund the government pension scheme that the working class will have to survive on in their old age. Ordinary workers will probably be required to work until they drop because of this welfare for the well-to-do.
I think it would make sense, and be fairer, to set a proportional figure for a retirement age – that the retirement and a pension would be available for the oldest “x” % of the population, and automatically adjust the age for this as demographics changed. Setting this figure could be done from historical data – looking at the proportion of the population over 65 years old over the last 50 years, and selecting the average.
In a similar manner, income support should be given to the “y”% of the poorest in the population, and adjust the actual income amount that triggers this payment according to economic developments. Similarly tax bands could be based on income percentages, rather than actual $income figures.
This makes sense to me, but does not get used. Why not, I have to ask all the economists reading this?
I would largely agree with the general thrust of your observations, PrQ. In any society where resources are not, for practicval purposes, infinite, choices must be made opver how much benefit each individual can draw from the labour of others, now, and into the future. What choices are made is a question that will reflect each person’s views about equity and their broader vision of the nature of community.
My own vioew is that the rather idealised vision of retirement that one sees in the propagnda for self-funded retirees is simply not sustainable. While many of us working will love the idea of aimless wandering about on lightly populated beaches and leaisurely breakfasts from the pergola with the ocean views, really, this is good for about 4-6 weeks. People need to be doing things to stay happy, IMO, and by and large that means “work”, where “work” simply means “purposeful activity that can be recognised as valuable by others”. We are first and last, social beings. In societies such as ours, paid employment is the most common way to mark out such activity.
Back in 1908, not only did people in Austrlia die a lot earlier, but they spent a significant period of the time prior to death in a poorly managed descent into death. In short, trying to compel people to give up significant portions of whatever relief they had from this in working (possibly aggravtaing their condition) rather than looking after themselves and getting as much time as they could to enjoy the fruits of their contribution was rightly seen as unreasonable. In that context “work until you drop” was a fair enough claim against such practice.
These days of course, our medical systems are far better both at preventing and managing illness than was the case before — and indeed, the expense of that system as it applies to people who are ageing and suffering from chronic disease is one of the issues driving a reconsideration of who should work and who might not. There is, moreover, some evidence that after the initial benefits of releif from work have been had, people tend to feel less happy and less satisfied and have worse health outcomes after retirement. This is hardly surprising as many of our most important social relationships are attached to our work contexts. Separation from all that can be alienating.
It seems to me that there is a case for, at the very least, inviting people approaching retirement age to voluntarily defer getting cash-based pension and super benefits 9and rewarding at least those on modest incomes with cash augmentation of their super and/or more permissive treatment of their ultimate pension claims. There should be an emphasis on supporting people who are fit to work (full or part time) in work and wish to with whatever ancillary services are needed. Conversely, if people are unfit to work even part-time then means and asset-tested support for them to live in physical comfort, dignity and with reasonable autonomy ought to be provided, regardless of their age.
It is clear that advancing technology in health, and the increasing scope we will have to work from home makes this scenario a lot more feasible than would have been the case even 20 years ago. It should be begun.
Fran @ 26
Excellent points and observations – agree with all of them.
In 2000 Frank Stilwell wrote in his book Changing track “Andre Gorz’s proposal for more flexible work-liesure relationships is also worthy of further consideration… Recognising that only, say, 20,000 hours need be worked by each person over their lifetime in a technologically advanced society in order to generate the goods and services required for a reasonably comfortable existence, individuals could choose when to work them… for example, by working full time for fifteen years straight, by working thirty years half-time, by mixing work with periods of education or liesure, and so forth… Much social policy concerned with redistribution of income over time (eg… aged pensions) could be rendered redundant in such a context.”
Ten years ago this was a bold proposal, now of course it would be classed as a ridiculous fantasy. (OT, he mentions “ecological tax reform” – what happened to that?)
Many years ago when I was a Commonwealth public servant I tried to get my colleagues to consider bargaining for increased annual leave instead of a pay increase (2% pay increase = 1 week’s leave); almost everyone said they needed the money more. Of course if over the last twenty years we had been taking only 1% of our pay increases as increased annual leave, we would now be working 38 weeks a year! Imagine Kevin Rudd’s reaction if the ACTU said they were after an increase in annual leave!
Having considered these issues, the points are:
Pay increases are reflected in salary for superannuation purposes. This benefit is lost if pay is traded for extra leave.
Pay increases in APS are generally moderate and follow Treasury CPI forecasts unless CPSU members take industrial action. Such pay increases are needed to maintain household budgets. You cannot pay off your mortgage withn 2 weeks extra leave.
Some may prefer the extra leave but this can be accommodated by purchased leave arrangements.
So this outcome appears to suit everyone. All superannuation benefits are protected and those that want 2 week extra leave can use “purchased leave” provisions.
@Chris Warren
re your first point, this could be changed.
re 2, if a lot of people were taking holidays, it would change a lot of things – house prices…
re 3, purchasing extra leave doesn’t work if only a few people try to do it – you just can’t get the time off.
JQ – I am not convinced there is a policy ‘lever” for these issues and particularly not productivity or working hours as a means of continuing to prop up domestic demand, company and personal and tax revenues. If we look at the Japanese experience as a guide to where we are headed, a not unreasonable proposition given their adoption of Keynesian theory, then the GFC will never be paid for by Western countries such as Australia and others but deficits as a ratio to GDP will simply increase to the Japanese level.
My assessment of the productivity issue is that improvements and benefits plateaued (probably in the mid to late 90’s) due to the limits of mechanical and computer technology productivity increases and has stalled due to excessive process and system complexity and the failure of the private and public sectors to invest appropriately in skill enhancement and development combined with the permanent changes in the sectoral employment mix and opportunities in Australia. The substitution of longer working hours merely masks that situation and I remain unconvinced that there is a correlation between longer work hours and productivity, probably there were inital marginal gains but then you go down the back end of the curve with little improvement as the theory of diminishing returns suggests it would.
The very significant changes in what we are able to produce, make and what we sell is evident in the never ending BOP deficits even though the deficits have shifted from the public to the private sectors. The only significant opportunity we had to change this mix and get ahead of the game, such as sustainable ecological agriculture, alternative energy systems and products has been squandered by the failed policy vision of the current Federal Government. We are left with the same problems we had in the 80’s but worse, now we are all Japanese.
It is also apparent that the longevity improvements are applicable to only the current age cohorts above 40 years of age and we are about to see the reality of a decrease in life expectancy in the under 40’s as the affects of a sendentary lifestyle and the changes to diet become apparent as the public health problem of diabetes etc., explode almost exponentially.
Someone always writes something like this and they are always wrong. Comparing average life expectancy is wrong but people always do it. It includes things like infant mortality that have no bearing on old age pensions.
The relevant measure would be something like “life expectancy at age 65” which still shows a problem but nothing as radical as claimed above. In 1940 a 65 year old would live to 77. In 2010 a 65 year old will live to 82. By 2070 a 65 year old is expected to live to 85. Over a 130-year period 8 years will be added to the “age lived in retirement”.
Those 8-years shouldn’t be ignored and will still cause massive problems. But totally misrepresenting the facts makes it easy to ignore crusaders.
@Justus
This suggests the problem is not that they are living too long once past sixty-five, simply that there are now far to many of them.
Something like the kangaroo population. Why don’t we use a similar solution? A periodic culling of the old would fix things. This could even be a further source of revenue for government. Government could issue licenses for old age pensioner hunting season. If the process was converted to reality TV, further revenue could be obtained from the TV rights. Many formats present themselves. You could even vote off your least liked oldie. I am sure it would make riviting viewing.
I cannot see the logic in the first two lines?
Anyway
If you have a reasonable union structure then time-off for purchased leave is usually not a problem.
If a local management refuses time-off in an unreasonable fashion they get caught-out through the usual management staff-representative consultative arrangements.
If you do not have a reasonable union presence – then you get nothing.
Many people will not be able to retire “early” as they do not have enough super/investments/housing security. The superannuation system is skewed to higher income, full time workers. The majority of women have very little super as they have been undertaking unpaid care of children, older relatives etc. Others working in casualised low paid industries also do not have sufficient savings etc. A small, highly educated group of people on higher incomes during their working lives will indeed be able to retire early. My friends and I will be working until pension eligibility and beyond as we and many others are not part of that elite.
@Helen
You raise good points about who gains from the current superannuation regime.
Compelling lower income groups to save through superannuation means they substitute saving for housing for retirement savings. These retirement savings can reduce their old age pension because of income and asset testing.
If the low paid were free to choose, they may prefer to save for a house, which is not subject to an old age pension asset test, and collect most or all of the old age pension. Compulsory retirement savings does little for overall savings because of portfolio substitution, but there are important exceptions.
If you are on a low income, and have little to save to begin with, your chances of making portfolio adjustments to offset the effects of compulsory superannuation contribution on the composition of your savings are much smaller. The low-paid are compelled to keep a lot of their savings in a saving format – superannuation – that may not be to their advantage.
A low paid worker may prefer to save for the basics of life and rely of an old age pension paid out of taxes, including the taxes of those who are better off than them.
As JQ points out we actually do not live so much longer after 60 than we did in the past. Though life expectancy at birth has risen a lot since 1900 life expectancy at 60 has not risen nearly as much. ie the rise is mainly due to lowing infant mortality. 8 years in 80 is not such a big deal. I am not sure if there is any evidence that we are in better health or we are just taking longer to die. It may be that you retire to die at the same point as we have for the last century.
@Jim Rose, given much of Australian housing prices I don’t think you even really need the “lower income” qualification for your argument to have force. I’m sure quite a few middle income people would prefer to have a few extra percent per year go toward a house deposit that they can use in the next 3–5 years rather than a super that solely by virtue of the distance till withdrawal has a lot more risk around it.
It’s not just that life expectancy has increased, even at 65. It’s also the kinds of jobs we are doing. When most people worked in manual labour a retirement age of 65 was too late – they were physically broken long before. Now that most work is mental people are not only up to doing it later, but keeping working is good for their mental health.
The idea of working full time for x years and then suddenly going to nothing has never made sense to me. I’ve only ever had one year of working full time. Working part time I’ve managed to save a little towards retirement, but not enough to be very comfortable if I stopped at 65, but I can’t imagine wanting to. Rather I anticipate slowly tapering off, going from 3 days a week at 50 to 2 at 60 and 1 at 70 (well probably two afternoons actually). Allowing for a bit of flexibility for travel I can’t imagine why anyone would find this less desirable than a sudden stopping.
Of course this should not be enforced on those who prefer something else, but I do think there is a role for the government in challenging employers’ attachment to the historic system, and some sort of phase in of the old age pension might be appropriate.
@Helen
so true Helen – neither my partner nor myself have much super. The whole super thing was a con partially designed to suck working people into believing their interests lay with the stock exchange. And by basing it on percentage income it guaranteed increased disparities in wealth.
A guaranteed ‘living wage’ would be much better and I don’t see why that should be different for anyone, able, disabled, young or old.
There are a couple of interesting directions for empirical research to shed some light on the aging population, increasing post sixty-five life expectancy and accumulated super and savings. They would involve getting data on and looking at the distribution of life expectancy, post sixty-five, by occupation, by income (at a point in time and life-time), savings, and accumulated super. If health data were also available they would be useful too. Results from this sort of study, assuming it hasn’t been done already, would be useful in informing policy in the area. I imgaine the detail would be very useful. Too much can be hidden by averages. Actuaries might have some of the data, or at least be able to suggest where it might be sourced.
@Jim Rose
says
“Less is now left-over to pre-fund the government pension scheme that the working class will have to survive on in their old age. Ordinary workers will probably be required to work until they drop because of this welfare for the well-to-do.”
For once I agree with Jim Rose.
@Fran Barlow
Fran you say
“These days of course, our medical systems are far better both at preventing and managing illness than was the case before — and indeed, the expense of that system as it applies to people who are ageing and suffering from chronic disease is one of the issues driving a reconsideration of who should work and who might not. ”
Not the case at all in public hospitals….our medical systems are better at preventing and managing illness… just like our legal systems are better at protecting people’s rights. Only for those who can afford it.
@Freelander
@41. Agreed.
@Fran Barlow
The contribution of aging to the growth in health care spending is surprisingly small.
One-half of a percentage point out of 3 to 4 percentage point real growth in spending per year.
The rest is due to medical innovation, as I recall, because of all those wonder drugs and life-saving and quality of life enhancing medical treatments. A range of medical procedures and countless drugs commonplace today were rare if not unknown in the 1980s and 1970s.
Medical innovation is going to get even more costly with all those cures for cancer, diabetes, stokes, senility and so on arrive and I am sure they will not come cheap. It does not help either for health care to be a labour intensive service in a capital rich society.
Medical care was cheap for our grandparents because there was not a lot the doctors could really do for you compared too today. It was maybe the 1920s or 1930s before even going to a hospital became a net gain in terms of a safe place to go to get better. Hospitals back then were full of infectiously sick people with few known cures. The conquest of now forgotten endemic diseases with vaccinations is as recent as the 1950s.
@Alice
Absolutely. I loved Sydney buses to work – not! Of course, after I moved to Murray Bridge, the Chatswood to Epping train line became active, and that would have been a single train trip to work with a short walk. I remember catching a train from Kirribilli to the city just so I could catch a bus at a bus stop where I could get a seat and a fast-ish trip.
While my current bus transport is not ideal due to cost and limited departure times, the early bus to Adelaide and the late bus back home – a total of 160km return trip – takes less time than my usual Sydney time. And, it is air-conditioned, and it is reliable. I can actually read on the bus at night thanks to the reading lights above each seat; oh, and they have seatbelts! Makes for a looong day though, and sometimes I get to Adelaide and I’m hurting too much to go into the office – like today, for instance.
@Jim Rose
Proximity to death is a better indicator of cost than aging – although of course they are related. You are correct that increased possibilities for intervention contribute significantly. But there are also other problems that are not as well known – eg the increasing age of the healthcare workforce which, combined with increased international demand and increased worker mobility, will place enormous pressures on workforce recruitment and retention.
@Donald Oats
Buses and trains are a good way to get the middle class to their office jobs in the city. They are not very good at much else because the trips have so variable destinations, multiple stops and unpredictable departure and return times. Young children get a bit inpatient too if they have to wait.
These idiosyncratic trips would, if anything, increase with age.
I take the bus to work. Recently moved house and now take the stop two down from my old one. Civilisation collapsed! I am no longer guaranteed a window seat on the bus!
I prefer cordon pricing and time of day pricing for car users.
The people plus 65 do not pay for bus travel off-peak where I live.
“improving productivity means that any given standard of living can be achieved with less work”
I don’t believe this is the case in the main cities in Australia if the cost of a given residence location for unleveraged labour at a given age and occupation (and single wage) is accounted for.
20 years ago in Sydney I took note that the dentist etc whose father was a dentist etc could typically not afford the same quality of residence. My impression is that there has been substantial deterioration since: families in the west not advantaged by capital or very large incomes pay heavy road tolls to access the Harbour and “free” central cultural activities and institutions. (locally it is my impression that former housing commission homes in Brisbane would require a pretty good wage to gain secure access to today)
Similarly I was dismayed several years ago to meet a young graduate in a professional role with a v. large company, commuting from the parental home in the Blue Mountains because the cost of acceptable accomodation with easy city access was prohibitive. This would not have been the case 20-40 years ago- so in my assessment the standard of living for many Australians has fallen in very important ways.
Furthermore the immediate standard of living in Australia has been distorted by the rapid and large growth in private and state government debt, divestment of equities, and a boom in minerals. Foreign debt cannot increase forever, at least not at the rates underpinning the current asset price increases, nor can assets -QR, state forests, housing, education, equities – be divested overseas limitlessly.
The “correction” may be imminent, and if the “correction” accelerates global wage arbitrage any given standard of living will only be achieved -for most Australians – with more work than is humanly possible.
I recall reading an interview with a German auto worker who after hearing that the retirement age had been increased to 69 years said to the effect “Why would they increase the retirement age to 69 years when a man of 50 years has difficulty coping with this physical work ?”
Here is my point: I do not know anyone, over the age of 55 years, who has worked in a trade or done physical labour all their lives who is not physically buggered (no homo). What about the people who have work in the battery hen environment of the call centre who are mentally exhausted ? What about those who work in environments they can barely cope with? What about those who are just not physically and/or mentally capable of working on?
Increasing the pensionable and retirement age is nothing less than a betrayal of everything our economic system has promised us.
On the other hand I have friends, well off, working past their retirement age sitting on boards, doing highly paid and satisfying consulting and/or part time work. Most people however will be doing low paid unsatisfying work at unsociable hours. Survival at best. Only the “knowledge workers” will do OK.
This is where economic theory goes off the rails. It does not start with an assessment of what will happen to those affected and what those affects may be. My guess is that most, if not all posters here are “knowledge workers” who see things through their own situation.
I’m surprised there has been no public backlash already, but there again we are an obedient lot.