Among the scary numbers in the Intergenerational Report was the estimate that, by 2050, life expectancy would have risen to 95/96 years, which would seem to imply a huge increase in the number of years spent in retirement. I checked and found that the report gave current life expectancy as 92/93 years, far higher than the 80 or so that is usually quoted. The reason, it turns out is that the standard estimate is done on a “period” basis, using the age-specific mortality rates of the present. The higher estimate is done on a “cohort” basis, taking account of expected future reductions in mortality. More on this here.
A few observations on this point.
* An increase of four years is neither surprising nor alarming. This is doubtless why this comparison ins not made in the IGR.
* In my last post, I noted the use of the obsolete 15-64 category to estimate the working-age population. One possible defence was that this was done in consistency with past practice. But clearly this can’t apply to the (unannounced) shift from the standard period basis to a cohort basis
* More importantly, the 95-year figure is an estimate of the likely life expectancy of children born in 2050, who would reach retiring age some time after 2115. Even the current birth cohort won’t be of pensionable age until near the end of this century.
A cohort measure of life expectancy is more relevant to projections of future pension expenditure than a period measure, though it requires the use of estimates of future mortality. But the relevant cohorts for the purpose of the IGR are those born before 1983 who will be 67 and over in 2050 and will then (assuming no policy change) be eligible for the age pension.
John Quiggin 
Channelling Soylent Green I think a world which is top heavy with 95 y.o.s may not be a pleasant place. Some x% will have lost their marbles through Alzeheimers and dementia but 100% will be frail. Frail in the sense they may not be able to work on a construction site as Mr Hockey would like.
This also shows up another possible gap in the IG report… future extreme weather. The southern mainland capitals have all hit 46 or 47C in recent years. 50C is on the cards before long. If these seniors are to remain in their 1960s built brick veneer and weatherboard homes they are going to need powerful air conditioning, say an extra $1,000 worth of electricity each year. In contrast the UK has a home heating allowance for seniors. Extreme weather for stay-at-home seniors might also require heartrate monitors and regular home nursing visits.
@Hermit
If life expectancy increases, there are three possibilities:
i. healthy life expectancy increases faster than life expectancy;
ii. healthy life expectancy increases in line with the increase in life expectancy;
iii. healthy life expectancy increases more slowly than life expectancy.
If number (iii) turns out to be the case, then the number of years the average elderly person spends suffering from frailty and disability will increase; but if number (i) turns out to be the case, then the number of years the average elderly person spends suffering from frailty and disability will decrease.
In the absence of specific evidence, isn’t number (ii) the most likely default expectation? If life expectancy is increasing, isn’t that likely to be because of better nutrition, better sanitation, safer working conditions, healthier lifestyles, better health care, and so on? And aren’t those things likely also to increase healthy life expectancy? Aren’t the onset of morbidity and of decrepitude likely to be retarded by the same factors that retard mortality, and therefore presumably at a roughly similar rate?
It may seem natural to expect the physical condition of the average 90-year-old of the future to be similar to the physical condition of the average 90-year-old now, and the physical condition of the average 60-year-old of the future to be similar to the physical condition of the average 60-year-old now. But in circumstances of increasing life expectancy, are those expectations justified?
Given that by 2050;
(a) significant, destructive climate change has about a 95% chance of being locked for the second half of the century;
(b) many critical resources will be exhausted; and
(c) the global economy could very well be in free-fall;
I doubt very much that persons born in 2050 will turn out to have a life expectancy of 95 years.
Given the dangers and uncertainties ahead, we have to worry about the next 20 years. If we don’t radically change our economy to clean, green, renewable, sustainable, circular, steady-state etc. then 2050 and beyond is a black hole with no guarantees.
Okay…absorbing info…I admit I am having trouble with accepting any conclusions running out to 2115 for something which is so highly contingent on so many factors which are extremely fragile. As an intellectual exercise, a philosophical musing, considering how society might be shaped if people do indeed have such an extended lifespan, I have no issue with that. If any policy wonk thinks they can actually trust these projections to the point of making substantial structural changes in policy, well that is a whole other matter entirely. Given the pathetic denials (which are inadequately concealed in direct action garb) over AGW and the projected impacts of it, on time scales much shorter than they seem capable of comprehending, I just can’t take the IGR seriously.
On the point of estimating longevity, is it just for Australian citizens, or are these estimates global? If just for Australian citizens (which I assume is the case, given the IGR is about Australia’s economic conditions) then how do they take into account the statistical impact of our immigration; immigration effectively imports the longevity of the immigrant source countries, and therefore modifies the longevity for Australian citizens. Just curious.
As always predicting the future is mind numbing because of the number of variables. I think few cigarette smokers and the obese will make it to senior ranks. We’ll have better treatment and realtime monitoring for most conditions. The first problem is the greater numbers. However as Ikon points out what we now take for granted as inexpensive may not be so in the future; example personal mobility by car or taxi. So we’ll be more efficient but also more cost constrained. If Cuba gives us an insight into the fortunes of the former middle class the model it offers for aged care is not too encouraging
http://www.havanatimes.org/?p=101303
Everything is very open with a really clear clarification of the
issues. It was definitely informative. Your website is very useful.
Thanks for sharing!
@500 glenrcck
How do you do that?
As many others have said, it seems odd to worry so much about how we will look after the elderly in future – which after all is just a matter of sensible resource allocation – and to worry so little about climate change…
Thank you JQ for clearing this up, I was wondering how they came up with these figures. No doubt Hockey preferred to use the cohort figure because he could throw around the 95 year old figure (relying on people not to actually read the report and see the current ‘cohort’ life expectancy, I presume). Just to get headline figures, that’s the point.
And, similarly, so a lot of people and journalists would (like Hermit) think ooh, we’re going to have all these frail old people around, how are we going to cope with that? Scary! Actually people’s use of health services is related to their health status, not just their age – high use of hospital services tends to indicate that people are in the last years of their life, sadly, regardless of whether they are 50, 70 or 90.
JD your explanation was pretty good. At the moment we are tending a bit towards your point three, because of the rise in chronic disease. People can in a sense still have “healthy lives” if they have a controlled chronic disease like heart disease or diabetes, but obviously it’s not quite the same as being free of illness, and there are health costs associated.
However there is a concern, which naturally this report doesn’t mention (given that it seems to be clearly a political document, with the hand of Hockey all over it), that life expectancy may start to decline unless obesity can be controlled. As overweight and obesity are related to capitalism and profit (junk food, manufactured foods, car use, tv watching, etc), that’s not a point Mr Hockey would probably like to dwell on! But a decline in life expectancy in white woman with low education in some US States has already been observed http://www.usatoday.com/story/news/nation/2013/03/04/study-life-span-women/1963093/, and increasing obesity is one of the possible explanations.
I am so appalled by this document. Mainstream economics is misleading in many ways, and both Labor and LNP use these misleading economic ‘facts’ (such as that unpaid or voluntary work has no value, and that ‘growth’ must continue forever) but this report goes much further than that. I presume the reason it was late was because Hockey wanted it fixed – I’ve got no evidence for that, but it’s just in line with the way the government operates.
As someone working and studying in public health, I despair of what’s happening in this country. I know most people don’t like Abbott and Hockey, and don’t trust a lot of what they say, but I don’t think most people realise what an absolute ride they are being taken on by this government.
It was entirely too cute for Hockey to use the cohort life expectancy of those born today in the IGR, as the IGR covers only the next 40 years. However using cohort life expectancies for older age groups is I think more illuminating than using the period life expectancies as we normally do. So the period life expectancy for a woman aged 50 is 85.6 years (taken from the 2000-2012 life tables), but the cohort life expectancy is 90.3 years (estimated from the 2000-2012 life tables and Booth and Tickle 2004). I think the cohort life expectancy is more relevant than the period life expectancy to the 50 year old woman making superannuation decisions. And its more relevant for public policy making too. The population projections we all use assume a continued decline in age specific mortality rates, but the period life expectancy number we use as a summary statistic assumes no decline in mortality rates. That’s not very consistent.
Surely, if the burden of pensioners is your interest, then the expecected number of year a person *at retirement age* will live is the statistic you need – they might live 5, 10, 25 or (as I intend) 50 years beyond retirement.
And if you are projecting out 40 years into the future you will also need to project what the offIcial retirement age might be (expecting Joe Hockey would want to keep upping it) and then figure out how many years people at that upped retirement age will live.
The change in that number of years gives your change in the famous budget bottom line. I have no difficulty imagining this would be a number which reduces based on LNP ideology projected over the next 40 years.
Yes indeed. The post retirement life expectancy is a very useful number. But you should use the cohort post retirement life expectancy rather than the period post retirement life expectancy if you want to understand the more likely future.
John – One of your concerns is that the 95 year figure implies a large increase in life expectancy, but everywhere I look in the report both the current and projected life expectancies are quoted, for example:
page vii: In 2054-55, life expectancy at birth is projected to be 95.1 years for men and
96.6 years for women, compared with 91.5 and 93.6 years today.
As far as I can see, the report is entirely clear on the size of the projected increase – is there actually anywhere where the report conceals the current life expectancy figures?
In a couple of weeks I am going to a birthday party for the first man that I have met in my life who is turning 100, or even come close to that age.
….five years after that day is my father’s birthday,….. as he was born about the same date in 1920.
And if he were alive today he would want to come too.
h/t Victor Borge
Good comment John Brookes @8
Is there no mention of the 150 year olds?? Joe Hockey promised me I would live to 150 if I voted for him. How did he find out that I didn’t.
Given the increases in ‘lifestyle-based’ health issues like obesity, I’m struggling to see how life expectancy will actually increase at all from current levels unless there are significantly cheaper medical treatments.
I wonder what the analysis would would like if we assume that the current life expectancy is actually the peak.
The health industry is focussed on putting out the bad news like increasing obesity as this is an argument for more funding. At least that’s how they see it. You could argue that given they have failed on matters like obesity, why should they be given more money. But because they are focussed on the bad news the general public doesn’t understand things are getting better and are very likely to continue getting better. Smoking rates continue to drop, alcohol consumption is dropping and treatments for many diseases are improving. These factors more than compensate for the fact that obesity is increasing and physical inactivity is not improving or is worsening.
I understand the Treasurer, Joe Hockey, talks about increased life expectancy (as clarified by JQ) in the context of ‘the budget’. That is, increased life expectancy at a time in the distant future (over 40 years) implies longer periods of pension payments; a ‘cost to the taxpayer’ and hence his budget worries. (The health care expenditure effect is dubious, for several reasons, as discussed on this thread.) Most of us understand that compulsory superannuation contributions were introduced in the past with the objective of reducing ‘the cost to the taxpayer’ in the future. It came as a great surprise to me, and probably to everybody else, to hear our current Treasurer, Joe Hockey, suggesting that superannuation funds should be made accessible to first home buyers. My simple brain, trained as it is to think in a multiperiod state contingent general equilibrium models, with or without complete markets, with or without financial markets, complex partially segmented markets with multinational firms and many possible technological development paths as well as states of nature but ultimately finite resources hurts. It hurts badly. Is there anybody who could relieve me from this mental assault by pointing out where I am wrong and Hockey is right?
Then there is the line of argument concerning the ‘dependency ratio’, which is said to deteriorate such that in the said distant future there will be fewer people of working age to support the aged (or the aged and the young, Hockey himself is not explicit on this). If we think along this path then the first realisation is that financial markets do not provide any useful mechanism to ‘save for old age’ because the resources that can be made available to the then old depend on the productivity of the then young, total resources and technological knowhow. This line of reasoning underlies a pension system where the currently ‘young’ pay for the currently ‘old’ with no particular role for financial markets in accumulating ‘savings’. This is the system abandoned in some countries during the blooming period of economic rationalism and the financialisation of ‘the economy’. If Hockey now comes to the conclusion – somehow – that the old system is the better one, then the education policy and the treatment of young unemployed makes no sense. Again my brain aches. The Financial System Inquiry does contain a bit of cleaning up work in so far as it makes quite clear that the tax subsidies for the wealthy should be separated from the retirement function. Hockey doesn’t talk much about the FSI report.
@Ernestine Gross
“Is there anybody who could relieve me from this mental assault by pointing out where I am wrong and Hockey is right?” – E.G.
Sorry, I can’t help you because I can’t point out where you are wrong and Hockey is right. However, I can point out where Hockey is wrong and you are right. But since I would use models much simpler than yours to do this, I doubt that I would add to your understanding in this matter.
Interesting to see aged care touted as a growth industry in hard times. The trick will be to find private revenue which I think means super must be cashed in and homes sold to get into future aged care.
Fast forward to when Gen Z needs aged care the chances are due to a lifetime of irregular casual employment they will neither have homes to sell nor much in super funds. The Commonwealth then becomes the carer of last resort.
http://www.theguardian.com/business/grogonomics/2015/mar/09/intergenerational-report-assumptions-about-government-spending-are-a-confusion-of-idiocy
The above link is interesting in that it discusses the many and varied that Honey got wrong with this IGR. Is there any indication yet as to why the report was late, was he perhaps changing it what appears to be a very partisan one against the better judgement of treasury staffers?
Hockey definitely not meant to be Honey, sorry:)
One cheering thought – I would estimate the life expectancy of Hockey’s treasurership can not be more than eighteen months. There is sure to be someone more competent handling this stuff after then.
Pretty please??
@john goss
Lordy, Lordy, I don’t know where to start with this one. You seem to think the entire health sector is just talking about obesity because they want more money, while concealing the fact that smoking rates have dropped. Did you not know that public health advocates have been fighting to bring smoking rates down for over 50 years?
Similarly the public health sector is extremely active on trying to reduce alcohol use, encourage healthy eating and promote physical activity. Many, like myself, are even working on broader social issues.
Please think before you again slander a whole profession.
@Val
I took that comment another way. Maybe John Goss will clarify, but I saw health “industry” as distinct from health “sector” or “professionals” etc…
In other words, the way I read it was “Big Sick” (it wouldn’t be right to call it “Big Health”) just like “Big Agri”, “Big Oil”, “Big Tabaco” etc.. is always going to push the next barrow it sees as being in its self-interest – lecturing us about our failings – rather than presenting a more balanced outlook, such as: “We’ve done very well on smoking and booze, but there are other areas we could improve on as well.”
Often you can see headlines on media websites that proclaim how fat/drunk/unfit/unhealthy/stupid etc… we all supposedly are. If you dig into the source of the story it will almost invariably be tracked back to “Big Sick” in one guise or another.
When one is advocating for change there is a natural tendency to focus on those arguments that support one’s position and minimise those arguments which don’t support it. This is something I have done and no doubt still do despite my efforts to be objective. It is a fact of life. So I am not being critical of the work of people in the health industry who are working to reduce risk factors and the social determinants of health. I am saying though that the message coming from the health lobby groups is unbalanced in its emphasis on the bad news. And although this is a fact of life, anyway interested in health policy needs to be aware how messages from the health lobby groups distort the real story. A sceptical eye is necessary.
@Aaron
Check the first slide on the Powerpoint presenting the report. It mentions the current and future period measures, then points to the future cohort measure (95 years) as more accurate, but doesn’t mention that we are already at 91 on the cohort measure.
Thanks Megan and John Goss, that makes it a bit clearer. I agree with Megan about “Big Sick” -great name – but I think they are more likely to be presenting the ‘answer’ as more medication and more surgery!
I did think that maybe those who were telling us it was all our own fault because of our “lifestyles” were misguided, but not necessarily driven by the profit motive, until I remembered that Michelle Bridges, the fitness instructor and guru on “The Biggest Loser” has just entered the BRW richest women list. So I guess agree – the ‘health industry (whether it’s ‘lifestyle’ people or “Big Sick” people) are all making a buck out of the obesity issue one way or another I guess.
But I hope in future John you will make the distinction between public health people who are trying to address the social determinants of health, and the “health industry”.
These numbers are quite realistic. Life expectancy increased in the first 50 years of the 20th century by something like 20 years.
Life expectancy growth then paused in the 1960s because a bunch of diseases came along, such as as cancer and so on that medicine had no particular response to because not that many people lived long enough previously to succumb to these illnesses in large numbers.
Considerable progress was then made against a range of diseases with cancer survival rates on average doubling in the last 20 to 30 years.
Another medical breakthrough, such as through genetic mapping or whatever the case may be could lead to another sharp boost in life expectancy growth.
My simple test is very crude and is based on watching the world at War television series made in the 1970s.
The old soldiers interviewed in that TV series were interviewed in the 1960s and no later than the 1970s. They would have been in their 50s and 60s, and my word did they look old, much older than people in their 50s and 60s now look in the 21st century.
These days it is very hard to work out whether people of 40, 50 or 60 unless they’re really falling apart and not looking after themselves.