Extending the Pension Age to 67
by Bernard Salt on May.21, 2009, under Uncategorized
I am not at all surprised by the Federal Government’s decision to ratchet up the age at which Australians become eligible for the Age Pension. Several Western European nations have already done the same thing. In the
Whenever something like that happens “over there” it’s really only a matter of time before it surfaces here: after all, from a politician’s point of view the precedent has been set. And you can sort of see their eyes light up at the thought of getting their hands on more tax dollars. More people in the workforce for longer is good news for governments. Not only is there the bonus of a delayed draw on the Age Pension but there’s also more tax paid. And, let’s be frank here, not only will workers work and pay tax for two extra years but there’s also the delicious possibility that some will drop dead within that time frame: more tax in; less pension out.
The counter argument to extending the working life is that baby boomers have been in the workforce paying taxes for 40 years; the premiums have already been paid; now it’s pay-back time. The problem is that much of the tax paid by boomers since they entered the workforce in the 1970s has been spent. Future retirees must rely on current workers to fund their lifestyle. This system worked well enough for 40 years because the worker base was always expanding. But from 2011 onwards the rate of growth in the working age population of Australians slows: more boomers exit at 65 than Gen Ys enter at 15.
The year 2011 is critical because it is in that year that the first baby boomer ever invented will turn 65. Not that the first boomers (born in the late 40s) are much of a problem; there’s not so many of them. The real demographic trouble-makers are those pesky boomers born in the 1950s. And that’s the group that is targeted in the planned postponement of pensionable age. I agree with the policy; it’s the right thing to do. However I think there will be issues in extending the working life for some sections of the workforce.
Pen-pushing white-collar workers can easily extend their work commitments. This is a more difficult proposition for labourers. Consider the plight of say a boilermaker who has been hard at work with his body all day every day since the age of 15. By his mid 50s this bloke’s body is buggered. There needs to be some consideration for the circumstances of those whose work can be described as hard labouring.
The other issue here is the way in which older workers will be used in the workforce. Even without this new policy the number of older workers (say 60-64) is rising because of the boomer push.
There’s now a need for employers to find meaningful work that is tailored to older worker’s capabilities. They aren’t all going to end up sitting on boards pontificating about matters of importance; many will end up in mundane “old jobs” cordoned off from the main cut and thrust of business. Or at least that’s one possibility.
Finally the fact that there will be more old people working, and drawing a commercial income, means more discretionary spending will be injected into the 60-something stage in the life cycle. In the 20s this “me money” ends up in cafes, bars, restaurants or is spent on clothes, travel and electronic gadgets including phones.
What do you think older workers will spend their money on? And don’t say Generation Y because by then the Ys will be in their late 30s with families and commitments and a life of their own. I think the boomers will spend their money in areas not traditionally associated with this market such as fashion clothing. Show me a fashion label that packages and presents clothing styles for the over 60s that is not “grandma daggy”.
There is also the distinct possibility that the pensionable age will be pushed beyond 67 at a later stage. But
June 1st, 2009 on 1:47 pm
Bernard,
While I agree that with Australia’s ageing population it makes policy sense to push out the retirement age by a couple of years, the biggest issue will be the lack of opportunities available to older Australians. Typically business does not value the individual or collective experience of older people and in fact frequently pushes out older employees, replacing them with younger, supposedly more ‘energetic’ staff.
While this attitude may change as the country’s demographics change, more needs to be done, as you point out, to provide worthwhile employment opportunities for older workers. Unless the government leads this attitudinal and behavioural change with policy and programme support, their recent policy announcement extending the pension age to 67 will be a disaster for many Australians.
June 1st, 2009 on 8:10 pm
Life expectancy and financial self sufficiency depend on what socio-economic status people have experinced during working like and what chronic disabilities they have collected along the way. A great book on the subject is Status Syndrome by Sir Michael Marmot. A unidimensional view of retirement age is unhelpful to people in the lower half of this distribution. If the government was really in touch with the dispersed nature of the polulation’s welfare they would have come to this issue with an integrated model of disbility support, older age employment incentives, asset taxes and voluntary work tax bonuses etc. Instead they have grabbed a single statistic to get a “being tough” headline to go with their debt blowout budget. The people most disadvantaged by a unliateral move in age pension age are single women, 50% of whom have suffered divorce and financial fragmentation during their working life and face a desolate life from 55 on packing shelves at Wollies. And all this while the public servants who scheme these ideas polish their #100bn tax payer funded Future Fund which guarntees their gold plated pensions.
June 1st, 2009 on 1:51 pm
While the government’s motivating in extending the retirement age is understandable, the reality for those not in employment when they reach the proposed age is difficult.
First, gaining employment when you are over 60 years of age is… and let’s just understate it here… it’s difficult. Are these people expected to tramp the streets seeking work that few, perhaps that no employer is ready to offer them?
Second, many in this age group would be reluctant to take on some of the mundane work that might be offered. They have already done the dead-end, boring jobs in their youth. That’s were such work to be available - after all, it is already done by young people and migrants trying to get a start in the country - and who is going to hire older people to do work done faster by these other demographics?
My third point is that many in the proposed age group already continue to work in socially beneficial areas. That is, by assisting - through their skills and life experience - organisations in the community sector. They might have left the paid workforce but have not left the workforce per se.
An extended working life would remove them from this voluntary community sector. This would be to its disadvantage and to the disadvantage of the clients that sector serves. Presumably, such a consequence is invisible to government decision makers with their monocular and narrow economistic vision. Such a possibility should be factored by the government into its decision making.
Fourth point - people over 60 are, as a rule, not as agile or able as younger people. Some are undergoing continual medical treatment. Anyone with just a little experience in business will recognise the plain truth that this will lead to their further discrimination in employment. In turn, this would likely further the resentment already felt by those job seekers of that age who already find it almost impossible to obtain dignified work.
This is the problem when governments, through the silo thinking of their public service advisors (who have more or less guaranteed employment until retirement) make decisions without understanding the systems nature of the issues. Pensions and the retirement age is not simply an economics question, it is to do with sociology and personal health and fitness.
June 3rd, 2009 on 8:02 pm
Just one small comment.
The difference in the notice period given by the UK government compared to the Australia government.
The UK gave 20 years notice - Australia about 9 years.
The difference this makes in planning for a fruit full retirement is in the UK people at 45 years of age could plan for the age increase. I am 56 and this has been sprung on me. If I need the pension or more importantly its associated health or pharmacutical benefits they are now further away than when I turn 65.
June 15th, 2009 on 5:08 pm
It’s not surprise at all this is happening. It’s been on the cards since the late 1970s really.
I suspect by the time I come to put my feet up, the retirement age will be 80.
June 15th, 2009 on 5:10 pm
Great! I’ve got another 35 years of work ahead of me. Just when I thought I was halfway there! I wonder how much extra I’ll be taxed by then too?
December 23rd, 2009 on 5:34 am
By the time I hit 67 in another 26 years, advancements in technology will be able to increase my life expectancy by at least another 26 years, and most probably longer as each year passes. That means I have a good chance of living to 100+. What am I going to do with all those years? If you find work that you enjoy doing, then that is your answer. If you retire, you die. So don’t retire. But I wouldn’t say No to the pension still along the way
January 11th, 2010 on 2:20 pm
The problem with working till you are 100 is that this is not possible for blue collar workers. What you suggest is a whitre collar and a middle class response. By 50 most blue collars workers have muscular and skeletal issues.