Address
to Committee for Economic Development, Washington DC, Sept 2000 Address
to Committee for Economic Development, Washington DC, Sept 2000
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Older Australians: A Working Future?
The Ageing Population and Work in the 21st Century
Presentation to the Committee for Economic Development Conference 11-12 September 2000, Washington DC
THE AGEING OF THE GLOBAL WORKFORCE
by
Veronica Sheen
Deputy Director
Council on the Ageing (Australia)A full version is published as Strategic Ageing vol.10/2000
Introduction
The ageing workforce
Three tier framework for action1. Reforming the framework of social obligations
2. Education, training and lifelong learning
3. Changing the process of retirement - flexibility in social security and workThank you for the opportunity to speak today.
Ageing workforce issues have been the central focus of my work at the Council on the Ageing over the past 2 years.
Our interest in the issue has two main sources:
- first, the large numbers of mature age people who have contacted us about the problems they have in the labour market – particularly age discrimination;
- second, the emerging debate in Australia about the rising costs to the community and to the government of the ageing population.
We took up the issue as our focus for the 1999 International Year of Older Persons, holding a major national conference on the issue last November and completing several research and policy reports as the basis for advocacy directed to the Federal Government and a number of high level inquiries.
This presentation has two purposes:
- to overview the scope of the issues in the Australian context
- to examine the directions of Australia's policy responses to the issues particularly in relation to the recommendations made by the CED in its report on older workers.
Australia has always seen itself as a young country.
Our country was the last of the continents to be colonised by Europeans and for most of the past two hundred years we have had high population growth which has fuelled our self-image as a young nation. We also had very high levels of immigration and birth rates after the second world war which have also contributed to both the reality and perception of being a young country, until very recently.
The facts are though that this image is fast losing its grip on reality.
Like most advanced countries, we are experiencing low fertility combined with increased longevity. Although we have a robust immigration program, it is unable to have any significant impact on these trends. The post war baby boom is well over and the baby boomers like everywhere else are now in their forties and fifties.
The trends are:
- currently there are around 170,000 new entrants to the workforce each year.
- for the entire decade 2020 to 2030, we estimate that there will be 125, 000 new entrants.
There are various projections of the old age dependency ratios but most show the trend indicated in figure 1, which is based on a scenario of relatively high net immigration.
Figure 1. Old age dependency ratio, number of persons aged 65 and over per 100 persons of working age (15-65)
Source: Clare and Tulpule, 1994.
According to this estimate:
- In 2011, we are likely to have around 20 people aged 65 and over for every 100 of working age (15-64).
- By 2051 we will have around 40 people aged 65 and over for every 100 of working age. A doubling of the ratio in the space of 40 years.
While much of the debate on the ageing workforce has been fuelled by such projection, increasingly it is being driven by the fact that there is a significant cohort of mature age people (people age approximately 50-64) who are either not in the labour market or who are marginally attached to the labour market.
The size of the cohort is significant.
46 per cent of people aged 50 to 64 are not in paid employment.
Most of these people do not show up in headline unemployment rates however. Indeed older people have low unemployment rates.
Figure 2. Unemployment rates by age, April 2000
Source: ABS, 2000.
However, they do show up in various other statistics – the most important being measurements that take account of discouragement in the labour market and rates of early retirement.
Discouragement
We are able to revise unemployment rates to take account of people who would like a job but are not currently seeking one because of the perception of their poor labour market prospects.
Figure 3. Female recorded and revised unemployment rates, Sept 1998
Male recorded and revised unemployment rates, Sept 1998
Source: VandenHeuvel, 1999, p18.
Early retirement
But more importantly perhaps is the fact that most Australians retire long before the age traditionally considered appropriate for retirement which is around the mid 60s. The average retirement age is 58 for males and 41 for females, taking account that the retirement age for women is conditioned by leaving the workforce to have families.
The most important fact about retirement in Australia is that much of it is involuntary – that is to say a very large proportion leave the full time workforce not because they wish to but because they have to.
Figure 4. Reasons for early retirement
Males (45-64 years) Family (2%)
Involuntary (54%)
Voluntary (44%)
Females (45-64) Family (15%)
Involuntary (33%)
Voluntary (54%)
Source: ABS 1998
Although there are always a range of reasons for discouragement and early retirement, it is not difficult to find an association with age discrimination. For example, charts 5 and 6 present the findings of a 1999 survey of 500 Australian employers by personnel agency Drake International.
The first chart shows the preferred age groups when recruiting and selecting employees ( 61.7% aged between 31 and 40).
The second shows the preferred age groups when retrenching employees (64.5% aged 50 and over).
Figure 5. Preferred age groups when recruiting and selecting employees
Source: Drake Personnel Limited, 1999.
These findings are corroborated by other studies such as a survey of over 4000 employers by job agency Morgan and Banks late last year which showed that half of those surveyed believed that older workers were less productive than younger workers.
At the present time, Australia is at an impasse. Our population and workforce is ageing, there is a large cohort of older people who want and need to work but employers are hooked on the culture of youth and insist that younger workers are who they wish to employ.
However, the time is approaching that the impasse must be broken. There is a growing community and government perception that the situation is no longer sustainable. The facts are that we cannot afford to maintain the present status quo of early retirement and unemployment however it is defined and measured amongst mature age people. Mature age people need to maximise their years of workforce attachment to secure a satisfactory quality of life now and in the future as they grow into old age.
Hence, there is considerable policy and research interest in the issue, the dimensions of which I will discuss below. We are looking to the international experience to show the way and in the process developing our own solutions. The CED report on older workers has very strong resonance in the Australian context and the recommendations are quite similar to those of my own organisation Council on the Ageing.
The main difference in the Australian context, is that we would place greater emphasis on the role of government in leading reform in this area.
There are many reasons for this. We have a relatively poorly developed culture of corporate citizenship, compared to the United States. In addition, our social welfare system has evolved more closely along British and European lines so we have higher expectations of government involvement in managing social risks than would be tolerated or expected in the United States.
Responses to the issues around the ageing workforce have been slow in developing in Australia and it is only in the last few years that there has been recognition that there is indeed a problem.
It is not so much a story about where we have been but where we are going and should be going in the light of very current research and policy development undertaken at the highest levels. We have had three major national inquiries which will set the framework for intenra
The first inquiry relates to age discrimination legislation by the Federal Human Rights and Equal Opportunity Commission which administers our sex, race and disability legislation.
The second inquiry is an inquiry by the House of Representatives Standing Committee on Employment, Education and Workplace Relations specifically into issues for mature age workers.
The third inquiry is a review of our social welfare system by an expert committee appointed by the Federal Minister responsible for social welfare.
Taken together, the recommendations of the three inquiries suggest a three tier framework for action on older workers issues and the ageing workforce. The recommendations both reflect and take forward many of the recommendations made by the CED in its older workers report as well as picking up the major recommendations of the Council on the Ageing.
1. Reforming the framework of "social obligations" to include employers.
2. Reforming the education and training system to take account of longer working lives.
3. Reforming the process of retirement to maximise retirement savings.
The review of our social welfare system has its background in a number of factors but certainly developments in the United States have had an important role. We are very much aware of the recent Clinton welfare reforms, which have radically altered the fundamental nature of social assistance in the United States involving:
- a finite limit of four years of entitlement over a lifetime
- work as a condition of receiving benefit.
In recent years, Australia has also dramatically increased its conditions around receipt of welfare. The Government has introduced a specific "mutual obligation" policy framework which largely covers younger unemployed people requiring them to "work for the dole": this means they work for a number of hours each week for a fixed period of around 20 weeks in return for unemployment benefits.
We have been grappling as a society however with the concept of "mutual obligation" in relation to a much wider group of people who receive social welfare benefits including sole parents, disability pensioners and older unemployed people.
Mature age people are a major group of welfare recipients. Indeed around 33 per cent in the 50 to 64 age group receive some form of social security payment and there has been a steady upward growth over the past 20 years. Most of this growth has been in the numbers of mature people receiving disability pensions.
Figure 6. Percent of population 50-64 reliant on a social security payment
Source: Department of Family and Community Services, 1998, unpublished statistics
The welfare review, not suprisingly, has recommended that the "mutual obligation" policy framework should be extended out to a much wider group including mature age people
within the context of improved services and opportunities for training. The Federal Government has indicated that it is likely to implement this recommendation.
However, the review has also said that in addition to take the social obligations framework underpinning its report forward, additional expectations and requirements of business will need to be established.
The reasoning is that if as a society we ask for individuals to make the maximum effort to find and remain in jobs then we must also ask the business sector to make fair judgements in their employment practices. For older workers, this relates to hiring and firing practices and equal opportunity in the workplace.
There are a variety of mechanisms for achieving a "social obligations" framework for business. The welfare review suggests social reporting benchmarks - but more powerful mechanisms are available which are recommended by the two other inquiries I referred to earlier – the Human Rights and Equal Opportunity Committee's age discrimination inquiry and the House of Representatives Inquiry into older workers.
The first mechanism involves compulsion through age discrimination legislation. In Australia, we have age discrimination legislation in the States but no Federal legislation which creates gaps and inconsistencies. The Human Rights and Equal Opportunity Commission has recommended specific federal legislation on age discrimination.
However, it is likely that age discrimination legislation on its own will only ever be a second best option. Determined employers will find ways of avoiding the legislation through carefully worded advertising and wily selection processes.
The second mechanism then is through education and voluntary codes of practice.
It is likely that legislation, education and the voluntary codes of practice are all necessary and complementary.
The House of Representatives inquiry on older workers has made its first recommendation that:
The Government develop, in consultation with the States, a sustained national strategy and campaign targeting employers, to promote the benefits of maturity and age balance in the workforce. Such a campaign should be subject to formal assessment and evaluation.
The mechanism it recommends to achieve this is a body similar to the UK Employers Forum on Age which has the following aims:
- to support member organisations in managing the skills and age mix of their workforces to obtain maximum business benefit
- to remove barriers to achieving an age-balanced workforce by influencing key decision-makers, notably in Government, education, training, recruitment and the trade union movement
- to inform all employers of the benefits of a mixed-age workforce
The Employers Forum on Age has been a key player (along with other organisations) in working with the UK Government to develop a voluntary Code of Practice on Age Diversity. The Code of Practice covers:
- recruitment strategies – that is advertising - on the basis of the skills and abilities needed to do the job
- selection on merit
- promotion on the ability or demonstrated potential to do the job
- encouraging all employees to take advantage of relevant and suitable training and development opportunities
- ensure that retirement schemes are fairly applied, taking individual and business needs into account
In Australia – and arguably in other comparable countries - we urgently need a body such as the UK Employers Forum on Age which embodies a code of practice on age diversity. We have had some tentative efforts in this regard with the Australian Employers Convention which at the moment is needing Federal Government funding to pursue its objectives.
The Employers Forum needs to be linked to better age discrimination legislation and a campaign to assist employers to understand the legislation.
There is ample evidence presented at this conference, in the CED report and in the report that I have prepared in conjunction with CEDA, that prolonging working lives will be essential if our economies are to manage the challenges of the ageing population.
It will be critical then that employers begin to prepare now for the demographic transitions that lie ahead in coming years. These transitions will require "social obligations" to engage in employment practices that give older workers opportunities for gaining and retaining employment. An employers forum and a code or practice can play an important role in assisting business to fulfill these obligations.
What is proposed is not a cost to employers – there is plenty of evidence that age balance in the workforce has a net benefit or at least is neutral in terms of productivity compared to a heavily youth oriented workplace.
And finally on this, age balance in employment should be part of an overall business strategy which recognises the value of mature age people as consumers of goods and services – the so-called silver market.
The second major area for reform is in the area of education and training. In asking employers to reform their human resource practices, it is essential that all workers are well-equipped to meet the challenges and demands ahead of them.
There are two levels at which the reforms in this area need to occur.
1. Evolving a culture of life-long learning for all workers
The first level is relatively straightforward and requires that all workers are acculturated to the concept of life-long learning so that their skills are continuously upgraded to meet current and emerging business requirements. It is the responsibility of individuals to continuously upgrade their skills. It is the responsibility of employers to ensure that workers of all ages and at all levels have opportunities to pursue relevant training.
Governments also have responsibility to ensure that there is adequate education and training infrastructure and that participation is accessible and affordable for all groups.
2. Specific training for current groups of mature age people who are disadvantaged in the labour market
The second level is more complex and involves working with current groups of mature age people who have lost jobs or who have been out of the labour market and who want and need paid employment.
This group needs assistance in a wide range of areas. A number of recommendations made by the CED are supported by the House of Representatives inquiry into older workers.
- computer training and general technological upgrading
- assistance with adjusting to changing labour market structures and employment practices
- advice and assistance in job search
- prevention of long term unemployment following retrenchment.
3. Changing the process of retirement - flexibility in social security and flexibility in work
The third dimension of actions for the ageing workforce relate to retirement - many of these were discussed in the CED report.
Clearly we need to promote longer working lives as a result of increased longevity.
The importance of an adequate funding base for the retirement income needs of Australia's population in the future can hardly be underestimated.
For many countries, the retirement incomes commitment will begin to impact on country assessments of international financial markets in the next few years.
Some recent modelling shows the potential importance of delaying retirement as long as possible (Fitzgerald and Rooney, 1999, p 42):
For a male retiring at 58 (the average retirement age) and drawing down $30,000 per annum or 60 per cent of final salary, superannuation will be depleted by the age of 72. By delaying retirement by 2 years superannuation savings will last until 79. By working an extra 5 years, superannuation would last until the age of 95.
For the same person working one extra year full-time and one extra year part-time, superannuation will last until he is 78. And if he continues part-time until age 63 his superannuation savings will last until he is 90.
The ageing population and ageing workforce will create a demand and a need for phased retirement programs and more flexible working conditions for mature workers. In addition, the ageing population and ageing workforce will create greater pressures on employers to retain their skills base as it becomes increasingly more difficult to recruit younger workers.
As people age, many people wish to change the nature of their relationship to paid employment. This may mean reducing hours of work or taking on part-time work. It may mean continuing on in work after conventional retirement ages. Alternatively, it may mean changing occupations or industries or working in different jobs in the same organisation.
We are unable to identify any examples of phased retirement programs in Australia. There are few examples in the US as discussed in the CED report.
An alternative to phased retirement programs are rehiring programs for retired workers. Under such programs the company provides opportunities for retired workers to take up casual, contract and informal work opportunities. This arrangement can also be of benefit to companies in having needed skills and knowledge on tap.
An important corollary to greater flexibility in the workplace is greater flexibility in social security.
It is important that the balance of financial incentives and disincentives is appropriate to foster the maximum level of labour force participation among mature age people. Social security provisions in Australia involve very high effective marginal tax rates which discourage participation in part-time work - jobs which could lead to full-time jobs and financial independence.
This paper has shown a strong need for reform in three areas:
- business practice with regard to older workers
- education, training and life-long learning and
- the retirement process itself.
As leading Australian ageing researchers, Professor John McCallum and Karin Geiselhart, (1996, p2) point out:
The critical problem arising from population ageing is not one of excessive burdens on the young…but the slowness of social and economic institutions to accommodate an unprecedented range of fundamental changes in our society, like the medium term rise in the numbers of elderly. It is extremely unlikely, on current trends, that higher fertility or immigration levels will reverse this ageing of the population. But we argue that it is the social and economic structures rather than the demography that has to change.
****
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Copyright © 2000 Council on the
Ageing. All rights reserved.
Date: 15 September 2000
Revised: 30 October 2001
Council on the Ageing
(Australia)
Level 2, 3 Bowen Crescent, Melbourne Vic 3004
Tel (03) 9820 2655 Fax (03) 9820 9886
email cota@cota.org.au
