COTA Federal Budget submission 2001-02: Australia's ageing workforce

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Council on the Ageing (Australia)

 

INVESTING IN THE FUTURE:

AUSTRALIA'S AGEING WORKFORCE

 

Submission to Federal Budget 2001-02

for

Department of Employment, Workplace Relations and Small Business
Department of Education and Youth Affairs
Department of Family and Community Services
Department of Health and Aged Care
Department of Treasury
Department of Attorney-General

Council on the Ageing (Australia)
Level 2, 3 Bowen Crescent
Melbourne Victoria 3004
Phone: 03 9820 2655
Facsimile: 03 9820 9886
Email: cota@cota.org.au

February 2001

CONTENTS

Summary of Recommendations

Introduction: Investing in the future

1. MAXIMISING THE COMPETITIVENESS OF MATURE WORKERS

2. WELFARE REFORM

3. LIFELONG LEARNING

4. FEDERAL AGE DISCRIMINATION LEGISLATION

5. SOCIAL SECURITY PROVISIONS

SUMMARY OF RECOMMENDATIONS

1. TARGETTED APPROACHES TO ASSISTING MATURE WORKERS

Recommendation 1

Develop a specific employment program to assist mature workers.

2. WELFARE REFORM

Recommendation 2

The Government must be prepared to provide sufficient funding to meet its commitments to mature age people of working age made in the statement: Welfare Reform: A Stronger, Fairer Australia.

3. LIFELONG LEARNING

Recommendation 3

The Federal Government needs to institute a number of actions to support a culture of lifelong learning in Australia:

• Develop an explicit policy of education for older adults.

• Reduce barriers to existing education and training opportunities for older adults such as costs, time and location.

• Provide incentives for the education and training of older adults in the workplace.

• Extend community and internet-based learning options.

• Foster the development of methodologies for the learning of older adults.

• A national policy framework for adult learning as recommended by Adult Learning Australia.

4. FEDERAL AGE DISCRIMINATION LEGISLATION

A Federal Age Discrimination Act

Recommendation 4.1

• Introduction of a Federal Age Discrimination Act to match those of sex, race and disability

• Education campaign to complement introduction of the Age Discrimination Act.

Amendment to Company Law

Recommendation 4.2

Company law should be amended so that there is no statutory limit on the age of retirement for company directors.

5. SOCIAL SECURITY PROVISIONS

The Assets Test

Recommendation 5.1

The social security assets test for mature age people should be revised to more realistically reflect lifecycle factors affecting savings and to be cognisant of the retirement savings requirements of older Australians. This may lead to the development a graduated age-related assets test.

Newstart Allowance

Recommendation 5.2

Newstart Allowance for older unemployed people should be increased or replaced with another payment that more realistically reflects the duration of unemployment they are likely to experience: the current level of a pension payment would be appropriate. This new payment should be introduced for people 50 and over – or even 45, the age at which age discrimination begins to manifest itself. The income test for this payment should also be lifted to the same income test as for a pension income.

Liquid Assets Test

Recommendation 5.3

Abolish the waiting periods for Newstart Allowance based on the Liquid Assets Test.

Means Testing of Superannuation Assets of People 55 and over

Recommendation 5.4

The assets test for unemployed people 55 and over in receipt of government income support over 39 weeks should exclude superannuation assets in order to ensure that people 55 and over are able to maximise superannuation savings available for retirement and old age.

Introduction: Investing in the Future

COTA considers that the issue of Australia's ageing workforce is one that warrants specific attention in the context of the 2001 Budget.

The proposals we recommend fit with a number of the most important national agendas:

• managing the challenges of the ageing population

• dealing with our competitiveness in global markets

• improving the social and economic participation in paid employment of people between the ages of 50 and 64 while reducing reliance on social security incomes.

There has been an ongoing debate in recent years in Australia, as elsewhere, about the possible effects on the economy and the capacity of governments to pay for the services that a large and dependent aged population is likely to need in the future. There has been little examination of the potential for increased labour force participation and later retirement ages for the older population as a tool in managing the costs to government of an ageing population. The sort of benefits of increased labour force participation include:

• greater capacity for individuals to make savings for retirement;

• lower dependency on publicly funded income support payments and services for longer periods;

• better health for longer periods (provided that the job itself does not pose a health risk);

• higher returns to revenue through taxation;

• higher standard of living in the pre-retirement and retirement years than would be available from early retirement.

COTA believes that predicted dependency ratios could be substantially ameliorated by increasing employment amongst mature age people. There is significant work to be done in the short to medium term in improving the employment to population ratios of people under the conventional retirement age of 65. A longer term project will be to encourage people over the age of 65, health permitting, to remain in employment if they wish, as well as removing barriers to their participation.

Using the Budget Surplus for Long Term Investment

As a small, open economy, the optimisation of Australia's human resource capacity will be essential to manage the challenges ahead in maintaining and increasing our international competitiveness. Our competitiveness will be linked inextricably to our capacity to be leaders in the knowledge economy. We cannot afford to lose our existing talent to other countries or to waste it through discriminatory employment practices and lack of attention to lifelong learning.

Over the past two years, COTA has been appalled at the waste of skills and experience of the mature age people who have contacted us. A number have reported that they can readily find work consistent with their skills and experience in Asia but not in Australia. Others are relegated to jobs below their skill level and many are forced into early retirement.

Australia's current treatment of its older workers is consistent with its relatively poor record in nurturing research and development, fostering innovation in new technologies and providing opportunities for career advancement for some of our brightest talents. Hopefully, the Government's recent Innovation Action Plan Backing Australia's Ability will begin to remedy some of these issues.

However, the Government still needs to go further in terms of positioning older workers to take advantage of opportunities in the new economy, to defer retirement plans and continue to contribute to the economic development of the nation.

The current Budget surplus provides the Government with a unique opportunity to redress the imbalances that have emerged in recent years through investments that will ensure that Australia is able to compete effectively in the global economy of the 21^st century.

Vince Fitzgerald discusses the benefits of infrastructure spending over debt retirement for the 2001 Budget (Australian Financial Review, 29 November 2000, p 43):

• adding to national saving

• positive flow of net benefits to the community

• compensation for past under-investment in some public infrastructure and in intellectual capital (via research, skills development etc)

The infrastructure requirements to manage the ageing workforce cross a number of policies and programs in a range of areas, in particular:

• Lifelong learning

• Programs that focus on ensuring that mature workers are competitive in the contemporary labour market

• Effective age discrimination legislation

• Sound social security provisions.

In the future, individuals, employers and the society in its entirety, will not be able to afford the loss of skills and income caused by the premature attrition of mature age people from the workforce. The Government must act in the 2001 Budget to ensure that there is an improvement in the position of present cohorts of mature age people and future generations.

COTA's Budget submission makes a number of recommendation for managing Australia's ageing workforce.

1. Maximising The Competitiveness Of Mature Workers

Targetted approaches to Assisting Mature Workers

Relevant to:

• Department of Employment, Workplace Relations and Small Business
• Department of Family and Community Services
• Department of Health and Aged Care

COTA believes that there is a need for a specific assistance for mature age people involving:

• the development of methodologies for assisting mature age people experiencing labour market difficulties;

• a broadening of the focus of labour market assistance to all mature age people needing labour market assistance.

The Government has not supported the development of employment programs for particular population groups. In addition, the design of government employment policies is primarily by the objective of minimising welfare dependency in the short term.

However, this approach is unsuitable for mature age people, many of whom may have access, at least in the short term, to private income sources or who may have a strong claim for an income support payment other than Newstart or Mature Age Allowance.

Approaches need to be developed that offer opportunities for the employment, education and training of older workers that are not related to their source of income. These approaches need to be compatible with the life stage, experience, maturity, values and learning styles of diverse groups of mature age people.

COTA envisages that services need to be developed specifically for mature workers encompassing the following elements:

• referral to appropriate services and training

• careers advice

• assistance with job search

• information technology training

• transition to retirement programs

• education about the labour market of the 21^st century.

COTA does not believe that the present Job Network arrangements are able to develop the methodologies needed for addressing the specific issues for mature age people. Mature age people are referred to generic education, training or counselling services but none specialise in the needs of older people.

An American report on Unique Training Requirements of Low Income Older Workers (National Senior Citizens Education and Research Centre (1998) Unique Training Requirements of Low Income Older Workers, United States Department of Labor) shows that it is important to take account of the following factors in working with older people:

• the particular age related characteristics of mature workers relating to learning styles and interests;

• their past experiences in education and training;

• their level of confidence.

The Government needs to develop programs that specifically suit the issues faced by older people who need labour market assistance.

Recommendation 1 Develop a specific employment program to assist mature workers.

2. Welfare Reform

Relevant to:

• Department of Family and Community Services
• Department of Employment, Workplace Relations and Small Business

The Government has made a range of commitments to welfare reform in its 14 December 2000 statement: Welfare Reform: A Stronger, Fairer Australia. The Council on the Ageing is greatly encouraged by the Government's commitments made in the statement.

Here we follow through each of the commitments made in the statement with specific recommendations for action.

Older workforce age people currently on non-activity tested payments (Mature Age, Widow and Partner Allowance) will be encouraged to attend an interview to develop participation plans.

COTA supports this commitment. It will be critical though that the Government is able to offer genuine program options and support for these people that are appropriate to their needs, background and aspirations. A specialised program with people trained to work with disadvantaged older people who have had little recent workforce experience will be important.

New places in a wide range of employment, education and training services will be made available to all those who wish to take advantage of them.

In recent work, COTA identified considerable dissatisfaction amongst older unemployed about the low level of options available to them through the Job Network. It is not clear what additional services that the Government intends to offer. COTA believes that targetted program assistance as described in section one above is essential in addition to new places in existing employment, education and training programs.

Older unemployed people will receive better access to services and support to help them get back to work, including better support for newly retrenched workers or those facing retrenchment. They will be better informed of participation incentives currently available to them.

COTA has advocated keenly on this issue in recent years and is pleased to see the Government's recognition of the issue. We believe that any initiative should broadly target all mature age people who are facing retrenchment or who have recently been retrenched. Prevention of long term unemployment is critical.

The Prime Minister's Community Business Partnership will be asked to encourage business to identify and generate more opportunities for mature age people.

The Council on the Ageing believes that business plays a critical role in improve the position of mature age people. COTA is well positioned to assist in this initiative.

Mature age jobless will also gain from improved financial incentives to take up part-time and casual work that will flow from the establishment of a Transition Bank, a McClure Report recommendation that the Government will develop.

This concept has been a COTA policy for a number of years which we fully support. See section on income security below.

Recommendation 2 The Government must be prepared to provide sufficient funding to meet its commitments made to mature age people of working age made in the statement: Welfare Reform: A Stronger, Fairer Australia.

3. Lifelong Learning

Relevant to:

• Department of Employment, Workplace Relations and Small Business
• Department of Education and Youth Affairs
• Department of Health and Aged Care
• Department of Treasury

A critical factor in managing the ageing workforce is to support a culture of lifelong learning. Lifelong learning aims to provide opportunities for adults throughout the life course to undertake education and skills upgrading. The Government's Innovation Action Plan: Backing Australia's Ability needs to be complemented in the Budget by a specific measure to promote lifelong learning.

There are several core reasons to develop a culture of lifelong learning in the context of an ageing population and ageing workforce.

1. Labour force needs
   The ageing of the population means an ageing workforce. There will be a smaller pool of younger, recently educated people to recruit from, in the future. For this most prosaic of reasons, the skills of mature age people will need to be fostered and enhanced to meet workforce requirements in the future.
   
2. Responding to economic and technological change
   The technological environment will continue to undergo profound and rapid change. A culture of lifelong learning will be needed if Australia is to be able to respond to these continuous changes. The costs to Australia of not developing a culture of lifelong learning may be very severe with respect to our rate of economic growth and our competitiveness in the global economy. Over the longer term this translates into a fall in our standard of living, further contributing to poor economic output. This will make it more difficult to manage the challenges of an ageing population.
   
3. Maximising social and economic participation
   Opportunities for lifelong learning are also essential to maximise social and economic participation. The Welfare Reference Group identified a growing divide between "job rich" and "job poor" households which translates into households reliant primarily on a low social security income and those able to accumulate resources through paid employment. At the present time around 33 per cent of people between the ages of 50 and 64 are primarily reliant on some form of social security income and 46 per cent are not in paid employment.

   Education is an important conduit into paid employment and is an important form of social participation in its own right. Lifelong learning opportunities therefore can make an important contribution in narrowing the gaps between rich and poor households. This has important effects in terms of social cohesion and equity. An economically polarised society damages the fabric of society creating negative externalities for everyone.

4. Managing change and complexity
   The 21^st century will present a great many challenges across the globe – and in Australia. These challenges cross the environment, the society, family and the economy. The changing demographics are one of these challenges. It will be critical to the management of change and complexity that the society is well-equipped to respond in constructive and cohesive ways. Lifelong learning will empower individuals to develop constructive responses and will assist in nurturing Australia's democratic and peaceful traditions.

Current education policy

Lifelong learning does not feature strongly in current national education policy. Older adults with whom COTA has had contact report the following difficulties in pursuing educational goals:

• Cost - Australian education is fee-paying. Many professional courses require substantial outlays of thousands of dollars. Many older adults, especially if unemployed and with family responsibilities, are unable to meet these costs. While the Government's commitment in Backing Australia's Ability to allow people to defer fees under a HECS (Higher Education Contribution Scheme)- type system may be of some help but may still deter people who are not prepared to take on debts later in life.

• Uncertainty of investment. Many mature age people feel that the investment in obtaining new qualifications cannot be warranted in terms of the time they perceive they have ahead in the workforce and the uncertainty of the return. However, the perception seems to be derived from the idea that gaining new qualifications requires commitments of two or three year full time equivalent education.

• Inappropriate teaching and learning methodologies. Older adults have reported to COTA that they feel that the methods used in conventional educational courses are inappropriate to their background and learning styles.

• Lack of linkage to the workplace. Lack of information is a barrier for the training of mature age people. Most mature age people are risk averse and have insufficient information about the sort of education and training that will assist them in the labour market.

• Insufficient linkage to existing skills and training – insufficient recognition of prior learning.

• Youth focussed. Education policy is primarily concerned with the provision of education of people under the age of 25. There is very little concern with the educational needs of people beyond the completion of secondary school and primary degrees and qualifications.

Developing an Australian lifelong learning policy

Lifelong learning should, at the minimum, encompass the following characteristics:

• High level accessibility in terms of time, cost and location.

• Modularity – components of education should be linked to each other.

• Recognition of prior learning.

• Locally based.

• Relevant to both specific labour market needs and broader personal and social interests.

• Diversity in approaches, venues, methods, content.

• Appropriate use of technology.

Recommendation 3 The Federal Government needs to institute a number of actions to support a culture of lifelong learning in Australia: Develop an explicit policy of education for older adults. Reduce barriers to existing education and training opportunities for older adults such as costs, time and location. Provide incentives for the education and training of older adults in the workplace. Extend community and internet-based learning options. Foster the development of methodologies for the learning of older adults. A national policy framework for adult learning as recommended by Adult Learning Australia.

5. Federal Age Discrimination Legislation

Relevant to:

• Department of Attorney General
• Department of Employment, Workplace Relations and Small Business

At the present time, there is no specific Australian federal age discrimination legislation. Age discrimination is not unlawful in the federal sphere, although the Workplace Relations Act 1996 prohibits age discrimination in termination of employment. Although there is age

discrimination legislation in state government jurisdictions, the lack of federal legislation means that not everybody is covered by age discrimination legislation. In addition, the lack of uniformity of state laws means that individuals can be treated differently in law depending on where they live. There are also concerns about the low level of enforceability of age discrimination legislation both within the state legislative framework and in any future federal legislation.

While legislation alone can be a blunt device for obtaining behavioural change, it nevertheless can be an important backdrop for educating the community about important social issues. Government can have a major role in attaching resources for education about age discrimination both in general terms and in relation to the specific legislation. A community education campaign will reinforce the intention of the legislation but should focus on the positive aspects of behaving and making decisions in ways that are free from age bias.

The need for federal legislation is underscored in the recently released report of the Commonwealth's Human Rights and Equal Opportunity Commission on age discrimination (HREOC, 2000, p116):

The Commonwealth bears ultimate responsibility for the protection of human rights in Australia. It should also lead the way and model best law and practice.

We envisage that better federal age discrimination legislation will be an important springboard to engaging employers in issues about the mature age workforce. While some employers will continue to find ways to discriminate on the basis of age, comprehensive legislation will nevertheless be an inducement to examine assumptions that are driving hiring and firing decisions. We have seen this happen in the area of sex discrimination over the past 20 years.

There is a range of issues relating to the processes for enforcement of both present state legislation and future federal legislation which is beyond the scope of this submission. However, as for many forms of legislation, enforcement should be a measure of last resort, with the primary purpose of the legislation being promotion of positive behaviours and attitudes and prevention of discriminatory practices.

Recommendation 4.1 Introduction of a Federal Age Discrimination Act to match those of sex, race and disability Education campaign to complement introduction of the Act.

Abolishing implicit retirement of age of 72 for company directors

A useful measure for promoting the social and economic participation of older Australians would be to abolish the implicit compulsory retirement age of 72 for company directors. A number of COTA's Directors are over 72 and they have continuously expressed their frustration with this discriminatory stipulation (which is only averted through a special resolution at an annual general meeting.) Boards should have in place performance review for all directors regardless of age.

Recommendation 4.2 Company law should be amended sot that there is no statutory limit on the age of retirement for company directors.

5. Social Security Provisions

Relevant to:

• Department of Family and Community Services
• Department of Treasury

The Assets Test

Many unemployed mature age people are drawing down savings for day to day living costs because the assets test precludes them from receiving a social security payment such as Newstart Allowance. COTA believes that mature age people should be able to preserve their savings and assets for retirement purposes in accordance with the Government's objectives of encouraging independence and self-provision in retirement.

We believe that the excessive stringency of the social security assets test results in many mature age people having to draw an age pension upon retirement because they have used up their savings while unemployed. The assets test at its present level does not take account of lifecycle factors involved in savings. People in their fifties are more likely to have savings than people in their twenties or thirties. In addition, many mature age people receive redundancy packages which must last for many years. They should not be required to use these funds for recurrent living purposes while unemployed.

Recommendation 5.1 The social security assets test for mature age people should be revised to more realistically reflect lifecycle factors affecting savings and to be cognisant of the retirement savings requirements of older Australians. This may lead to the development a graduated age-related assets test.

Newstart Allowance

COTA's research also found that age discrimination in the labour market means that many unemployed mature age people are reliant on a Newstart Allowance for a significant duration. The average duration of unemployment for mature age people is 2 years. A strong theme in our research showed the difficulties many mature age people experienced supporting themselves on Newstart Allowance for such a long period.

Recommendation 5.2 Newstart Allowance for older unemployed people should be increased or replaced with another payment that more realistically reflects the duration of unemployment they are likely to experience: the current level of a pension payment would be appropriate. This new payment should be introduced for people 50 and over – or even 45, the age at which age discrimination begins to manifest itself. The income test for this payment should also be lifted to the same income test as for a pension income.

Liquid Assets Test

In addition, the liquid assets test for Newstart Allowance is extremely harsh, forcing unemployed people to use up savings for day to day living costs while serving a waiting period up to 3 months if there liquid assets exceed $2,500 for singles or $5,000 for doubles. This issue is discussed at length in the Age Counts report of the House of Representatives Standing Committee on Employment, Education and Workplace Relations (p179).

While there is a responsibility to ensure that social security is appropriately targetted, it is counter-productive to leave individuals with no reserves for emergencies and, for older people, to reduce their retirement savings capacity.

Recommendation 5.3 Abolish the waiting periods for Newstart Allowance based on the Liquid Assets Test.

Means testing the Superannuation Assets of People 55 and over

COTA continues to strongly oppose the Government's inclusion of superannuation in the assets test for people 55 and over receiving an income support payment over 39 weeks.

This policy has the effect of forcing a person in receipt of Newstart Allowance or other income support payment into approaching their superannuation fund for the release of an income stream for current living costs, although they may wish to continue to work. They will then be unable to make further contributions to the fund should they subsequently find a job.

Given the relatively tight level of the assets test, an individual could be financially very disadvantaged by this policy in the long term because it cuts across the advantages that could be gained by maintaining and adding to their savings in the superannuation fund until retirement. The highest level of compounding interest for a superannuation fund occurs in the immediate pre-retirement years. It is poor retirement incomes policy to reduce opportunities for people to maximise their final superannuation entitlement with a result being long term dependence on government income support in retirement.

The recent reports Rethinking Work and Retirement: report to National Bank of Australia by Dr Vince Fitzgerald and Catherine Rooney (1999) and Independence and Self Provision Discussion Paper for the National Strategy for an Ageing Australia (1999) support COTA's analysis of this policy issue by showing the importance for final retirement savings of continuing employment as long as possible and avoiding premature depletion of assets, including superannuation, for recurrent living costs.

Recommendation 5.4 The assets test for unemployed people 55 and over in receipt of government income support over 39 weeks should exclude superannuation assets in order to ensure that people 55 and over are able to maximise superannuation savings available for retirement and old age.

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Copyright © 2001 Council on the Ageing. All rights reserved.
Date:: 19 April 2001
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