2010/12: Should Australia's retirement age be raised to 67?

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2010/12: Should Australia's retirement age be raised to 67?

What they said...

'Working age people who can't afford to retire when they like ... are going to be pushed further away from retirement'
Michael Rafferty, from the University of Sydney's Workplace Research Centre

'Ensuring these people will stay in the workforce would solve some of these problems as these employees would save the public purse by not drawing pensions and they would continue to pay taxes'
Leon Gettler, an economics writer for The Age

The issue at a glance
On June 16, 2010, the French government announced its plan to cater for an ageing population. Under the plan, French workers will have to pay pension contributions for a longer period and new taxes will be placed on high-income earners and on capital gains to help plug a major shortfall in pensions funding. The retiring age will be raised from 60 to 62 by 2018.
'Working longer is inevitable. There is no magical solution,' Labour Minister Eric Woerth when he released the changes. Pushing back the retirement age appears to be the most controversial.
On May 12, 2009, the Treasurer Wayne Swan announced that Australia's retirement age would be increased. The Government will begin increasing the aged-pension age in six-monthly increments from 65 in 2017 to 67 by 2023.
The change has met with a mixed response. Some unofficial polls indicate general acceptance. The Business Council of Australia (BCA) has argued that the retirement age should be 73, while some union spokespeople have argued it should not be raised. Interestingly, despite the position of the BCA, many employers appear reluctant to employ older workers.

Background
(Much of the information contained in the following has been drawn from Wikipedia's entry on 'Retirement'. The full text of this entry can be found at http://en.wikipedia.org/wiki/Retirement)

Retirement occurs when a person stops employment completely (or decides to leave the labor force if he or she is unemployed). A person may also semi-retire by reducing work hours.
Many people choose to retire when they are eligible for private or public pension benefits, although some are forced to retire when physical conditions don't allow the person to work any more (by illness or accident).
In most countries, the idea of retirement is of recent origin, being introduced during the 19th and 20th centuries. Previously, low life expectancy and the absence of pension arrangements meant that most workers continued to work until death.
Germany was the first country to introduce retirement in the 1880s. The age of 65 was originally selected as the time for retirement by the "Iron Chancellor," Otto von Bismarck, when he introduced a social security system to appeal to the German working class and combat the power of the Socialist Party in Germany during the late 1800s. Bismarck knew that the program would cost little because the average German worker never reached 65, and many of those who did lived only a few years beyond that age.
When the United States finally passed a social security law in 1935, the average life expectancy in America was only 61.7 years.
Nowadays most developed countries have systems to provide pensions on retirement in old age, which may be sponsored by employers and/or the state. In many poorer countries, support for the old is still mainly provided through the family.
Today, retirement with a pension is considered a right of the worker in many societies, and hard ideological, social, cultural and political battles have been fought over whether this is a right. In many western countries this right is mentioned in national constitutions.
Ageing populations in developed countries (the result of declining birthrates and increased longevity) are putting pressure on this 'right'. Many nations are taking steps to increase the 'retirement age', that is, the age at which government-funded age pensions can be accessed.

Internet information
The 2010 Treasury Intergenerational Report outlines the most recent projections regarding demographic trends in Australia. The full text of this report can be found at http://www.treasury.gov.au/igr/igr2010/

The 2007 Treasury Intergenerational Report outlines projections regarding demographic trends in Australia. The full text of this report can be found at http://www.treasury.gov.au/documents/1239/PDF/IGR_2007_final_report.pdf

On May 12, 2009, the federal treasurer, Wayne Swan, issued a media release outlining the main features of the federal budget for that year. The release includes details of the changes to the retirement age. The full text of this media report can be found at http://www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2009/068.htm&pageID=003&min=wms&

On February 15, 2010, The West Australian published a news report outlining the position of the Business Council of Australia (BCA) on what the retirement age should be. The BCA is recommending that the retirement age be 73. The full text of this report can be found at http://au.news.yahoo.com/thewest/a/-/breaking/6802340/big-business-floats-73-as-new-retirement-age/

On March 31, 2010, The Age published an analysis by its economics writer Leon Gettler, outlining some of the discrimination faced by older workers. The full text of this report can be found at http://blogs.theage.com.au/executive-style/managementline/2010/03/31/givingolderwo.html

On June 16, 2010, the ABC issued a report detailing the plans of the French government to lift the retirement age from 60 to 62. The full text of this report can be found at http://www.abc.net.au/news/stories/2010/06/16/2929003.htm

Arguments against Australia's retirement age being lifted to 67
1. Increasing the retirement age will be socially discriminatory
It has been claimed that increasing the retirement age will be discriminatory. Wealthy individuals are not dependent on government pensions. Therefore they are able to cease work when they choose to. Those largely dependent on a government pension to fund their retirement will not only have little or no choice as to when they retire, they are now being told they will have to work for two years longer.
Mike Rafferty, from the University of Sydney's Workplace Research Centre, has claimed that lifting the pension age is an unfair policy. Mr Rafferty has stated, 'For many people that are wealthy, they can retire whenever they like.
So what it is really doing is it is saying to the working age people who can't afford to retire when they like that essentially now they are going to be pushed further away from retirement.'
Mr Rafferty has claimed the move will cause a greater class rift in retirement. He has further stated, 'You are going to create larger inequality into retirement because we already know that by the time people get towards retirement age all sorts of inequalities are already locked in. Now you are going to say amongst those who can't afford to retire, you are going to work longer as well.'
It has also been stated that the increase is discriminatory because it applies to those dependent on an old age pension and does not affect those able to draw on a superannuation pension.
There has been no increase in the age at which people are able to access their superannuation contributions. This means that those unable to build up substantial superannuatoin investments will be at a disadvantage. They will effectively be required to remain at work for longer than others who will be able to draw on a superannuation income.

2. Many workers in manual jobs may not be physically able to continue
It has been claimed that extending the retirement age to 67 may place unreasonable demands on some workers. It is argued that those people who have been employed in physically demanding manual work may well carry injuries which would make it very difficult for them to continue working for a further two years.
Many manual workers have claimed they are simply unable to continue to 67. Mr Noel Brown, 62, was interviewed by The Australian on may 24, 2009. Mr Brown has worked as a bricklayer for 40 years. He suffers from chronic arthritis in his hips and has trouble walking. He now works as a traffic controller on a building site. Mr Brown has stated, 'It's when you hit 50 that you start to feel the aches and pains. I haven't laid a brick in eight years. Hands, knees, back - the lot's gone. In two years, I just want to get out of it. I don't want to see another building site again.'
The Australian also interviewed Mr John Burns, also 62, who is a rigger. Mr Brown stated, 'Sixty-five is a milestone and two years is a long time when you're doing physical work. You're that buggered you can't enjoy your retirement the way you should.'
A similar point of view has been expressed by the Australian Federation of Nurses. On May 27, 2009, the Federation issued a report which stated, 'Given that the nature of nursing work is heavy, stressful and involves shift work, with long unsociable hours, it is difficult to see how nurses could sustain working the extra years. It is already a struggle for nurses to continue working well into their 60s.
These additional years could lead to falling morale, and dissuade nurses from staying on in the health system; we already have difficulty retaining nurses. It is possible that it will lead to an increase in workplace injuries as nurses try to cope with the heavy work on ageing bodies.'

3. Older workers are likely to face discrimination
It has been claimed that many older workers will have difficulty remaining in the workforce because they face discrimination on the basis of their age. Though there is anti-discrimination legislation which prohibits such prejudice, it has been claimed that the reality is that ageism still operates in the workplace. It has been claimed that this is particularly the case should an older worker lose their job. They will then find it very difficult to find comparable, or indeed, any employment because many employers appear to be reluctant to take on older workers.
It has been claimed that there is a general tendency to discriminate against older workers and to attribute a range of negative qualities to them. Elizabeth Broderick, in an article published in The Newcastle Herald, 5 February 2010, stated, 'We live in a culture that is largely obsessed with appearance and places high value on being "vital and young". These values often lead to systematic stereotyping of, and discrimination against, people simply because of their age - in this case, mature age. That is ageism. The unfortunate thing about stereotypes like, "mature people are slow to pick up technology", is not just that they are untrue, but that they are often accepted as "truth" or "reality". Ageism strongly implies a message of decline and of burden.' Such attitudes appear to lead employers not employing mature workers.
Figures released by the Australian Bureau of Statistics indicate that the number of 'discouraged job seekers' - people who are able to work but have stopped searching - increased 51.2 per cent to 111,800 over the last four years to 2009. Of these 'discouraged job seekers', more than half (52 per cent) were aged over 55 and about 40 per cent said they had stopped looking for a job because they were considered too old by employers.
Shane Higgins, from the online job agency Older Workers, has claimed that employers are essentially dismissive of olders workers. Mr Higgins has stated, 'They don't even give them a chance to show their qualifications. A lot of our members are writing and emailing us saying, "we're not even getting responses to our emails, to our job applications". '
Michael O'Neill, the chief executive of National Seniors has claimed that Australia has among the lowest participation rates for the over-55s among the English-speaking OECD nations. Mr O'Neill attributes a significant part of this low participation rate to discrimination against older employees.

4. It will have an adverse impact on those industries dependent on retirees
The retirement industry in Australia is experiencing a growth phase as baby boomers approach retirement age. This growth has also seen a change in the product on offer to retirees. The range of industries involved in servicing retirees has increased. Retirees are now an important component of the tourist market, all areas of the leisure market, the hospitality industry and the real estate industry.
Leon Gettler, an economics commentator for The Age, noted in a blog published on March 31, 2010, that there has been a huge growth in businesses targeting the 'grey market' with a focus on 'leisure products, beauty products and elder care services'. Such businesses are likely to suffer if the retiree market is restricted because people believe their access to pensions and/or to their superannuation entitlements is likely to be delayed.
The recent drops in the share market have given an indication of the negative impact on businesses which could occur if the retiree market is significantly diminished. Finance columnist Michael Pascoe has stated, 'I was talking to a travel agent recently who told me that the part of her business that has really disappeared is the retiree market - people depending on their investments to live.'
It has been suggested that if the age at which people can retire is increased then this may have a negative impact on all those industries which have come to depend for a significant portion of their income on the retiree market.

5. It will reduce the social contribution that older Australians can make
It has been noted that many retirees perform significant amounts of unpaid, volunteer work that contributes in a substantial manner to the wellbeing of Australian society. This work includes community volunteer work in schools, with church and welfare agencies, in animal rescue bodies and in fund raising for charities.
In addition to this, it has been noted, that many retirees perform valuable work within their own families. The care for their grandchildren so that their sons and daughters are able to work. They look after members of their families and others who are ailing and/or variously disabled. Without these services many working mothers would not be able to hold down a job and many of the ill and frail being cared for in their own homes would become a drain on hospitals, nursing homes and other government-funded services.
It has been claimed that Australia has a general tendency to undervalue unpaid labour. The Australian Bureau of Statistics has indicated that it does not consider there needs to be questions about unpaid work in the Census. This means that it is extremely difficult to quantify either the amount of unpaid work being performed or its value.
In 1994, Melbourne economist Duncan Ironmonger published a research paper that attempted to quantify and value unpaid work.
Ironmonger found that the hours of unpaid work performed by Australians are substantially higher than the hours of paid work (in 1992 40 percent more), and over a nearly 20 year period from 1974, the hours of unpaid work in Australia grew by 131 million hours per week. Extrapolating from this to consider the unpaid work of retirees, it seems likely that it is both significant and of important economic and social worth.
If older Australians are compelled to remain in the paid workforce for longer, then their capacity to contribute to the community in other ways will be reduced.

Arguments in favour of Australia's retirement age being lifted to 67
1. It will reduce the number of retirees dependent on a shrinking taxpayer base
Three factors are impacting on the proportion of Australians who are taxpayers relative to those who are drawing age pensions.
Declining birth rates have meant that the number of young Australians becoming taxpayers is declining relative to the total population. Increased longevity is having the same effect. Australia has the fifth highest life expectancy in the developed world. This means again that the proportion of the population drawing on age pensions is also growing relative to the tax paying population.
The third factor impacting on this is that the group of Australians born in the generation after World War II (commonly referred to as 'baby boomers') is approaching retirement age. This demographic bulge will also increase the ratio of pensioners to taxpayers.
In the lead-up to the federal budget of may 2009, the Business Council of Australia (BCA) released a paper outlining its concerns regarding Australia's growing, ageing population, warning that that the number of people aged 65 or older will increase from 2.9 million to an estimated 7.4 million by 2049.
The BCA argued that the growth in the proportion of older people had major implications for the aged pension and for Federal and State budgets if taxation revenues were to shrink. It said retirement ages would have to be lifted significantly in the decades to come to ensure the proportion of five people of working age for every one retired was maintained.
Leon Gettler, writing for The Age in a blog comment issued on March 31, 2010, has stated, '...the number of people aged 65 to 84 years will more than double over the next 40 years. Expect the number of people 85 years and over to more than quadruple. From an economic point of view, ensuring these people will stay in the workforce would solve some of these problems as these employees would save the public purse by not drawing pensions and they would continue to pay taxes.'

2. Most Australians will still be able to enjoy a substantial retirement period
When the aged pension was introduced in Australia in 1909 the average male life expectancy was 55 years. The retirement age was set at 65 years. This meant that very many Australian men did not live to retirement age and so did not draw an old age pension. It also meant that many men did not live for long after their retirement.
Until the 1970s, the amount of time that a person aged 65 years could expect to spend on the Age Pension remained fairly constant, at about 12 years.
Increased life expectancy means that even when the retirement age is increased to 67 most Australians will still have a substantial period in their later years during which they will not need to undertake paid employment in order to support themselves.
According to United Nations estimates, Australia has the joint fourth-highest life expectancy in the world (along with Switzerland) over the period 2005-10 when ranked by male life expectancy. Only Iceland, Japan and Hong Kong have higher male life expectancy than Australia. Australia also has the joint third-highest female life expectancy. Like in most countries, female life expectancy is higher than male life expectancy in Australia.
Average male life expectancy in Australia is 79 and average female life expectancy is 84. In terms of the period a person is likely to spend drawing an old age pension, these figures are somewhat misleading. Those who live to 65 have a higher life expectancy than the average because they have avoided all the causes of death which have led to the deaths of those who do not reach 65.
Therefore, even though the retirement age in Australia is to be increased to 67, increased life expectancy will mean that those who do not receive a pension until this later age will still enjoy a substantial period of pensionable retirement.

3. It will enable the skills of older Australians to continue to be drawn on in the workplace
It has been noted that older Australians have skills and experience that are of great value to employers.
Older workers often have what is referred to as 'corporate knowledge', that is, particular experience of how an individual workplace or corporation operates. It is argued that this is knowledge that a younger, inexperienced employee might takes years to acquire and its absence could result in a significant loss in either efficiency or production.
The Australian Human Rights Commission has stated, 'We are seeing a dramatic loss of corporate knowledge. This knowledge is the product of a long-term investment in training and experience and is difficult to replace. On top of this is the time consuming and expensive process of recruiting and training new staff.
Workforce productivity and growth are major factors in overall economic growth. If the growth of the workforce slows, then that will have dramatic consequences and implications for all Australian businesses, including the government and community sectors.'
It has also been claimed that older workers bring valuable life experience and judgement. It has further been suggested that as the population ages there will be many customers who will prefer to have services provided by people closer in age to themselves.
Banks such as Westpac and St George along with major retailers Coles and Woolworths are actively recruiting older workers through diversity programs and specialist recruiters.
Stuart Elliott, Westpac's head of people strategy and development, has claimed that among the particular strengths older workers often bring to the workplace include judgement and wisdom. "A lot of the time in banking, we're talking about issues of risk management or judgement, and we use the term "It would be good to get some grey hairs" working in this sort of space because they are the people who are actually able to understand the complexity and what's happened in the past. Despite our desire to think that things are actually incredibly different now to how they were 15 years ago, they're not."
John Piggott, a professor of economics at the Australian School of Business and director of the Australian Institute for Population Ageing Research, has stated, 'It may be that an increasing proportion of [the] customer base would prefer the [person] behind the counter to look [older] than 20. So I think there is a customer relationship motivation and there also is a kind of political correctness motivation.'
Mal Walker, the founder of the specialist mature-age executive placement firm, GreyHair Alchemy, has stated, 'People are talking about the serious experience drain that's about to hit us, so I'm getting a lot of traction wherever I go [to seek placements].'

4. Provisions can be made to make extended employment more attractive and flexible
There is a wide range of employment arrangements that can be made to allow workers to have a more pleasant and productive extended worklife.
It has been claimed that many companies are already rethinking the way in which they employ their older workers. Some encourage more part time work or have their older workers go casual and contract their work back in.
Some companies and organisations like Australia Post and National Australia Bank are redesigning work around older workers, many of whom tend to choose to stay on with more flexible work packages that might, for example, allow them to take sabbaticals, huge slabs of unpaid leave, or one day off a week as part of their long service leave.
One of Australia's biggest shift operators, Australia Post trains its managers to have conversations with older employees about personal issues and career aspirations. This allows Australia Post to be more informed about the desires of its older workers and to shape their working arrangements accordingly.

5. Such an increase is in line with trends all over the world
It has been noted that increasing the retirement age has become a trend all over the world as advanced economies respond to the demands of their ageing populations.
France has recently increased the retirement age from 60 to 62. In the United States, while the normal retirement age for Social Security, or Old Age Survivors Insurance (OASI), historically has been age 65 to receive unreduced benefits, it is gradually increasing to age 67. For those turning 65 in 2008, full benefits will be payable beginning at age 66.
Britain is increasing its pension age to 68 from its current level of 65 between 2024 and 2046. In Austria, the retirement age for women will be gradually raised from 60 to 65 between 2024 and 2033. In Belgium, from 2009, the NRA for women will be raised from 64 to 65. Retirement ages for men and women in the Czech Republic have been increasing by two months and four months every year respectively since 1996. By 2013, the aim is to reach the target retirement age of 63 for males and 59 - 63 for females, depending on the number of children raised. Denmark will increase the NRA age for men and women from 65 to 67 between 2024 and 2027. Germany, too, is increasing the age for men and women from 65 to 67 between 2012 and 2029.
In Hungary, the government plans to pass legislation to increase the retirement age from 61/62 to 64 for women and from 62 to 65 for men by 2020 and then to 68 for women and to 69 for men by 2050. Israeli legislation in 2004 is gradually raising (according to date of birth) the retirement age from 65 to 67 for males and from 60 to 64 for females. In Italy, the government is proposing to increase the minimum retirement age from 57 to 58 in 2008 and then to 61 by 2013.
Japan is gradually increasing the retirement age under Employees' Pension Insurance from 60 to 65. For company-sponsored retirement plans in Japan, the normal retirement age is gradually being extended from 60 to 65 between 2006 and 2013. The Singaporean government's long-term objective is to increase the retirement age from 62 to 67 for men and women but it has not yet implemented legislation. In South Korea, the normal retirement age will increase from 60 to 61 in 2013 and then further by one year every 5 years until NRA reaches a standard 65.
The chairman of the new Australian Institute for Population Ageing Research, Marc de Cure, has stated, 'Australia needs to increase its taxation base, change consumption habits, encourage people to work past the current retirement age and develop a more resource-efficient health system.'

Further implications
The French Labour Minister, Eric Woerth, has noted, 'Working longer is inevitable.' This judgement appears to be so. Ageing populations and a shrinking tax base are on a collision course around the developed world.
The issue appears to be not so much whether retirement ages will increase but how this development will be accommodated.
Clearly employers' attitudes will need to change unless elderly workers are to be expected to complete their working lives in jobs that do not properly utilise their capabilities. There is the possibility that many older workers will complete their working lives in part-time, menial jobs because the prejudices of employers debar them from other work, including more demanding jobs they previously occupied.
Another possibility is that attitudes will shift and working conditions will become more flexible, allowing older workers to remain in employment (perhaps in part-time jobs) that takes advantage of their previous experience and abilities.
A dwindling workforce may well compel employers to make more substantial use of older workers than is currently happening. Australia is importing skilled labour from overseas through its skilled migration program. This is likely to continue; however, it is also possible that encouraging older workers to remain in employment will become another way of addressing skills shortages. Should this happen, older workers with needed skills may find themselves in a good bargaining position and able to demand desirable conditions and remuneration. Older workers without sought-after skills will not be in a far more unfortunate position.

Newspaper items used in the creation of this issue outline
AGE, September 5, Insight section, page 3, analysis (ref also to life expectancy, longevity and social, economic and health care effects) by Adele Horin, `The time of our longer lives'.
http://www.theage.com.au/national/the-time-of-our-longer-lives-20090904-fbg1.html

AGE, December 30, page 1, news item by Peter Martin, `So can we still feed them now they're 64?'.
http://www.theage.com.au/national/so-can-we-still-feed-them-now-theyre-64-20091229-lis2.html

AUST, January 28, page 11, analysis by Adam Cresswell, `The real cost of a long life'.
http://www.theaustralian.com.au/news/features/the-real-cost-of-a-long-life/story-e6frg6z6-1225824117183

AUST, February 2, page 13, editorial (with cartoon), `The trouble with talking about the next generation'.
http://www.theaustralian.com.au/news/opinion/the-trouble-with-talking-about-the-next-generation/story-e6frg71x-1225825692199

AUST, February 2, page 11, analysis by Tom Dusevic, `Our coming of age'.
http://www.theaustralian.com.au/news/features/our-coming-of-age/story-e6frg6z6-1225825666817

AGE, February 2, page 9, comment by Tim Colebatch, `(Intergenerational) Report fails to make the grade'.
http://www.theage.com.au/opinion/politics/report-fails-to-make-the-grade-20100201-n8rb.html

AGE, February 2, page 9, editorial, `Decisions now alter destiny in 2050'.
http://www.theage.com.au/opinion/editorial/decisions-now-alter-destiny-in-2050-20100201-n8rg.html

AGE, February 2, page 4, news items (with projections to 2050) by Peter Martin and Metherell, `Aged to hit budget hard by 2050, report warns'.
http://www.theage.com.au/national/aged-to-hit-budget-hard-by-2050-report-warns-20100201-n8y0.html

AUST, February 1, page 15, editorial, `We need tough treatment for high healthcare results'.
http://www.theaustralian.com.au/news/opinion/we-need-tough-treatment-for-high-healthcare-costs/story-e6frg71x-1225825220103

AUST, February 1, page 1, news item by Samantha Maiden, `Swan's carrot for older workers'.
http://www.theaustralian.com.au/politics/wayne-swans-carrot-for-older-workers/story-e6frgczf-1225825257525

AUST, January 30, page 14, comment (ref to Martin Amis' call for "euthanasia booths") by Brendan O'Neill, `Longevity is a triumph, not a problem'.
http://www.theaustralian.com.au/news/opinion/longevity-is-a-triumph-not-a-problem/story-e6frg6zo-1225824847907

AUST, February 18, page 12, comment by Gary Johns, `The elderly can pay for nursing homes'.
http://www.theaustralian.com.au/news/opinion/the-elderly-can-pay-for-nursing-homes/story-e6frg6zo-1225831542541

AUST, February 12, page 14, comment (on the Intergenerational Report) by Henry Ergas, `Much thicker but no wiser'.
http://www.theaustralian.com.au/politics/opinion/much-thicker-but-no-wiser/story-e6frgd0x-1225829337158

AGE, February 23, page 9, analysis by Farah Farouque, `Boom, crash, learn' (with related item, `Age discrimination shuts the door on a wealth of experience').
http://www.theage.com.au/national/boom-crash-learn-20100222-orvd.html
http://www.theage.com.au/national/age-discrimination-shuts-door-on-a-wealth-of-experience-20100222-orvb.html

AUST, March 29, page 14, comment by Glenn Milne, `For those of a certain age, health is everything'.
http://www.theaustralian.com.au/news/opinion/for-those-of-a-certain-age-health-is-everything/story-e6frg75x-1225846613143

AGE, April 11, page 13, analysis by Kathy Evans, `The future is grey'.
http://www.theage.com.au/lifestyle/the-future-is-grey-20100410-rzw3.html

AUST, June 3, page 11, comment by Anatole Kaletsky, `Retirement revolution to shake the world'.
http://www.theaustralian.com.au/news/opinion/retirement-revolution-to-shake-world/story-e6frg6zo-1225874710567