In Summary

The case for extending working lives is contained in the National Audit Commission report, which projects a dependency ratio of 39 per cent in 2041 in the aged to working age population ratio. The Treasurer’s Budget speech stated that the age of ‘entitlement’ has to be replaced, not with an age of austerity but with an age of ‘opportunity’. In this speech the Treasurer asserted that we are a nation of ‘lifters’ and not of ‘leaners’.

Extending the age pension to 70 by 2035 has aroused anxiety for senior Australians not sure whether their skills, health and longevity in work can be assured at that age. Concurrently, the Budget foreshadowed that age pensions would be indexed according to the CPI from 1 July 2017, and not benchmarked to male total average weekly earnings. This measure has been estimated to reduce individual pensions by $500 per year based on inflation.

The present policy of deferring the age pension to 70 will require a great leap forward in policy to become more than a speculative target. Currently the workforce participation for those over 70 and over is tiny, with 7 % of men and 3% of women still in the workforce. Even at ages 65-69 only 33% of men and 18% of women participate in the workforce. Female participation is rising but women’s broken career trajectories have led to cumulative inequalities in careers and incomes.

Measures which prepare the nation for working longer by 2035 should work in concert.  Health and skills expenditures, which are prerequisites for continuing in the workplace, have also been shaved. Health co-payments of $7 for GP visits and the shift from bulk billed universal health insurance will particularly affect the ageing population with comorbidities requiring multiple services. Rising health costs will particularly affect older unemployed people prone to the ill-health consequences of unemployment.

Education is shifting to user pays within a massive unregulated uncapped market which may potentially lead to divergent educational pathways. Yet extended retirement rates are substantially higher for those with higher educational attainment than those with lower qualifications. Moreover productivity is also related to increasing education external to the workplace which contributed 0.14% per annum to labour productivity (1997-2009) according to a NCVER paper (Karmel 2014). Skills policy should be aligned with the need to extend working lives, which inter alia, will contribute to productivity.

Older workers who have been unemployed for over six months have been targeted in the Budget by a $10000 employer subsidy. The subsidy, ‘Restart’, which has been funded at $524.8 million for four years, will target 52,480 employers at the full subsidy rate of $10000 over two years. In April 2014 mature age jobseekers (based on ABS categories of 45-54, 55-64, and 65 and over) who had been unemployed for 26 weeks and over formed 44% of mature-age jobseekers. Overall, the subsidy will reach around close to two thirds of longer term mature age jobseekers with duration of unemployment of over 26 weeks, and a far smaller percentage of the total number of mature age jobseekers, of just under one third. The under-representation of mature-age jobseekers who may be discouraged and not in the labour force also decreases the actual proportion of older jobseekers reached.

This relatively thinly spread budget item which targets employers is an alternative to diverting resources towards building longer-term workforce capacity. Employer subsidy measures as part of an OECD suite of ‘passive’ labour market measures, can offer short-term protection to a disposable labour force. Mainstream skills development and tailored support are required to support transitions into the labour market beyond the subsidy period.   

Subsidised employment may not increase older workers subsequent competitiveness within the mainstream labour market due to age discrimination. ABS job search data collected in 2013 shows that of one in five workers aged 55 and over, the main reason for not looking for work related to age discrimination. Of discouraged workers who wanted to work and were available to work within the next four weeks but were not looking for work, 57% were aged 55 and over.

Long-term unemployment predicts being unemployed for longer. A 2014 Brookings paper concluded that despite transitory employment when they exit the labor force the long-term unemployed can return to joblessness. One reason suggested is that on the demand side, employers discriminate against the long-term unemployed, based on the (rational or irrational) expectation that there is a productivity-related reason for unemployment. An array of tailored measures was recommended to support the re-entry of this particularly vulnerable group to employment.

Extending working lives will also extend work injuries of older workers doing the heavy lifting. SafeWork Australia data show that for workers over 55, muscular stress (43%), hitting or being hit (23%), falls (8%) and exposure to mental stress (10%) were the highest causes of injury or illness. Aside from work injuries, chronic health risk factors are endemic.  Of over 300,000 workplace health checks carried out by WorkSafe Victoria's WorkHealth program, high blood pressure was detected in one quarter of workers, increased risk of developing cardiovascular disease in almost half of workers and high risk of developing type 2 diabetes in nearly a quarter of workers.

More recently workers compensation authorities at state and federal levels have oriented their interests towards preventive health and wellbeing programs. Australia has yet to adopt a systematic approach to occupational health which extends beyond OH & S compliance. Policies which extend beyond silos require multidimensional support connecting skills, health and adaptation to physical and mental workplace demands. One key exemplar is the Finnish ‘Workability’ framework, a multidimensional approach to occupational health and wellbeing which ‘joins up’ health and wellbeing, competence, values and attitudes and adaptability to work structures. These domains correspond with cross-sectoral government responsibilities in health, training, job search and industry workforce planning policies. It has been evaluated for almost three decades and is shown to improve the ability of people to continue to work longer.

Silo policies will lead to short term sheltered employment followed by spells of jobseeking which expose older jobseekers to greater inequalities. Unemployment benefits will fill the void left by deferral of age pensions. The costs of long term unemployment will be shifted into health system costs, adding to the costs of primary and secondary health care, with further downstream costs, and increasing housing inequalities.

Integrated policies are required if the call for raising the pension to 70 by 2035 is not just a futurist and globally untested social experiment. Interlocked government, health and skilling policies and strategic industry recruitment are obligatory policies to support raising the pension age. Meanwhile retirement incomes should provide security alleviating lack of work ‘choices’ beyond individuals’ work capacity.

While the government advocates ‘prudence not austerity’, without integrated government policy supporting actual choice about working longer, imprudent degradation of working and living standards is on the horizon for people now entering their fifties, and those succeeding them.

Written by Elizabeth Brooke is an Associate Professor from Swinburne's Centre for Social Impact. This article was originally published on Australian Policy Online. You can view the original article here