Our ageing population presents serious economic challenges. Right?
In a recent Fairfax opinion piece, my local member Joe Hockey was the latest in a long line of political and economic commentators to tell me this. Mr Hockey spoke about the ageing trend in Australia and globally. Mind you, he started off on a positive note by saying that the ageing of the population should be celebrated as a triumph, because it means we’re living longer. Hear, hear.
But then the federal Treasurer’s mood dimmed. Mr Hockey claimed that “as the population ages, the total participation rate will fall”. He went on to say that if our growing life expectancies are not offset by immigration, they can lead to a greater number of over 65s dependant on fewer workers, or even a shrinking workforce. This economic doomsday scenario seems to have entered common belief. But can these ageing-induced claims be supported?
First, we should examine whether Australia’s age structure can be materially influenced by immigration.
A 1999 Australian parliamentary research paper, ''Population Futures for Australia: the Policy Alternatives'', looked at the claim immigration could offset an ageing population. It found that to maintain the proportion of the population aged 65 and over at then present levels, ''enormous numbers of immigrants would be required, starting in 1998 at 200,000 per annum, rising to 4 million per annum by 2048 and to 30 million per annum by 2098. By the end of next century, with these levels of immigration, our population would have reached almost 1 billion.”
The paper concluded: ''It is demographic nonsense to believe that immigration can help to keep our population young.'' This is supported by the Productivity Commission. In its 2010 report, "Population and Migration: Understanding the Numbers", it concluded that "realistic changes in migration levels also make little difference to the age structure of the population in the future, with any effect being temporary."
In promoting what to some might sound like a pyramid scheme, has Mr Hockey forgotten that migrants also age?
The second issue to examine is the impact of an ageing society on workforce participation. This reveals a serious flaw in our federal Treasurer’s analysis. He uses the traditional definition of our ''working age'' population as 15-64, but this definition is obsolete. My father worked full time until he was 70 and part time until he was 75. This is indicative of a broader trend where an increasing number of people 65 and over are off-setting an increase in the average age.
Fairfax journalist Matt Wade recently wrote that baby boomers are changing our economy, noting that the workforce participation rate for men above 65 in NSW rose from about 10 per cent in the mid-1990s to above 15 per cent in 2010-11. NSW Treasury expects that figure to rise to 20 per cent by 2028. For women above 65, it has more than doubled to about 7 per cent since the mid-2000s and is forecast to be more than 12 per cent by mid-century. In Australia, an increasing number of people (voluntarily) work past 65, off-setting an increase in the average age.
When analysing workforce participation and real dependency, it’s therefore appropriate to look at total labour-force participation of all citizens, including those above 65. On this front, it’s also good news.
If we look at Australia since 1980, in the same period as our average age has increased by about seven years to 37, workforce participation has also increased, from 62 to 65 per cent. So we’ve aged and lowered real dependency.
This demonstrates that factors other than age determine workforce participation, such as economic performance and associated job availability, gender equality and age discrimination. Many would argue that there’s still much room for improvement on all of these fronts.
It might help Mr Hockey to know that there are a range of countries more ''aged'' than Australia, such as The Netherlands and Switzerland. They also have higher workforce participation rates – in The Netherlands, it's more than 80 per cent. Perhaps rather than panicking over ageing, Mr Hockey could emulate the Dutch.
William Bourke is President of the Sustainable Population Party.
This article was first published in the Sydney Morning Herald: