The Longevity Revolution – Crisis or Opportunity?

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National Press Club Address

 

Acknowledgements and Introduction

Before I begin I want to acknowledge the traditional owners of the land on which we meet and to pay my respects to their Elders, past and present.

I thank the National Press Club for inviting me to speak on a subject which, I believe, is correctly described as a revolution.

The outcomes of any revolution are hard to predict before it is over. The outcome of the longevity revolution cannot yet be predicted. It can go one of two ways. The consequences, as Treasury’s Intergenerational reports always foreshadow, could be disastrous. Or, it could mark a positive transformation of our lives.

But we can be certain of this: the dramatic and continuing increase in longevity in Australia, as well as around the world, is a powerful and unavoidable fact of human existence in this century.

There is no turning back. We have no reason at all to think it will be over soon, or we, for the convenience of policy makers, will all go back to dying before we reach 65, as our forebears did a century ago.

The crisis, if that is what it is, has arrived. No amount of complaining about unsustainable outlays on pensions and health will change the demography.

But we can deal with it. We can deal with it a lot more effectively than we have so far.

The demographic revolution demands a further revolution in the way that we work, and in the intergenerational compact that we make with one another.

Demographic change need not be a crisis but an opportunity – a wave we can catch and ride to set Australia up for success now and throughout the rest of the 21^st century.

Temporary shift or permanent adjustment?

Much has been said and written about Australia’s ageing population. Like most nations around the world, we are in the throes of a marked societal shift – one which will see Australians in the 55-70 age bracket numbers over 5 million by 2030.^[1] With the largest generation of the 20^th century hitting retirement age, and birth rates not at replacement level, the demographic scales are starting to tip.

This is also a global phenomenon. By 2050, for the first time in the history of humanity, there will be more people over 60 years of age globally than there are children.^[2]

Here in Australia, after leaving the workforce, many individuals will live over 30 years on the age pension and accompanying supports.

The Commonwealth is committed to funding about 80 per cent of all aged care costs.

No wonder Joe Hockey is worried.

Of all currently retired people, about 80 per cent of these draw a full or part pension. ^[3]

Contrast this with the scenario in 1909, the year of the introduction of the age pension when only about 4 per cent of the population lived long enough to receive it. Eligibility age, then, as now, was 65 years. ^[4]

It is not hard to see why for many policy makers and governments, increasing longevity presents as a looming fiscal crisis.

The reality is that the intergenerational compact to which most societies commit – that is, the expectation that the taxes paid by those of working age will subsidize the young and the old – looks set to veer off course, with the size of the assumed workforce shrinking relative to those it is expected to support, and the costs of this support outstripping our capacity to pay.

Recognizing these imbalances, successive governments have nominated the ageing population and concurrent skills shortages as among the most urgent pressures on the nation’s economy.

The solution to the fiscal challenge, we have conventionally assumed, is either that taxes must rise or that welfare must fall. This year’s federal budget takes up the second option, reducing welfare expenditures, and as well abandoning some taxes.

But it seems this approach won’t work.

What should we do about the intergenerational compact?

First, we need to recognize that this compact was designed to fit a model that no longer exists.

Gone are the days when the typical structure of Australian households involved a male breadwinner and female homemaker, with the male spending his working life in one job before retiring, worn out, at the age of 65, and conveniently dying not too much later. That was the model set up by the Harvester Judgment in 1907.

Now, in 2014, both adults in a household have usually been in paid work at various stages, and may have changed jobs numerous times. What’s more, they may be still supporting adult children at home; or caring for grandchildren, or their own frail parents ... or all of those things.

Another change: rather than being experienced as the twilight years, – a quiet demise spent passively in a rocking chair on the verandah or in a nursing home– retirement now means a wide range of things to different people.

With mature Australians holding 40 per cent of the nation’s wealth,^[5] travel, study, investment and community work are firmly on the agenda.

What’s more in 2010, over a third of people over 55 were still in the workforce.^[6] This fact suggests that many older Australians want to work for longer. Although we are behind some other OECD countries in this regard, estimates nevertheless suggest that participation of those aged 55 and over will rise by 2.7 per cent by 2024-25^[7] – partly as a result of the dramatic increase in women’s workforce participation in recent decades.

That however is not a big enough increase, and not fast enough.

It is clear we are not dealing with a temporary shift – this is not an aberration which Band-Aid measures like a bit more welfare, a supplement here or a concession there, can fix. Rather, the nature of ageing, and its relationship to the economy, has become a permanent change in the way that our society functions. Rather than inflicting an intolerable burden on the declining proportion of taxpaying workers aged less than 60 years, we can spread the load by a straight forward change: by lengthening the working life of all Australians.

When we do this we will have established the basis for a new intergenerational compact.

This new compact, based on teams of older and younger workers cooperating and contributing together to increase tax revenues will not just avert a crisis; it will set us up to seize the opportunity, to catch that wave.

Understanding the business case

What are the implications for the national economy? Beyond the 2.7 per cent increase in workforce participation already expected, modelling done for the Australian Human Rights Commission by Deloitte Access Economics suggests that a further 3 per cent increase in workforce participation amongst workers aged 55 and over would contribute an extra $33 billion to the nation’s GDP – or around 1.6 per cent of national income, while an additional 5 per cent would contribute an further $48 billion.^[8]

Essentially, this additional increase would mean that participation rates of workers in their 50s and 60s would come close to that of those in their 30s and 40s. This would provide an extraordinary boost to the economy.

This increase is entirely feasible in terms of the health and capacities of our mature citizens.

Such a prospect can only gladden the heart of the beleaguered of Treasurers everywhere.

After all, the longer that mature Australians participate in the workforce, the longer they pay taxes. Their superannuation savings continue to grow, even at 9 and a half percent Superannuation Guarantee. When they do join that 80 per cent of retirees who eventually claim the age pension, it should be later, at a lower rate, and for fewer years.

Ongoing employment means that this significant group are not only building their own savings, but contributing to economic consumption as well, with consumers over 60 spending over $8 trillion worldwide in 2010, a figure expected to rise to $15 trillion by 2020.^[9]

And research recognizes that continued engagement in paid work is a factor in better physical and mental health, and reduces health costs.^[10]

It makes serious economic sense, as well as common sense, to harness this human capital.

I am not the first person to say this, of course. For some time, business and government leaders across the spectrum have been calling for measures to encourage older Australians to stay in the workforce. The recently announced intention of increasing the pension eligibility age to 70 by 2035 is just one example.

But, as a response to the ageing crisis, this measure by itself falls short. It leaves us still wedged in the wrong mindset – tinkering at the edges, scrabbling round for a few sticks to beat our older citizens with, rather than revolutionizing the way that we structure work.

If we are going to seize the opportunity before us and utilize the human capital at our disposal, then we will change the way that the workforce functions. We will move away from a model that seeks and favors only the youthful, presumed “hungry and high energy” dynamos .The new model should include all skilled and high energy candidates, regardless of how many birthdays they have chalked up.

As well, jobs must offer flexibility.

All employers need to ditch assumptions that job flexibility is an aberration to be reluctantly granted only to women returning from maternity leave, and resented and resisted when sought by older workers. That’s the outdated unproductive way.

Progressive and successful companies are already redesigning jobs and hours, and approved places of work.

The CEO of Telstra David Thodey recently declared that every job within this giant corporation, including his, can be considered up for flexible arrangements. Telstra’s “All Roles Flex” policy is likely to be taken up by some other major employers.

These constructive changes are culturally dramatic, but not hugely difficult to put into in practice. They are absolutely worth making. They will liberate the talents and efforts of hundreds of thousands of older workers to assist in securing the much longed for but elusive productivity gains.

We must stop speaking about an ageing population and a skills shortage as if they are mutually exclusive problems, rather than connected phenomena that rationally handled in concert can provide solutions.

I cannot accept that all of the jobs given to overseas skilled labour, on 457 and other working visas, are beyond the capacity of the vast pool of locals in their 50s and 60s looking for work.

Steps to a revolution

Clearly, we have to root out the remnants of these long outdated expectations, these negative stereotypes.

We should recognize longevity as the solution for, rather than the cause of, the economic, fiscal and social challenges confronting us.

What must we do?

First, we must look at our policy settings – and review legislation which erects barriers to workers as they age. A recent report by the Australian Law Reform Commission identified a range of measures that need to be taken in this regard, including amending superannuation provisions which discourage people from staying in the workforce.

Perhaps now we need to encourage them to work beyond 2025 so they can finally receive a 12 percent Superannuation Guarantee!

We must address the absence of adequate workers compensation provision for those over 65s who are able to find work.^[11] Insurers generally refuse income protection cover to older workers, leaving them without protection in the event of accident of illness.

While underlying workplace culture and broader stereotypes prevail, however, such regulatory changes will only take us so far. For example, 2009 estimates suggest that 2 million people over the age of 55 were interested in work but could not get a job.^[12]

Certainly, between 2010 and 2013 there was a 41.2 per cent increase in people in their 50s and 60s receiving the Newstart unemployment benefit, much higher than the overall growth across all demographics.^[13] In fact, older people are more likely to be unemployed long-term than any other group.^[14]

Recent Commission research into age stereotypes found that negative assumptions about ageing prevailed amongst people between the ages of 18-54, with those under 35 having the most negative attitudes.^[15]

So the problem is deeply embedded in social prejudice, and without intervention, will continue to damage the prospects of future generations.

These negative perceptions have real, pervasive and damaging consequences. We know that over 50 per cent of age discrimination complaints made to the Commission relate to employment,^[16] with the most common example of discriminatory treatment being older workers made redundant before their younger colleagues – a unwelcome reverse, perhaps, of the customary “last on, first off” approach.

Clearly, there is rampant age prejudice out there. To overcome it we need a better understanding of its extent and character.

That is why I can announce today that the Commission has engaged Roy Morgan to conduct the first ever National Prevalence Survey of age discrimination in the workplace. The results from this unprecedented survey will offer a broad and detailed picture of this kind of discrimination, from the perspective of those who experience it, and of those who inflict it.

I do not wish to preempt its results; my guess however, is that it will signal an urgent and massive challenge.

Far from merely identifying and understanding the problem, the Commission is also working to achieve a shift in the way that mature Australians are portrayed and perceived.

Just last month we launched a new campaign, The Power of Oldness, which illustrates the huge gap that exists between the skills, perspective and experience that older Australians offer, and the negative ways in which they are often perceived.

We have to dismantle these damaging perceptions. What should we replace them with?

The carrot and stick approach only really works if the goal is actually achievable. Legislative and government-led reform will have limited effect if underlying negative attitudes endure. It is no use raising the pension to age 70, for example, if a significant number of people above the age of 50 cannot retain their jobs. Such a change could have people trying to eke out an existence on Newstart for 20 years, then segueing without pause to the full age pension.

No savings to the budget there.

What’s more, there is no benefit to the budget in raising the pension age universally and without exception if a significant number of employees, whether nurses or construction workers, are no longer able to meet the physical requirements of their current roles, and are not offered any other.

Contemplating those physically damaged building workers and nurses led me to my next proposal.

A National Plan, a Jobs Checkpoint Plan (for the over 50s)

We need to rethink how we approach the middle and later years of working life. We need business and political leaders to recognize the value of all our human capital in terms of potential productivity gains. We need employers of all sizes to see this potential. The recently announced $10,000 Restart grant for employers who hire workers aged over 50 is a tangible and encouraging action along these lines.

We can however be more ambitious than this.

We should be aiming for rates of workforce participation to be the same for those in their 50s and 60s as they currently are for those in their 30s and 40s. I believe we can achieve cultural and workforce change so that someone aged 50 is seen as just as valuable as someone twenty years younger, and can sensibly look to working for twenty years more – whether in their current role or occupation, or another role altogether.

For this to happen, of course, mature aged workers need information and support. They need a timely signal, a reminder that it is time for a career checkup.

As with health checkups, this should be routine and preventative.

It should be carried out before unemployment has struck.

Certainly, we don’t want to see a repeat of the South Australian car manufacturing industry collapse, where middle-aged skilled workers were laid off and left - initially at least - with no advice and no direction as to how they might find new jobs.

What workers in this situation need – and virtually every individual does at some point in their working life – is a structured process by which they can review where they are and plan for their ongoing participation in employment.

That is why I am calling today for a National Jobs Checkpoint Plan.

I am urging a high profile, widely supported, and nationally coordinated approach to helping all people at midlife to check where they are and change direction if they need to. This national approach can be developed by governments, industry and vocational education providers working together.

I see TAFE right at the center of this Plan. TAFE colleges have the required training skills and links with local employers and government programs, but these links need to be strengthened and supported for vocational education everywhere throughout Australia.

Who do I have in mind as beneficiaries of this Plan?

Most of us. Most of us approaching 50, regardless of the sector we are in, or where we live, need to ask ourselves what sort of a job we can expect over the next 20 years. This is especially relevant to workers in declining industries, such as car manufacturing, or print and TV journalism, but also to workers who are burned out, or physically unable to continue their current job, or who are just ready for a change.

Initially under this Plan, anyone approaching 50 could attend a local TAFE to get a skills analysis, and basic advice about which sectors are growing and need workers, where the jobs are located in that region, and what skills and credentials are required to secure one.

A well-targeted checkup and redirection at 50 could set a person up for another 20 years work, age pension age rules notwithstanding.

This is not a crisis management plan, it is a preventative approach that would have older people recharging and moving smoothly into their next stage of employment.

This is not an add on to the myriad of state and commonwealth vocational training activities, but a better coordinated, better targeted and more widely utilized replacement for them.

Why do I think it will work?

Australia has a growth economy, but it does suffer from skills shortages. Business growth and improved productivity require more skilled workers.

Australian governments want to reduce the size of welfare payments and increase revenue. The Jobs Checkpoint Plan supports these objectives.

I am aware that each state and territory offers bits and pieces through TAFE and other providers, and a hotch-potch of labour market programs.

But, from a national perspective, the offerings are patchy and often miss the mark. The public investment does not produce the intended returns.

Individuals who really need this direction often don’t know where to find it. Potential employers are put off by red tape.

A nation-wide jobs checkpoint approach would prompt individuals to examine their own work options and prompt employers to refresh and increase their own talent pools.

Obviously, a Plan of this nature would require a substantial communications effort and significant investment.

But what I am signaling is a strategy which would produce a large, post age 50, productive workforce.

This ambitious objective requires insightful and committed leadership – from senior government figures and from business leaders as well. All age groups in the community should buy into it, including young people. The Plan would grow jobs for younger workers, and ensure that there were plenty of mentors in the workplace to assist them to flourish.

Stronger intergenerational cooperation, a new intergenerational compact would be the other valuable outcome.

Will it happen?

I do not think that it is too much to ask employers to make better use of mature workers.

I don’t expect governments to cling to costly but ineffective programs, when they could successfully invest in skills.

I am not calling for acts of charity from business or for more red tape from government. I am calling for business success and a stronger economy.

Conclusion

There is no escaping the challenge.

We are facing the universal condition of humanity. Either we die or we grow old.

Most of us will experience the latter before the former.

Longevity not only changes the composition of the population, but the way in which we live and work.

Far from being an unseemly decline, ageing can be a positive and substantial phase, where people can continue to make valuable and meaningful contributions.

We know that outdated assumptions and stereotypes too often stand in the way, locking millions of older Australians out of the workforce and destroying the quality of their lives.

If we can turn this approach to longevity around, the emerging new reality represents a workforce boost, broad economic opportunity and a more cohesive society.

It is well within our capacity.

Thank you.
 

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^[1] Deloitte Access Economics, The Connected Workplace – War for talent in the digital economy 2013, p 13. At: http://www.deloitte.com/view/en_AU/au/ad401077bda1f310VgnVCM3000003456f70aRCRD.htm (viewed 29 August 2014)
^[2] Office of the High Commissioner for Human Rights, UN Human Rights Chief offers her support for a new Convention on the rights of older persons, 8 April 2014. At: http://www.ohchr.org/en/NewsEvents/Pages/RightsOfOlderPersons.aspx (viewed 9 September 2014).
^[3] The Australian Government, National Commission of Audit, 7.1 The Age Pension, 2014. At: http://www.ncoa.gov.au/report/phase-one/part-b/7-1-age-pension.html (viewed 9 September 2014).
^[4] Australian Bureau of Statistics, 2112.0 - Census of the Commonwealth of Australia, 1911, 2112.0 - Volume II - Part I Ages. At: http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/2112.01911?OpenDocument (viewed 9 September 2014).
^[5] G Stubbs, ‘Baby Boomers – the Greatest Untapped Opportunity for Marketers’, Mi9, 2013. At http://mi9.com.au/blog.aspx?blogentryid=1101760&showcomments=true (viewed 29 August 2014).
^[6] Australian Bureau of Statistics, Older People and the Labour Market, 4102.0 – Australian Social Trends – September 2010, At: http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4102.0Main+Features30Sep+2010 (viewed 29 August 2014).
^[7] Deloitte Access Economics Increasing economic participation among older workers: the grey army advances, September 2012, p 12. At: https://www.humanrights.gov.au/increasing-participation-among-older-workers-grey-army-advances2012 (viewed 29 August 2014).
^[8] Deloitte Access Economics Increasing economic participation among older workers: the grey army advances, September 2012, p 12. At: https://www.humanrights.gov.au/increasing-participation-among-older-workers-grey-army-advances2012 (viewed 29 August 2014).
^[9] AT Kearney, Understanding the Needs and Consequences of the Ageing Consumer, 2013, p 5. At: http://www.atkearney.com/paper/-/asset_publisher/dVxv4Hz2h8bS/content/understanding-the-needs-and-consequences-of-the-ageing-consumer/10192 (viewed 29 August 2014).
^[10] Paula Goodyer, Sydney Morning Herald, ‘Is retirement bad for our brain?’ 31 January 2012 (with quotes from Ian Hickie, Executive Director of the University of Sydney’s Brain and Mind Research Institute) At: http://www.smh.com.au/lifestyle/diet-and-fitness/blogs/chew-on-this/is-retirement-bad-for-our-brain-20120130-1qovc.html (viewed 9 September 2014).
^[11] Australian Law Reform Commission, Access All Ages – Older Workers and Commonwealth Laws, (ALRC Report 120), 2013. At: http://www.alrc.gov.au/publications/access-all-ages-report120 (viewed 29 August 2014).
^[12] National Seniors Australia Productive Ageing Centre, Still Putting In: Measuring the Economic and Social Contributions of Older Australians, 2009, p 10. At: http://www.productiveageing.com.au/userfiles/file/StillPuttingIn.pdf (viewed 29 August 2014).
^[13] 2013-14 Additional Estimates Hearings, Senate Community Affairs Committee, Social Services Portfolio, Question 583, response to Senator Siewart.
^[14] Department of Social Services (DSS), Statistical Paper 11, Income Support Customers: A Statistical
Overview 2012. At: http://www.dss.gov.au/about-the-department/publications-articles/research-publications/statistical-paper-series/statistical-paper-no-11-income-support-customers-a-statistical-overview-2012 (viewed 9 September 2014).
^[15] Australian Human Rights Commission, Fact or Fiction? Stereotypes of Older Australians, Research Report, 2013, p 8. At: https://www.humanrights.gov.au/publications/fact-or-fiction-stereotypes-older-australians-research-report-2013 (viewed 29 August 2014).
^[16] Australian Human Rights Commission, Annual Report 2012-13, 2013. At: https://www.humanrights.gov.au/publications/annual-report-2012-2013 (viewed 29 August 2014).