Ageing debate hijacked by vested interests

Kevin Rudd’s political career was over when he uttered the words ‘big Australia’.  Dick Smith, the hobby pilot and millionaire political agitator, took it upon himself to raise the profile of the population debate, making it the Australian identity crisis of 2010.  Many economic commentators came out in support of the high rate of population growth, citing the increasing age dependency ratio as a critical issue that population growth, and high rates of immigration in particular, could address.

The public debate, however, was about three years behind the statistics.  The graph below shows that the rate of population growth in Australia peaked in late 2008 (at 2.2%), and was already on its way down to the historical average of 1.4% where is currently sits.

Unlike many economists, I have a different opinion on the age dependency ratio. I see it as a shining beacon of success.  People are working for shorter periods of their life.  We as a group are finally taking some of our productivity gains of the past half-century in the form of leisure time, albeit in our twilight years.

Australia’s age dependency ratio is 16th out of this comparison of 20 developed nations – none of whom appear to be in a hurry to stimulate population growth to ‘solve’ this problem. Sweden, Norway, UK, USA, Denmark, Germany and Canada all appear to cope quite well with their demographic fortunes.  Our culture, financial structures and welfare system, are still adapting to a population pyramid becoming more cylindrical.

But whether or not you agree that the age dependency ratio is a problem, the suggested solution of population growth is, in reality, counterproductive, and will only aggravate the situation.

An increase in the age dependency ratio is principally the result of improving longevity. If each generation lives longer than the last we will face this problem even with a growing population. Simply adding more at the bottom of the population pyramid to keep it bigger than the top has the apt label ‘population Ponzi scheme’.

Indeed, to counteract this trend would require a perpetually increasing birth rate, age biased migration policies, or even the extreme scenario of sending migrants home at age 65.  To me, none of these are desirable.

Notably, the side of the debate promoting greater immigration are mostly vested business interests. Businesses facing demand saturation limits per person (a single person can only consume one of the same newspaper per day, or a finite amount of food) and are limited to domestic consumption (which foreigners are interested in Australian newspapers) have the most to gain from population growth.

Luckily age dependency argument in favour of population growth was put to rest by the Productivity Commission, when it published a research paper published in December last year.

In sum, realistic changes in migration levels are unlikely to make a substantial difference to the age structure of Australia’s population in the future, and any effects are likely to be temporary. Realistic changes to fertility could have some effect in the long term, but the proportion of older Australians will still grow from current levels. Increased longevity (a desirable trend!) is the dominant force.

Overcoming age dependency is not an option. Regardless of whether retirees self-fund or are supported via the welfare system, the economic impact arises simply from their non-participation in the workforce.  Therefore accommodating an aging demographic is the way forward.

While the Australian government is incrementally increasing the qualifying age for the age-pension to 67 by 2023, potentially offsetting dependency concerns, I expect other adaptations to naturally occur:

  1. People will spread their work time over the life much better, possibly taking intermittent retirements between careers.
  2. Part-time jobs will become expected even in senior positions, as the highly experienced workforce phases down to retirement.
  3. Productivity of the workforce will gradually improve.
  4. The population aged under 15, who are also dependent, will shrink as a fertility rates decline from the current heights of the baby boomer ‘echo’ (the grandchildren of boomers).

As we adapt to an ageing demographic, the questions we need to ask are about how best to utilise our new labour force structure.  We don’t need the debate hijacked by vested interestes arguing for population growth.

Tips, suggestions, comments and requests to [email protected] + follow me on Twitter @rumplestatskin

Comments

  1. It is obvious that Dick Smith is a commie who has never run a successful business in his life.
    .
    ohh..wait.

    • Yeah,

      “…Dick Smith, the hobby pilot and millionaire political agitator…”

      I don’t agree with everything Dick Smith believes in, but I wouldn’t take away from him that he is a great Australian, and has tried his best to do whatever he can for this country.

      I thought the above comment was well below the belt, and a poor case of playing the man and not the ball.

      • I was being sarcastic – just anticipating and precluding the kind of comments that right-wingers throw to vilify and denigrate great Aussies such as Dick Smith.

      • Actually I think Dick is great, and his political agitations are just what we need. Perhaps the written word does not convey the tongue-in-cheek way I intended the phrase.

        • +1.. No, your description was fine. I think many people don’t have their sarcasm meter turned on today and misinterpreted my comment.

          • Mav,

            Please read my post again.

            My response was in reference to Rumplestatskins description of Dick Smith as:

            “…Dick Smith, the hobby pilot and millionaire political agitator…”

            which I took as a pretty cheap shot at a bloke who has done a lot for this country. Rumples subsequent comments may have clarified his position somewhat.

            I understood perfectly where you were coming from – apologies for any confusion.

  2. THe problem I see is that potentially this may be the last generation that really sees a leisurely retirement – i.e the lucky generation. Retirement is a luxury that we may not be able to afford much longer.

    With peak oil, the lack of pensions, commodity inflation, the changing structure of the population pyramid, and other events looking very possible just over the horizon this maybe remembered as our golden years of prosperity.

    • with some life style adjustments (from consumption to meaning) next generations will have opportunity to be happy generations not the lucky ones

      I’m always for happy option over the lucky one

    • A “shining beacon of success”???? This success can’t be attributed to the debt splurge that has happened over the past two decades.

      Gen Z & Y are in for a world of hurt. Gen X has not created nearly as much wealth as their baby boomer parents and will rely on the younger generations to take care of them as they age. That’s not to say Gen X isn’t successful or intelligent like their parents its just the majority will not have the same wealth at the retirement age like the baby boomers have/had.

      Australia needs a big Australia, BUT!!! we need to build more cities to put these new people in. Existing cities are at breaking point with the poor infrastructure. IMO the government can start planning new cities and learn from its mistakes such as Sydney and its urban sprawl approach.

      • Did you read any of this article or the great article linked ‘population Ponzi scheme’ above?

        I doubt it.

    • I agree.

      By the time Gen Y get to retire, the retirement age will probably be 80.

      Contrast that against some boomers I know who retire at 55 on Govt pensions.

      • My Boomer uncle retired at 45. Spent the rest of his life on the dole, travelling around Oz in his camper van and working a few odd jobs here and there. Mostly on the dole though.

  3. Agree – The aging argument is a lot of hype driven by the business community and their media boosters.

    Sure smoothing the pillow for the boomers will cost a lot but every year that passes there will be fewer of them and it is not as though the cost will send us back to kerosene lamps and listening to the wireless.

    If there is genuine concern that we will be rooned by a lot of old timers boring us senseless with tales of how they saved the world and invented sex we can always trim their pensions and make them stay at work.

    Hmm perhaps encouraging them to go up the coast is a better option

  4. High immigration is a free lunch for business.

    – More consumers
    – Cheaper labour
    – Higher house prices enabling the rest of us to consume more through borrowing

    When I hear someone talk about “big Australia”, my question to them is: how big do you want it to be? 30 million? 50 million? 100 million? They refuse to say. And I think that’s because they don’t have a destination in mind — just a wish to keep the game going for a bit longer.

    • It reeks of self-interest doesn’t it.
      Some people will always be after something for nothing, so long as it isn’t them that has to pay in the end. I doubt you’ll hear any 18yo’s begging for ‘cheaper wages’ or ‘higher house prices’.

  5. Hey Rumple – do you see advances in robotics as potentially having an impact in the future? It’d increase the workforce – both numerically and through vastly better productivity – which may ease the dependency ratio issue.

    • That is what I was thinking. We need robotics to assist the ageing population stay in the workforce longer. Also help people who have health issues, ie can’t do heavy lifting etc.

      I went to purchase an electric lawn mower on the weekend and told them I cannot start a petrol mower because of my neck problems. He said, more and more elderly frail people – who still want to be active (and do the lawn themselves) are purchasing electric mowers for that reason. If you invest in this industry or have the smarts (I wish I did), this could be an opportunity! I don’t think things will be as bad as people say. We will adapt.

      I miss the show “the new inventors” on the abc, because it showed the ideas that come from necessity. I know some of the inventions were crap, but it’s a start.

      We need to invest in the synchnotron in clayton vic. I can’t believe they are going to close it down! This is where the robotics technology can grow. At the same time I saw an article in the Age by Amanda Vanstone justifying a cut to medical and tech funding during hard times. That is when you need to INCREASE finding (eliminate neg gearing and you have found the $$$). Of coarse she is from the “do nothing” old guard conservitives (vomit)

      Back 2 work now.

  6. Capitalist societies are competitive and this results in both partners in a lot of families needing to work full time to be competitive. This is especially the case today with extremely high cost of the most basic need of any family – a home. As a result birth rate will drop. Not to mention the social experiment of the new generation of kids being raised by school after-care and over-indebted part-time parents.

    • This is true, but our twisted version of modern capitalism also relies on continual growth (as it utilises debt). It worked really well during industrial eras and beyond through to modern times.
      It’s no surprise that politicians and economists are always talking about ‘growth’ (whether it be GDP or trade, etc), when it is often such growth that gets us into these messes in the first place.

  7. My workplace is putting a lot of effort into encouraging women of child-bearing age to move into ‘job share’. Instead of downsizing and losing expertise, they have worked out that they can encourage women to only work 3 days a week. This retains the knowledge and experience, reduces personnel costs by 40%, and if business conditions improve longer term they can increase days/hours again. They are also encouraging women of school age children to take extra ‘unpaid’ weeks of annual leave so that they can spend all school holidays with the kids. 40 week years for female staff are a big part of the female employee offer.

    However, my organisation does nothing for older men. Infact, if you are over 45 and reached your career potential (i.e. considered a blocker), you are shown the door.

    A lot of these older men are ending up coming back after a years gardening leave as ‘contractors’ on higher pay then they were originally just because they hold the expertise / experience.

    They pass the day to day running of the business units onto the younger generation (but not the pay packet increase), and then come back as gloried consultants working a few days a week on huge daily rates.

    I’ve seen a lot of this in the last 5 years in the workforce, working across two international companies that employ 100,000 people globally..

    • Yep the male workforce is copping a big ongoing change away from permanent long term employment.
      The blokes I talk to are loving the new circumstances.
      Obtain a redundancy and keep doing the job anyway.

  8. My retail business employs 110 hours of female labour per week. I cannot make it work with three full-timers, because two staff cannot cover for one person on annual leave 3 times 4 weeks of the year, and if they did, the extra hours of overtime costs me too much. So I have five persons, one does 27.5. one does 15.0 several do 20 hrs per week, mixed roster of early starts and closing, five hour shifts and 7.5 hr days. ALL CASUAL. With this mix I can almost always cover for illness, leave, etc etc because eg someone doing 20 hrs is quite happy to do 25 now and again. Almost all my current staff have primary aged school children, they are committed and dedicated and loyal. I firmly believe good rosters (I do six weeks ahead – I’m doing Xmas New Year now)are the key – and that very few retailers around me can roster well. I get at least one resume a week put on my desk, often from surrounding businesses.I only
    pay award rates, I teach all staff to do everything over time. It’s like job-share but it isn’t quite the same, if you work Tues morning, you do the jobs needed to be done on Tuesday morning.

    I would like to say that although not an economist, I read this blog with much interest and have learned many many things since I came across it. Thank you to all contibutors.

  9. Thanks Rumples excellent topic. I was at a Liberal Party function one day where, according to many contributors here, the relatively enlightened Malcolm Turnbull was speaking. At one point he opined that limiting immigration as a “stupid idea because then you would have no growth” Damn! Life can be frustrating for a curmudgeon sometimes

    As one of the older people around here I’d make a few comments. They won’t be new perhaps but just my perspective.

    1. Our immigration has consisted of bringing people here and parking them around cities. Given that manufacturing has been in continuous decline for some time, the effect of this is simply to increase imports to sustain the increased population. In a nation with an already chronic CAD, that requires us to sell off a ‘paddock’ every year to finance our deficit, this means immigration has not contributed to real growth but only to debt induced growth.

    2. The effect of parking immigrants around cities is to increase the size and complexity of the cities. This has required massive investment in urban infrastructure. I’m guessing the required infrastructure investment as cities get larger is some kind of geometric progression.

    3. The larger and more complex our cities become the more ‘unlivable’ they become for everybody. However importantly this applies more to the elderly. In simple communities an older person can live quite happily and comfortably in their home until a very late stage of their lives. In more complex cities this becomes impossible. Further the difficulty of providing ‘care’ must grow exponentially with the complexity of the city. I lived outside a small country town. With a little help from neighbours, family and friends, people were able to stay in their homes pretty much until they passed on. For those that were not able to stay in their home their were a few small nursing home type units attached to the hospital.
    My point is that even as far as the idea of importing ‘workers’ for ‘care’ the immigration idea is dead wrong!

    4. Most importantly and I have no solution for this but it needs discussing. This business of keeping us all alive to great ages at whatever expense needs consideration. Now there are a lot of areas of government I’d want to act to reduce waste before I got to this point however it still requires community discussion…and I don’t mean just to be discussed by the Public Service/University self appointed elite.
    As an old farmer, who dealt with life and death every day, when you are out of here you are out of here. Just make me as comfortable as possible.
    Some of what is now going on is ridiculous. However there are a couple of conditions!

    Now for all those who promote willy-nilly govt expenditure in all directions, just print it up,these are the sorts of REAL choices we need to be considering. Too many times in debates the ‘well how much for a human life?’ argument is thrown up as some winning point for ridiculous rules and laws. However it is never considered the children’s health research (for example)that could have gone on and saved hundreds, maybe3 thousands, of children’s lives for the expense by the community of hundreds of billions in the name of ‘safety’ that MIGHT save a couple of lives a year.
    Again if we are telling older people they are going to be shuffled of this mortal coil because we can’t afford them, we need to start being a lot more careful about how we waste money.

    • Good points flawse.
      Aus is in a precarious position. Manufacturing industry has been whiteanted by high AUD and offshore cheap labor. We cannot match it.
      Our population is now so high that Aus became a net importer of food in Dec 2009.
      I might agree with higher population if it lead to some kind of productive economy, but as you mentioned all that is basically produced has been greater quantities of debt.
      Although migrants contribute to taxes (ACCESS Economics estimated about $440M/yr in 2008) the costs of infrastructure expansion (roads, water, schools, electricity, etc) and services (teachers, police, doctors, nurses, etc) is out of control.
      For example, Electricity Empire invested $65B in the last 5yrs for upgrade & maintainence.
      Someone needs to sit down with a calculator and include all costs vs benefits from current high immigration. Then fund it.
      All I see atm is policy makers touching their toes when the property lobby says jump.

  10. Nice article
    Rudd is living in cloud cuckoo land. There’s already too much salt in the Murray Darling, traffic jams are already big enough. I’d like to think the man was an idi*t, of course it’s not that simple, he isn’t stupid, it’s just that he speaks through the great megaphone of vested interest. Probably the company he’s been keeping.

    • No salt in the Ord or Fitzroy.

      Little traffic concerns in Townsville. A big Australia can mean places like;

      Rockhampton,
      Cairns,
      Normanton,
      Darwin,
      Kunnunurra,
      Geraldton,
      Bunbury,
      Albany,
      Esperance,
      Mt Gambier,
      Launceston,
      Hobart,
      Coffs Harbour

      all Become like Townsville.

      A much bigger Australia, and we would also less likely to be captive to duopolies gauging us with a much bigger market.

      • Darwin? The current NT Government talks about growth while the cities services, infrastructure and housing struggles under the strain of it’s current population. There are very few cities in Australia that are able to grow without additional strain. Until our bone headed MSM and politicians get their heads around this, and not see ‘Big Australia’ as a panacea but rather a compounding problem, then we might start to have a sensible debate.

  11. I always like to make my Swiss comparisms with this debate. 1968 Swiss Population = 6 million, Austalia = 12 million
    2011 – Swiss Population = 7.5 million, Australia = 22.75 million.
    Swiss have highest living standard. Dont need big australia, need efficent and smart australia and to be a creditor nation not a debtor, otherwise chasing your tale.

    • On the other side, the middle east should be the most awesome place on earth if a young and rapidly growing population is what’s important…

      I don’t think there is a strong correlation either way on this, we can have good standard of living with or without high migration. As RS points out some businesses stand to benefit from high migration so that is probably why they push it.

      I think the reason so many Australians are opposed to the ‘big Australia’ idea, is because we have been doing high migration on the cheap. The federal government opened the taps allowing a heap of extra people into the country without ensuring the states, who provide all the services, were adequately funded to provide the required housing, transport, educational and medical infrastructure and services required. Instead we’ve pushed what we have to the limit, which has impacted on the quality of life of the existing population.

  12. at 47 i still love my job (IT/banking) and have no intention of *ever* retiring. That retire-at-65 model is outdated and since I still only consider myself half way thru my life the idea of only working another 7-10 years holds no interest to me at all. I always take lots of holidays and plan to continue working (probably part time) and/or running some kind of business until the day I die.

    That’s my idea of “phasing down”

    • Love your approach but events can conspire against you. In the 1990’s recession at 35 you were over the hill and virtually unemployable. Once you lost your job you either joined the ranks of the long term unemployed after which you were moved onto the disability pension to massage down the unemployment figures. To escape this demoralising future you had to buy yourself a job by buying a franchise, small business or starting your own business from scratch. Starting a small business in the middle of a recession can be tough and take two or more years to get established. In the credit constrained future the banks and IT will be hit hard. The banks will slash personnel and IT expeditures. I hope you have deep capital reserves because I think you will need to call upon them if events play our as MB suspects. Though, there will be ample time for holidays and very very part time work. Good luck!

  13. Rumple,

    is there any work that looks at the effect of productivity growth in the labour force on the number of working adults needed to support an ageing population? I though I’d seen some work that took the simplistic graph of number of workers per “retirement age” person and then added productivity growth per worker and found that productivity growth over the years has close to matched any increasing “burden” of an ageing population on the newer members of the workforce.

    I also think that the decreasing proportion of young dependents in an ageing population is often not included in arguments for a “big Australia”.

    Good article.

  14. Rudd is a slimy opportunist and so is Turnbull imo. I have no idea why so many people love Turnbull, maybe they see themselves as being a rich Eastern Suburbs dwelling entrepeneur/lawyer one day. Good luck with that given house prices. You’ll need at least 3 million for anything sizable and decent. Abbott is obviously a psycho.

    The Stable Population Party is the party to vote for next election.

  15. Nice piece,

    A few additional points worth adding are

    (1). During the Howard years the Bureau of Stats (I think) concluded that higher migration would not solve the ageing population “problem,” unless the majority were very, very young. Thats why the baby bonus came to be.

    (2). Australia now has as a very high birth rate by first world standards. So the constant moaning we hear from vested interests is simply incorrect. Also, even if our birth rate was as low as it got a few years back (1.7 – which is still high by world standards), it would contribute to population growth for about thirty years. Why? because births exceeded deaths.

    (3). Having a slower growing population can be a bonus. When resources are stretched to accomodate more people good city design gets compromised. The rich don’t care as they are near the centre of the cities. The middle and lower class do as they are in the new suburbs which usually have poor transport networks etc.

    I could go on about the resource costs, but I will let Dick do that for us.

  16. Big Australia just kicks the can down the road. (And I’m not anti-big Australia for the record)

    However this article I believe has an oversight, this statement can sum it up.

    “An increase in the age dependency ratio is principally the result of improving longevity.”

    Now seeing as much of what we need to sustain ourselves is non-durable, a person has to accrue financial assets now, to exchange for real goods in the future.

    If an an increasing number of people are ceasing to bring product to market, yet demanding from this dwindling supply with their financial assets, it is inflationary.

    Otherwise we may as well set the retirement age at 35, or 31, or 27.

    The other relevant statement is

    “We as a group are finally taking some of our productivity gains of the past half-century in the form of leisure time”

    Which can counter the argument previously. That will only work if we are finally content with our current standard of living. Then we can bring all this product to market with less and less effort.

    ??

    ??!!?

    Empirically, you can discard this model right now because it is a totally unrealistic assumption.

    This can not work, and for the life of me, I do not know why we treat the aged pension as long service leave, and want to discard people from contributions they can make once they reach 65.

    Many child care facilities could do with aged people offering 2-4 hours a day, be it just for feeding lunches or one-on-one time with developmental play.

    Council parks could have an abundance of fruit trees cared for.

  17. Given the bi-partisan push for a big Australia (because of the influence of vested interests), we’ve never had a real choice on population before. The Greens are no longer about conservation, so don’t fight it either.

    Solution?

    Google and Vote 1 STABLE POPULATION PARTY.

  18. Well done. It is indeed a pity that Australian’s are either ill informed or complacent on this issue.
    We can easily meet skills shortages with a migrant intake of under 60,000 and the ageing population debate is dead in the water.
    The latest argument of “the spark” that goes with increased concentration of people is groundless.
    Perhaps the most sobering comment comes from the work CSIRO soil scientist. Chris Watson kindly provided by Mark O’Connor on his website:
    http://www.australianpoet.com/boundless.html

    I just hope the general population starts to wake up before we have several more million more people (currently we are adding a million about every 3 years). Not something desirable, and certainly not sustainable.

    The Stable Population Party will have my vote come next election (and it can’t come quickly enough).

    Given the increase in chatter of the pro-growthers and the ramped up immigration, perhaps they realise the writing’s on the wall and are trying to do as much damage as they can while they can.

  19. High migration increases the aging of the population, it doesn’t reduce it.

    The median age of net migrants on arrival in Australia is 31.

    The median age of net births on arrival in Australia is 0.

    Whenever you increase a population size with more net migrants than net births, the average age of the country just goes up and up and up.

  20. Matt M – Thank you so much for the great links – I’m putting these maps up in the tea room at work tomorrow.

    I’ve never been out-back, but I would really really like to take a lot of the people who think Australia can support 50+ million out there to pick themselves a quarter acre block on which to be self-sufficient.

    Rusty Penny, we have so many restrictions on employment that you will never get any paid employment for pensioners around children, and of course no-one can work for less than the minimum wage or for less than three hours at a time – on and on it goes, nursing homes and child-care centres do not have spare funds, they can’t pay their skeleton staff enough as it is.