Think tanks and ageing agendas

ScreenHunter_18 Dec. 11 15.20

Propaganda from the loon bin seems to fill ever more pages of the mainstream media. Take this recent example from the UK

Higher state pension ages are not only possible (given longer life expectancy) and desirable (given the fiscal costs of state pensions) but later retirement should, in fact, lead to better average health in retirement [emphasis added]. As such the government should remove impediments to later retirement that are to be found in state pension systems, disability benefit provision and employment protection legislation.

The policy implication of this research is that policymakers should remove disincentives to continue work in old age. This does not mean that politicians should force people to “work till they die”, but that they should entirely remove disincentives to stop working.

It’s entirely doublespeak. “Remove disincentives” sounds good – don’t want any of those bad disincentives laying about. But when you remove the double negative you simply get “create incentives”. Create incentives to work longer. Make it more difficult to retire.

And the basis for this recommendation? That people who are retired are less healthy than those who are not. Therefore, in the interest of public health we should make people work longer.

It won’t be long before the CIS or IPA pick up on this argument and bring this nonsense to Australia. So let’s make a preemptive strike.

For a start, the first line of the document is completely incorrect

Since the Second World War three factors have combined to produce a significant reduction in the working population as a proportion of the total population. Those factors are: declining fertility rates; increasing life expectancy; and the emergence of retirement as a widespread phenomenon.

Nonsense. Take a look at Australia. Since the 1960s the dependency ratio has been falling and the participation rate of those aged 15 years and over has been steadily improving. Same in the UK, US and Canada.

It will take many decades just to get back to the dependency ratios seen in the 1970s. And all of this also ignores the massive, yet typically unnoticed decline of youth dependency over the same period. Given the fertility trends globally, youth dependency is likely to continue to decline, counterbalancing the increased age dependency.

AgeRatios

Not only is there a glaring ignorance of the counterbalancing dependency effect from ageing and low fertility, the report relies on earlier work that exploits a European life survey covering three periods starting when respondents are between 50-69 years old. If you care to look at the results you find that when a retired dummy is included in the regressions it is significant, but make the age variable insignificant. Essentially, since age and retirement are highly correlated, interpreting the power of each individual ‘independent’ variable (remembering that they are now not in fact independent) is nigh impossible. Multicollinearity sucks.

The argument that retirement causes poor health is simply rubbish. Essentially this whole propaganda piece is based on bad statistics that show that people get sick as they get older once in their 60s. Sad but true.

What is more dismaying is the media coverage. No expert in the field is consulted to help interpret the report or provide an impartial opinion. This nonsense even gets a run at the BBC.

Be warned.

Comments

  1. Well – ok – here’s one thought: since there’s an age when you start voting, why shouldn’t there be an age when you *stop* voting? 🙂 That is, with the view that politicians will stop pandering to the biggest voter segment.

    Or, normalise the voting power by age groups. I.e: if you’re in between 25-30 years old, one vote is equivalent to say 2 of someone over 60, depending on the population age make-up.

    Yeh, I’m trollin’ 🙂

    • LOL,

      A weighted system which gives net contributors the benefit of a heavier vote over net beneficiaries would be preferable.

      It would also gut the middle class welfare constituency.

      • drsmithyMEMBER

        A weighted system which gives net contributors the benefit of a heavier vote over net beneficiaries would be preferable.
        Bah. Too generous. Only white male property owners should be able to vote.

  2. Locus of ControlMEMBER

    Simple case of correlation does not equate to causation.

    Older people tend to cease work (retire) when ill health forces their hand on the matter. As such, retired older people tend to be more unhealthy than their counterparts who are still working. Working longer will not keep you healthy; you are simply able to work longer due to the fact that you are healthy.

    Bugger that. Like my parents and grandparents before me I intend to retire when I damn well want – when I feel I’ve acquired enough revenue generating streams outside of paid work to keep me in relative comfort. It is achieveable.

    • Lucky you if you have the choice of doing it or not. Some people are just redundant and they don’t have this choice and other employers don’t want to hire them, because they have to be paid for their skills and experience more than a graduate. Simple as it is.

      Only people in the labor force with very hard jobs would like to retire earlier, because physically their jobs are more exhausting. In general, only people in the government sector can work to 75 and more and they would love to do it, because it is not stressful as it is in private sector jobs.

  3. Hang on, your ‘facts’ are wrong…
    1. The participation rate is an important indicator of the supply of labour. It measures the share of the working-age population either working or looking for work. The participation rate has risen over recent decades, peaking in late 2010 (Graph C1). However, over the past two years the participation rate has declined, owing to both structural and cyclical factors.

    http://www.rba.gov.au/publications/smp/2013/feb/html/box-c.html
    http://www.rba.gov.au/publications/smp/2013/feb/graphs/graph-c1.html

    2. The young do not cost the state like the aged do. Kids do not get pensions and parents mostly cover their costs, apart from education of course. To think that the dependency ratio, by combining youth and aged is the way to calculate costs is mad as batpoo!

    • The cost of education plus family tax benefits plus subsidies for childcare, plus maternity/paternity leave add up to what compared to the pension? Is there really that much in it?

    • Tassie TomMEMBER

      Kids cost the state FTB Part A, Part B, Baby Bonus, Paid Maternity Leave, and Child Care Rebate.

      Individuals need a house with extra bedrooms, and this can be very expensive in some places.

      I would be very interested in seeing how much the average post-working age dependent costs the state and themselves/ their family, and foregone income from carers (daughter/son usually), and this compared to how much the average pre-working age dependent costs the state, their family, and their (usually mother’s) foregone income.

      It would have to be averages rather than medians, because a minority of the elderly are very very expensive, whereas most others would be relatively cheap.

      • Tassie TomMEMBER

        Hey Macrobusiness,

        I just noticed your new “click to edit” and “request deletion” functions.

        Great improvement – well done!

    • Rumplestatskin

      Dependency ratio is the ratio of working age population to total population. While the participation rate is the ratio of working age population in the workforce.

      So the participation rate falling the last two years means what? That is has been falling for the past 60 as the report implies? In fact it has been growing for at least the last forty years (not perfectly smoothly, but generally up as you link says).

      The young don’t ‘cost’ like the old? Do you have kids? Kids do get a means-tested ‘pension’ through family tax benefits, child care benefits, and so forth. Just like pensioners. Then there is education and health.

      Kids also cost their parents in terms of lost income from less work and more home duties. The very fact that parents are working less costs society as a whole. We pay for it even if there is no State facilitated transfer payment.

      I can’t see how there is any logical reason to consider one demographic shift and ignore the other when giving policy advice.

    • Rumplestatskin

      Willy, do you understand what these calculations are?

      1. Participation rate is % of population aged 15 and over in the workforce. It is near all time highs. But it ignores the share of the population aged under 15, which been seriously declining for over 30 years.

      2. People not in the workforce is a number, not a ratio. Click on people in the workforce and viola!

      3. Again, this is not a ratio but measure. Click full time employment, and again… it’s really magic.

      Finally, isn’t it better to have some people in part-time employment instead of outside the workforce?

      • Cameron…
        This statement by you is not correct, or at least it does not tell the whole story…to date.
        “Since the 1960s the dependency ratio has been falling and the participation rate of those aged 15 years and over has been steadily improving. Same in the UK, US and Canada.”

        The dependency old age rate is climbing quickly and the youth dependency rate falling just as quickly.
        The participation rate was improving and is now declining. Quite different to the picture you are trying to paint I think….

      • Rumplestatskin

        Actually, I said dependency ratio, not old age dependency ratio. This was in response to the report’s claim that “Since the Second World War three factors have combined to produce a significant reduction in the working population as a proportion of the total population

        The report claims that total working age population has been a declining share of the total. This is exactly the calculation in the chart in green for Australia.

        “The dependency old age rate is climbing quickly and the youth dependency rate falling just as quickly”

        Quite clearly the decline in youth dependency has been far greater than the increase in old age dependency. for many decades.

        And if you follow the link in my post you will find that the participation rate had been improving since the 1960s. It’s all there. Straight from the ABS.

        Now, if you want to look at the past two years data and say that these long run trends might be reversing, the question is “so what?”. We are far more productive now than at any time in the past 60 years, and our economy and standards of living grew nicely with far lower participation rates. Why wouldn’t that also be the case now?

        And as far as your reading of the Budget goes, why do you neglect the rest of the education budget? You might think that university funding is somehow – oh i don’t know, not relevant to the discussion of youth dependency.

        In any case, as I said earlier

        “Kids also cost their parents in terms of lost income from less work and more home duties. The very fact that parents are working less costs society as a whole. We pay for it even if there is no State facilitated transfer payment.”

  4. “This nonsense even gets a run at the BBC.”

    I listen to the BBC every night from midnight to 0530. A great deal of nonsense ‘gets a run at the BBC’.
    Sometimes you may attempt to correct it online, but you must be strictly PC.

  5. Youth and Aged costs…
    “Again, you might be surprised. By far the biggest cost in the welfare budget is the cost of the aged pension.

    The aged pension is predicted to cost $37 billion this year rising rapidly to $45 billion by 2015-16.

    It is estimated another 220,000 older Australians will start drawing down an aged pension in the coming four years.

    As the hairs keep turning grey and our population ages, this is only going to get more expensive.

    The second biggest welfare spend is on family benefits, of which $20 billion is distributed to families a year.”

    Read more: http://www.news.com.au/money/federal-budget/federal-budget-where-does-all-the-money-go/story-fn84fgcm-1226639950766#ixzz2TVuSWkpP

    The Top 10 biggest Federal Government spending items:

    $376 billion
    Total spending in 2012-13, as forecast last December

    $37 billion
    Aged pension

    $20 billion
    Family tax benefits

    $18 billion
    Medicare services

    $15 billion
    Disability support pension

    $10 billion
    Pharmaceutical benefits scheme

    $9 billion
    The dole

    $8 billion
    Money for private schools

    $8 billion
    Residential aged care

    $7 billion
    Funding for universities

    $7 billion
    Public sector superannuation

      • What argument are you trying divert here?

        There is one prime factor regarding young dependence vs aged dependence.

        The young are the future, the aged are the past.

        How much do we invest in the past vs how much do we invest in the future?

      • Cameron, this in not correct…
        “If you add up schools and family assistance it is more than caring for the aged.”

        It is nowhere need the costs of aged $51.1b, Health $23.7b and PBS $10.3b

        Families assistance $34.2B, Non Govt and Govt Schools $12.9b

        Are you sure you are adding up the right numbers?

        http://www.afr.com/p/national/health_aged_care_costs_to_double_IqqllL35E6zbCEbfxoFDBJ

        https://theconversation.com/australias-choice-keep-hiking-taxes-or-grapple-with-our-spending-on-health-and-the-aged-14343#_=_

        I am confused… Do you think we do not have growing costs do to the unprecedented aging of our nation?

      • Rumplestatskin

        Rusty,

        What do you mean when you say the young are the future and the aged are the past? You seem to have some rather arbitrary ideas about who society should look after.

      • What do you mean when you say the young are the future and the aged are the past?

        The FV of their respective contributions ahead fro this point in time.

        You seem to have some rather arbitrary ideas about who society should look after.

        Well I do apologise if you garnered that inference, I do not mean to have such an arbitrary value judgement on who deserves to be ‘looked after’.

        However, as in my leading comment below, the way we enact income support for the eldery, the way it is viewed and the entitlement the recipients espouse if it, it’s not about ‘looking after them’.

        It’s about reaching an arbitrary age, then receiving a gratuity for it.

        As I said, when it was first introduced, and the qualificatio age was 60, men were living to 59.

        Thus, the few that qualified were probably needing to be looked after. I would also assume with great confidence that todays 65 year old is much healtheir, much more capable of work and needing less ‘looking after’.

        I would assert they in most cases, they don’t need looking after, and are quite capable of looking after themselves.

        As a result, the resource can be diverted back to our young, and as a consequence we can invest in their (our) future.

      • Rumplestatskin

        I get your point now Rusty. Let me try a different framing.

        The old had worked tirelessly throughout their lives building the present. All the infrastructure we take for granted today is build on the sweat of the elderly and those before them. Should we not reward them from the economic abundance that resulted from their work with a token payment to make their lives a little easier as their bodies start to fail them?

        I have absolutely no problem with fewer people working in the formal economy.

      • I get your point now Rusty. Let me try a different framing

        The old had worked tirelessly throughout their lives building the present.< All the infrastructure we take for granted today is build on the sweat of the elderly and those before them.

        Well you’re framing it as a virtue, and I personally don’t. I frame that as chronology, just as those from long ago did the same, i will continue to do the same.

        I view it as legacy, not virtue.. which leads me to…

        Should we not reward them from the economic abundance that resulted from their work

        Real virtue, which is what a guy like flawse will point out, is deferred, or foregone consumption.

        Abundance would exist if we had 40+ years of Current account surpluses.

        We’ve had quite the reverse, thus pointing to the likliehood that we don’t like in abundance at all.

        Our sovereign net debt, which is the future product we create but have to forego may demonstrate how little abundance we have.

        with a token payment to make their lives a little easier as their bodies start to fail them?

        As iterated before, when introduced with a qualification age of 60 and male life expectency being 59, I can imagine the fraility of their bodies.

        I don’t view that to be the same situation today, and with the increase in life expectency, and a less frail body, then at this age of 65 they are quite free to generate their own token payments to sustain their quality of life, rather than the tax payer.

        if they are generally invalided, they i suspect they qualify for a different type of income support, just as a 25 year old who was invalided.

        I won’t pay virtue or offer compassion to an arbitrary age, I believe that feeds entitlement and a victim complex.

        I have absolutely no problem with fewer people working in the formal economy.

        Either do I if it corresponds with an increase in productivity to the point our standard of living doesn’t diminish. I fully concur with the benefits of increased wealth being ofered as increased leisure time instead of increased consumption of material goods.

        But this doesn’t look to be the case, what appears to be evident is that living standards are diminishing, and in particular, a quite savage regression for those under 30 (of which I am not).

        I mean, 10 & 15 year olds can’t vote right now, but they are stakeholders in this country and it looks likely their futures are being impaired.

      • Cameron
        A token payment? So you are ok with a pensioner that owns a home worth $3m, or $10m and has $1m in cash, getting the part pension as a token of what exactly? Our stupidity?

  6. Is this about dismissing all points and the vslidity of the argument because some of the details is poorly thought out?

    My first reaction is that this is about creating a policy thought bubble about winding back the entitlement attitude towards to old aged pension, more so than ipso facto, my word is Jehovah, wind it back now.

    I don’t think it’s beyond the pale to say the policies to aged retirement is going to be a drag on our future prosperity, and for one reason.

    Old aged dependence is a function of the age set for income support given as an old aged pension.

    If there is no old aged pension, there are no RHS dependence.

    Therefore level of dependence is calibrated at where you set the retirement age.

    Set retirement at age 35 and see how the dependency ratio blows out.

    Then we have to examine what are we trying to support here.

    The old aged pension when first introduced, it was 12% of AWOTE, it is now 27%.

    Life expectancy for men was 1 year LESS than the qualification age for retirement, women were 2 years above. You could cost the cost of a retiree then as 2×12%, of 24% AWOTE if given as a lump sum.

    Now, with both genders living towards 15-20 years beyond retirement, the lump sum would be costed at over 400% AWOTE.

    That is now 16 times more costly… all with a reduced workers base to pay for it.

    The old aged pension should not be treated as long service leave, which it currently is.

    It should be the preserve of say the eldest 4-% of the community, which is a figure easily os approximate given our census data and the dept of births, deatsh and marriages.

  7. Not sure why you would have a IPA link. This type of stuff would come from a Progressive Think Tanks like TAI , The McKell Institute and Percapita.

  8. ceteris paribus

    There is a lot of ageism out there on the internet- in the form of anger directed at older persons.

    Some younger people want “boomers” to get out of the workforce and stop blocking all the work opportunities and positions of power and income, while others criticize boomers as an imminent unproductive dependency around their neck.

    If it is considered purely in economic terms, for many the best thing boomers can do is go away and die quickly.

    My personal prejudices are these: 1. We should think of ourselves more as a society than an economy. Oldies have their place and can be fun and good for lots of things. 2. Oldies should be mature enough to handover work and economic opportunities to the next generation, when they can afford to do so.
    People invest so much ego and greed in their work positions, when in fact the work they are involved in is usually pedestrian, repetitious, of little impact and can easily be done by the next person.

    I am not knocking work at all. Most need the structure and delusion of some work to keep active and interested in life. But when there is still such a shortage of work to go around, younger people should have priority and the older people need to get on with the job of unpaid meaningful opccupation and interests if they are materially OK.

    I think the respective generations need to give each other a break.

    • “Oldies have their place and can be fun and good for lots of things..”

      Like, bestowers of wisdom, accrued over a lifetime of… life experience.

      If any of us younger folk can get over our own egos for long enough to actually ask them to share it!

      EDIT: Great END EDIT Superb comment cp. I wholly concur.

      Ageism … like most “isms”, pisses me right off.


      • Like, bestowers of wisdom, accrued over a lifetime of… life experience.

        If any of us younger folk can get over our own egos for long enough to actually ask them to share it!

        Sounds like you’re engaging is a bit of “-ism” towards younger folk here.

        Some of us recall the input of wisdom from generations prior to boomers for example.

        A generations that experienced a depression and a world war.

        Some of us may recall the wisdom they imparted regarding humility, the quelling of their instincts of greed, how they treated assylum seekers, how they understood and embraced keynesian policies, how they understood they are all in this together.

        There was no price gouging of property at all costs.

        There was no gutting of education services for the purpose of income tax cuts.

        There was no “SKI club, SKI club !!!”

        There was no calibration of the welfare sysem every 10 years to make them the major beneficiary at ALL times.

        Previously elderly have behaved in a much more noble manner.

      • +1 Rusty
        Given that the majority of boomers do not want to leave an inheritance I think it tells the cohort story well. ‘Greed is good and all that matters is the self.’
        The Gen Y on the other hand are about community, sharing and fairness. Thanks God they did not inherit the generational traits of the boomers.
        Sure they have gadgets, but those gadgets are ones of communication and socialization.
        PS – I am a boomer…lol

      • Well, if you restrict the pension, you have to acknowledge that more will join the SKI club.

        Fancy somebody spending what they saved and not decently dying and handing it all over to the next generation? The nerve of those greedy boomers. /sarc

        I am a little bemused by some who want the boomers to get out of the way so that the next generation can get promoted up the food chain into the vacant jobs. At the same time, the boomers should not get the pension when they do make way for the younger generation. That leaves the inheritance, which of course the boomers should not spend, but leave for the next generation…to spend.

        And apparently it is the boomers who are greedy. Mr Pot meet Mr Kettle.

        Having said that, I suspect that many generations throughout history have resented the fact that their parents have not had the decency to die and leave the inheritance to their deserving offspring.