Immigration is no solution to population ageing

By in Australian budget

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“Unabashed supporter of a bigger Australia”, Bernard Salt, has penned another article in The Australian warning of an impending ‘ageing crisis’ as the baby boomer generation retires, which explicitly endorses the false solution of mass immigration:

Concerns about the sustainability of the age pension system are underpinned by the ageing of the population, especially the advancing years of the baby boomers. There are about five million people born between 1946 and 1964; they are jumping into the space previously occupied by pre-boomers born 1927-1945 and who never numbered more than three million. You can see the issue: five million doesn’t go into three million…

The first Baby Boomers, born July 1946, turned 65 (and thus eligible for the age pension) eight years ago. And over the balance of this decade all that very first-boomer’s younger mates, born in the late 40s and early 50s have tripped across the 65-line. And there’s lots more to come. I hope those agreeable Xers and antsy Millennials are happy to work away paying taxes to prop up the entitlements of retired boomers…

Today the average life expectancy for Australian men and women is 82 which allows, say, 17 years in retirement. For many years, Australia, and many other countries, could afford to be generous with retirement benefits … if we promised not to live very long into retirement… I have to say this is a wonderful first-world problem to have — living long lives…

There are several solutions to the ageing problem. Tax-paying workers can be imported via an immigration program where new workers contribute to their own retirement via superannuation: that’s the Australian approach…

The good thing about Australia is that on a world scale we are still relatively young thanks to our immigration program and our tolerance of immigrant workers.

Let’s get a few things straight.

First, a key driver of Australia’s current ‘baby boomer bulge’ is the mass immigration program ran in the post-war period (i.e. 1950s and 1960s):

These migrants (which include my parents) have now grown old, thus adding to Australia’s current ageing ‘problem’. Therefore, importing more migrants to solve ageing is the equivalent of ‘can-kick economics’, because today’s migrants will also grow old, thus creating further ageing problems in 40 year’s time.

Second, Salt has ignored the increasing labour force participation by older Australians:

Indeed, since the mid-2000s, the labour force participation rate of over-65s has more than doubled. There is obviously further scope for increases in participation given older Australians are remaining healthier for longer, as well as the legislated lift in Australia’s pension eligibility age to 67 by 2023.

Third, Salt has completely ignored the costs of mass immigration and population growth.

The 17.5 million extra people projected to arrive in Australia over the next 48 years – driven entirely by net overseas migration (both directly as they arrive by plane and indirectly as migrants have children) – will all require huge sums of public spending on economic and social infrastructure, such as schools, hospitals, roads, public transport, aged care, etc.

These costs can obviously be avoided by not running a mass immigration program in the first place.

Fourth, the ABS’ own demographic projections show that immigration is next to useless in ‘younging’ Australia’s population. That is, if we apply a more realistic definition for the working aged population of 19 to 70 (given more kids are staying in school and older Australians are working longer), then running annual net overseas migration (NOM) of 200,000 to 280,000 delivers only 3% more working-aged Australians by 2101 than zero NOM:

This tiny ‘benefit’ will only be transitory and comes at the expense of adding 150% to 200% more people to Australia’s population versus zero NOM:

Such a massive increase in population will obviously take a massive toll on Australia’s natural environment and general liveability.

Detailed counter-arguments to Bernard Salt’s thesis are articulated in the recent research paper Three Economic Myths about Ageing: Participation, Immigration and Infrastructure, which was authored by Dr Cameron Murray and I and commissioned by Sustainable Australia.

It’s time to put the ageing economic myth to bed once and for all.

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