If you have been keeping with the news, you may have seen the 2023 release of the Intergenerational Report, a document summarising economic outlooks and Australia’s budget over the next 30 years. One of the major challenges identified is Australia’s ageing population, an issue which has sparked significant discussion in the media with concerns that even with superannuation, retirees will still not able to cover living expenses.
According to AMP’s 2022 Financial Wellness report, 21% of working Australians are not confident that they have the funds to live at their desired lifestyle in 2022, up from 17% in 2021.
While we acknowledge the challenges of the situation from both an economic and human standpoint, we’d like to contribute to the discussion by offering a different perspective on the matter.
A brief recap
Over the past 20 years, we have seen an increase in the share of Australians aged 65 and over as a percentage of the population. Part of this can be attributed to lower mortality rates, however lower fertility rates are also playing a significant role with couples not having children through both choice and circumstance.
In the same period, we have also seen a rise in the labour force participation rates of 55+ year olds, with a greater increase for those between the ages of 55-64 and a smaller increase for those above the age of 65.
Interestingly, participation rates for 65+ year olds have reverted back to 1960-1970 levels, and participation rates among 55-64 year olds have surpassed prior levels. Also note that much of the change in participation among the 65+ age group are coming from those between the ages of 65-74.
The concern is that older people are forced to stay in the labour force for longer due to insufficient superannuation savings and declining rates of home ownership. When considering these issues in the context of our current levels of inflation and the rising cost of living, those nearing retirement may be worried that they are unable to maintain a dignified quality of life. With the 65+ age group representing an ever-increasing proportion of the total population, the report is wary of the pressure this may put on the pension system.
What the future holds
Despite this somewhat gloomy outlook, we see potential in the way older generations can interact with the economy looking forward. While it is not ideal that those at retirement age should be forced to stay in the labour force for financial reasons, with factors such as ageism potentially acting as barriers to employment for those remaining in the labour force by choice, the changing nature of the workplace may provide more opportunities and benefits for both groups.
Given the data, it is not unreasonable to assume that there will be more part-time and casual older workers in the future. However, with the rise of technology and the gig economy, work has become more flexible, with people choosing when and how much they want to work through platforms such as Fiverr and Uber. This could allow older folks who may not want/be able to work 20 or 40 hours a week to still participate in the labour force at their own pace. Alternatively, this may provide low-barrier opportunities for those who want to try their hand at something different.
The changing composition of occupations in favour of professional work (i.e. work which is less physically demanding) may also benefit older workers so long as they are able to keep up with technological change and new advancements in their field.
Unlike past generations or even other countries, Australians are generally privileged in that they have more capacity to choose a career path which aligns with their interests and values due to greater access to education. The hope is that people will have a vested interest in their career and are able to continue building on their careers rather than falling into a job out of necessity, encouraging more to stay in the workforce.
Additionally, the social interaction and physical activities associated with travelling to work may also be beneficial for those nearing retirement, with many retirees experiencing loneliness. Keeping the mind active has been shown to lower the risk of dementia to hopefully prolong quality of life whilst preserving connections within the community.
Concluding remarks
Although ideally older Australians should not need to work out of necessity, a shift in workforce trends to better suit those at retirement age can empower and allow these groups to support themselves. Retirees should not be seen as a liability on society, even if a sizeable percentage of our taxes are towards aged care. Older generations are still able to both find value in remaining in the workforce, but also bring much value, by sharing unique perspectives and knowledge to society.