Keeping Australia's older workers in the labour force. A policy perspective

Australian Journal of Social Issues, Winter, 2008 by Maggie Walter, Natalie Jackson, Bruce Felmingham

Another question emerges from consideration of the superannuation transition measure; will take up of this option result in increased workforce participation among older workers? While such changes obviously aim to encourage those able to retire at age 55 to defer, this may not always be the actual outcome. Older workers might instead be tempted into reducing workforce activity at an earlier age than would be the case without access to this measure. Perversely, the end effect of such usage would be an overall reduction in workforce participation among older workers. To test the efficacy of the policy in encouraging longer workforce involvement, those who indicated awareness of the policy were asked two additional questions. The first related to how likely the changed regulations would be to increase their workforce participation, and the second, how likely they would be to use the changes to phase in retirement, but not change their intended retirement date. It should be noted that these options were posed as separate questions and the responses are not mutually exclusive. Rather the point is to comparatively test how attractive the respondents found the two different uses they could make of this option.

As shown in Figure 3, a majority indicated they are likely to consider utilising the policy change on both questions. However, the ability to access superannuation to reduce workforce activity, rather than actually extend the length of the working life, is significantly more popular. These results, therefore, question how effective the policy will be in actually increasing the working life of those who take up the option. The likelihood that the policy outcome might be an actual reduction in workforce activity among older Australian workers is substantial.

Superannuation Changes: Removal of Tax on Superannuation for the Over 60s

The survey was run in mid 2006, so reaction to the superannuation changes announced in the 2006 May budget was also canvassed. Specifically, respondents were asked about their awareness, and likely impact on their retirement intentions, of the measures to remove the 15 percent tax on superannuation payments for workers retiring after the age of 60. As can be seen from Table 3, the response to this change is positive, with around half of all respondents indicating that the measure is likely to persuade them to remain working until age 60. Moreover, the vast majority of respondents indicated an awareness of the policy change, with less than one per cent spontaneously indicating that they are unaware. Therefore, at least at this relatively early stage, this budget measure appears likely to be successful in persuading older workers to defer their retirement until at least age 60.

Policy Options for Coping with an Ageing Population

In recent years, international retirement studies have addressed problems posed by an ageing population (see BIB 2002; AARP 2005; Merrill Lynch 2004 for examples).

As a comparative measure the ASRAM study posed questions on two central themes of this topic: the difficulty of maintaining age pension schemes in the face of larger proportions of retirees; and how to address emerging national labour force shortages.