Government can’t ignore retiring baby-boomers
THE year 2011 was the year when people born straight after World War II turned 65. These were the thin end of a very large wedge.
The baby-boomers, that huge demographic group that has been slowly making its way up through the age brackets, are now starting to reach retirement age.
This presents a problem for governments and the economy in general.
Superannuation has been regarded as the answer to the problem, but not every Australian is going to have enough super to support them in old age – especially a very long old age.
People who have been on well-paid salaries for most of their lives can have over a million dollars in their super funds. However, many have not had access to super, or adequate super.
People who have been self-employed, unemployed, on disability or sickness benefits, supported by their spouse or working in industries where super is rare, face life on the aged pension – currently a subsistence allowance that is scarcely enough to put food on the table, let alone pay rapidly rising power bills.
A retiree with a younger partner who is still working is likely to get next to nothing as a pension and pity help pensioners who are still paying off a mortgage or have children living at home.
Two other solutions to financing retirement and aged care have been suggested. One is simply to abolish retirement: to encourage workers to stay in their jobs. However, how long can we expect people to keep working? There are health and safety issues for older workers. In our mid-60s heavy physical labour becomes difficult or impossible.
Do we want to see people in their 70s climbing on roofs, driving school buses or piloting planes? Apart from physical decline there is the problem of skills obsolescence: many people reach a point where their job ceases to exist.
If workers are unable to continue in their former careers, what alternative jobs are available to them? Are McDonald’s, Just Jeans or Supre going to start hiring salespeople in their 70s?
While there are a number of part-time jobs available for older people, there will never be enough to absorb all those who are about to retire. And what effect will it have on younger people trying to start careers if older people don’t vacate positions?
The second solution revolves around liquidating an individual’s assets to fund their retirement and, eventually, their aged care.
This includes such ideas as reverse mortgages (a misleading term: a reverse mortgage would presumably be a situation where someone lent money to the bank). This is simply a normal mortgage except that the borrower makes no repayments and the bank repossesses the home on their death.
What if the costs of care exceed the value of the home? How does such an arrangement take into account the rights of a spouse who co-owns the home?
What happens if the cost of caring for one partner leaves no equity to provide for the care of the other?
Many of the proposals for funding age care seem to assume that most couples go into care around the same time, whereas in reality there can be a 20-year gap.
Beyond the problems of equity and implementation, schemes to divest individuals of their wealth all imply either a diminution or the abolition of inheritance.
The economic consequences of this would be significant. One of the reasons Australians are prepared to spend 25 years paying off a mortgage is to leave something to their children. How keen will they be to do so if they know that, in the end, they are going to have to sell that home to pay for their aged care?
The tendency would be to devise schemes to pass wealth on to their children much earlier in life. One might foresee a booming business in property trusts and other schemes designed to keep the family home as the property of the family.
In the end governments are probably going to have to resign themselves to paying an adequate age pension and providing first class care for ageing citizens because, ultimately, economic difficulty will be trumped by political necessity.
An ageing population also means an ageing electorate and the most compelling issue in the next 20 years is going to be the number of cars driving slowly along our streets with stickers saying “I’m old and I vote”.
Ross Fitzgerald is Emeritus Professor of History and Politics at Griffith University
THE DAILY TELEGRAPH, OCTOBER 24, p 55