Back in 1997, Peter Drucker wrote in the Harvard Business Review, "The dominant factor for business in the next two decades — absent war, pestilence, or collision with a comet — is not going to be economics of technology. It will be demographics."
Drucker was prophetic. We are witnessing an unheralded number of forces warping our labour market but the chief force is demographics. There are simply not enough people born in the 1970s and 80s to take the place of the retiring boomers, so labour demand (and price) will rise.
There is much doom and gloom about the unthrifty boomers leaching Treasury of vital infrastructure monies to fund post war generation aged care and health payouts. I am far more optimistic. Indeed, over the last decade we have seen a massive leap in the boomer generation working longer.
The magic figure of older workers employed (part time and full time) according to the 2010 Treasury Intergenerational Report is about 67 per cent. This will help ameliorate the effects on healthcare and pension outlays.
Currently Australia’s mature age participation rate for those aged 55-64 is 63 per cent and rising. Back in 2000, only 46.6 per cent of men worked between 60-64. It’s now 61.6 percent. Only 21 per cent of women in the same age bracket age worked back in 2000. Now it’s 42.8 per cent according to OECD statistics. That’s good news.
The 2008 GFC wiped out about one fifth of the nation’s superannuation savings and this hit the boomers hardest — especially those with offshore property investments. That’s the kind of transaction one could do without. The post war generation will certainly work on longer. No one can predict how long.
This offers us a historical opportunity to change the way we work to benefit both young people but also their grandparents’ generation. Now is the time to advocate for full flexibility in the Fair Work Act and in Enterprise Bargaining Agreements around the country.
We need to change the structure and conditions of our workplaces so that older workers can work longer (if they choose) in flexible work modes such as part time, casual or from home. We need to change our workplaces so that young people can study and work without penalty. The workplace changes that benefit the boomers must be made available to young people as well.
While improvements in hours worked puts downward pressure on inflation and interest rates, most executives I talk to don’t recognise that their most experienced staff are a gold mine of knowledge. The concept of changing standard hours (9-5) to three days a week or working a day or two from home doesn’t get much traction.
Over the past decade, Australia’s real GDP growth rate has averaged 3.1 per cent per annum or about .25 percentage points per annum less than during the 1990s. National productivity is falling (although it got a bump up recently).
Population growth accounted for about 1.6 percentage points per annum, while labour productivity growth accounted for 1.4 percentage points per annum. Yet participation or labour supply growth shrunk almost 0.3 of a percentage point per annum. That’s why the Government wants the post-war generation to work on.
The 2012 Grattan Institute report called Game Changes makes special comment on mature age workers contribution to workforce participations. The report suggests increasing the age at which people can draw down the pension — currently 65 for men and 64 for women and increasing the age at which they can access their superannuation savings — currently 55. The Institute recommends pairing the superannuation and pension benefit ages at 65.
If the Government wants to put 5.7 million Australians offside in one swoop, try increasing both the age pension rate and then pairing it with the superannuation draw down age. This is not the role of Government. The Government should be exhorting employers to modify their workplaces and the structure of their rosters so that older workers can work on.
If corporate Australia and small businesses recognise that their mature age workers are a capital asset, and workplace flexibility is achieved, then the post war generation will work as long as they want to work (or can work). It makes good business sense to retain, train and hire older workers.
According to a National Seniors Association study, the cost of not using the skills and experience of older Australians is estimated at $10.8 billion a year. I suggest it will be much more over the next 30 years.
As population growth flattens and the terms of trade fall off as demand from China and India plateaus, more emphasis will be placed on net workforce participation (hours). Falling work hours is like steam escaping from a boiler — it generates less power. In real terms it means less purchasing power.
Clever companies see the potential benefits of tapping into mature, experienced staff. Not only can they see the value in the workplace, they will increasingly be part of the sales front line. Westpac has identified this cohort as a critical team to drive sales for a generation of women unprepared for retirement. Others are hiring and training mature age workers to deliver peer-to-peer customer service.
This is the shape of things to come and we will all benefit.
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