LOSERS AND WINNERS IN AN AGING AUSTRALIA
Stone the crows! We are going to penalise people who work the hardest.
While the budget case for delaying access to the age pension is obvious, critics claim this is unfair to people who cannot go the distance, largely due to the wear and tear of manual labour.[i]
The Crows take the point and, if not the pension, surely people worn out by work before they are at retirement age have far more of a right to the disability support pension than those who merely prefer it to the scandalously smaller unemployment payment. The DSP pays $383 a week compared to Newstart’s $260.[ii] However a wholesale transfer of the working age infirm to the DSP would defeat the purpose of increasing the age pension threshold and so we will likely see an increase to the number of people in the second half of their 60s rotting on the dole. Indeed, it seems this is already occurring, with the number of 50-plus people receiving Newstart up 40 per cent, eight times the increase of the age group overall.[iii]
Others will get an even rougher deal from the increased pension age – those who die before they collect. There is no doubt, in general, Australians are living longer. Most people born in 1940 barely made it to 60. In contrast, a boy beginning life in 2010 can expect to make it to 80, a girl to 84. And the longer you survive the greater age you can expect to reach. Men who made it to 65 by 2012 can expect to go another 20 years, 22 years for women. [iv]
That two decades was what Paul Keating was talking about on Thursday night on Lateline when he called for a new public insurance scheme to fund care and accommodation for the ultra old: “It’s possible to do. It’s a classic insurance thing. It’s like the houses in the street: you pay your insurance, but only one house burns down. What happens? One person dies earlier, but their work and savings subsidises other people who last into their late 90s,” he said.[v]
Quite. This is good for everybody except for people who fear they will not make it to the older retirement age. Of which there are plenty – although how many and what they do for a quid isn’t easy to work out. According to actuary Bruce Gregory while we know the richer live longer there is little data on how many people by occupation die earlier than the median.[vi] However, Bureau of Statistics data does demonstrate the way some people, good or otherwise, die young. Most men aged 50 now can expect to make it to 82, women to 85. But most blokes who are 60 will get to 83, women to 86.[vii]
It is a fair bet that those expiring early, or who cannot work, are more likely to have spent their working lives heaving, humping and hammering. A little more than half of labourers and machinery operators rate their health as excellent, compared to over two thirds of professionals, clericals and community service workers.[viii] As a submission to the Henry tax review put it; “The increase in life expectancy has not been matched by an increase in the quality of life of many individuals. These individuals are still likely to need to be assisted by other income support.” [ix]
It is an idea that resonates across the community. Around 70 per cent of all age groups from 18 to 65 oppose increasing the pension threshold to 70. (That just 54 per cent of over 65s are against the idea may indicate many of them want to work on, or don’t care because they are collecting already). [x]
And herein lies the problem and the solution we will never have. If we cannot afford to leave the pension age where it is, or make the DSP a de facto pension for people whose work skills depend on fitness, there is no future for the working age old but the dole. Unless that is, we free up some money, by redirecting funds from the old and relatively affluent. An inheritance tax is one of way of doing it. Encouraging the cash poor, asset rich old to provide for themselves by downsizing from their homes is another.
The Commission of Audit proposed means testing the value of pensioners’ homes over $500,000 and it pointed to reverse mortgages as a way of generating income. (While superannuation was outside the CoA’s remit, it did note “many superannuation tax concessions disproportionately benefit higher income earners, when compared to taxation at marginal tax rates under the progressive income tax system.”)[xi]
But we all know there is Buckleys chance of an inheritance tax and none of a serious means test on pensioners’ homes. Voters who will win by inheriting housing wealth will see to that.
The losers will be people who either die or are forced onto the dole because their bodies give out before they reach retirement age.
Disclosure: I worked on drafting the Commission of Audit report.
[i] John Collett, “Slogging on until your 70,” The Age, April 20
[iii] Jonathan Swan and Fergus Hunter, Unemployment spike in elderly a risk for pension changes,” Sydney Morning Herald, May 9
[x] Mark Kenny, “Pension age backlash,” Sydney Morning Herald, May 10