Date created:27/8/04
Last modified:27/8/04
Maintained by: John Quiggin
John Quiggin

Older workers forced out

Australian Financial Review

1 July 2004.

Recent statements by the Prime Minister and Treasurer have focused attention on the unsustainability of recent changes in our lifetime patterns of study, work and retirement.

In addressing the problem, Mr Costello has focused his attention on the incentives for voluntary early retirement provided by superannuation schemes, but this is no longer the main issue. Allowing people to access some of their superannuation savings while still working will have a modest impact compared to the end of defined benefit superannuation. The real problem is not voluntary early retirement on generous superannuation payments, but the fact that so many workers are being pushed out of the workforce in their 50s, going on to Disability Support Payments or early access to the age pension.

When this issue is discussed it is commonplace to refer to the supposed bias of employers against older workers or to their problems with adaptability and obsolete skills . No doubt such biases exist, and some skills need updating but that is unlikely to be the main reason why so many older workers are leaving the workforce. In thinking about this, it's useful to remember that, in the 1970s, when unemployment problems were concentrated on young people, a great deal was made about perception and attitude problems, affecting both employers and youn workers.

In retrospect, the upsurge in youth unemployment was clearly more to do with the structure of the labour market than with perceptions or attitudes. The immediate response of employers to the economic downturn that began in the early 1970s was to stop hiring rather than to lay off existing workers. The natural result was rapidly increasing unemployment among new entrants to the labour force such as school-leavers and migrants.

These days large scale retrenchment of workers is commonplace, and takes little account of years of service. At the same time, the workforce is increasingly polarised into a shrinking core of 'full-time' workers, expected to put in 50 or 60 hours a week and a growing peripheral group in insecure and casual employment. The decline in employment security is sometimes questioned on the basis of statistics showing that average job tenure has not changed much, but these statistics take no account of the hundreds of thousands of older workers who have left the labour force permanently.

Although structural change affects all workers, older workers have been more adversely affected than others. After, all the longer you stay in the workforce the more likely you are to be at the wrong end of a bout of workplace restructuring. Moreover, a highly competitive core workforce is dominated by an "up or out" ethos that makes it difficult for an older worker to re-enter employment at a level below that previously attained. The high-pressure environment of the core workforce also produces many cases of burnout even among those who succeed, particularly once the financial pressures associated with raising children are no longer present.

Structural change has proved very effective in getting more and more work out of fewer and fewer people, but it has a long-term cost. Although workers of all ages are affected by restructuring and redundancy, older workers are less well placed to start afresh and more likely to end up in the peripheral workforce if they regain work at all. In these circumstances, the option of a pension or benefit is increasingly the best way out. Even among the shrinking group of winners in the game, the pressures of the core workforce are producing cases of burnout in growing numbers.

A sensible allocation of work effort over the life cycle would involve working well past the age of 55 for most workers. But it would also involve shorter hours of full-time work, particularly for prime-aged workers (roughly those from 30 to 50) who are also, in most cases, those with the heaviest burden of family responsibilities. Over the past decade of so, an increased amount of total labour effort has been crammed into a shorter and shorter segment of our adult lives.

The irony is that the changes in the labour market that have produced the large-scale withdrawal of older workers are precisely those that have been championed by the Treasurer and Prime Minister, among others, under the banners of flexibility and reform. If we are going to keep working into our 60s and beyond, these changes will have to be reversed and the balance between life and work restored.

John Quiggin is an Australian Research Council Federation Fellow in Economics and Political Science at the University of Queensland.

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