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Older workers may be our economic salvation - or a pipeline to poverty

What are the benefits and risks of an ageing workforce? Image source:

Welcome to Shades of Grey, a series from The Conversation that examines the challenges posed by Australia’s ageing workforce, Today, Macquarie University’s Ben Spies-Butcher explains how increasing the participation of older workers for purely economic reasons can lead to poverty.

Economists claim that older workers may be our salvation against the perils of population ageing.

A recent report from Deloitte Access Economics has claimed a 5% increase in participation by older workers could increase GDP by $48 billion over 12 years.

But the history of women entering the workforce shows striving for equal participation can be a double-edged sword. Prosperity can accompany greater equality – between men and women, young and old – but without broader economic and social change it can mean growing inequality and insecurity amongst those left behind.

Before the concern over the ageing population began building during the 1990s, Australian governments were preoccupied with another challenge – globalisation. Open markets threatened the traditional economic model, which had protected manufacturing; had seen the development of a stable export trade with our former colonial master – Britain; and had guarded wages and working conditions through a centralised system of court arbitration.

Over the next 30 years, Australia gradually restructured its economy. Markets were opened, wages were deregulated, new export markets were expanded. While many experts hail this process as successful in generating higher incomes, it also resulted in considerably greater financial inequality and insecurity.

Market deregulation threatened to make it even worse. In New Zealand and the USA, it saw a much more dramatic decline in equity and social connection. Australia instead pursued a more moderate reform agenda. Wages were held down, and casualisation did increase. But other measures were taken to cushion the effects on workers. A key part of this cushion was a deliberate move to push women into work.

Even the feminist movement, particularly the “femocrats” involved in policy making, saw an opportunity to advance gender equality with economic arguments. While individual wages might stall, having a second income promised to increase family incomes. And increasing the number of women workers promised to ease labour shortages, particularly in the growing services sector.

Over the 1980s and 1990s Australia’s female participation rate rose 13 percentage points, double the OECD average. These workers have proven invaluable in some of the industries where employment is growing fastest – health, education, retail, and childcare. It has also played a significant role in raising family incomes, and giving women greater financial independence and life choice.

It seems the current Labor government is following a similar formula in promoting the employment of older workers.

Population ageing potentially lowers economic growth, not only because more Australians will be over our traditional retirement age of 65, but because participation rates for those older workers (50-65) are lower than for the young.

But our experience with women workers suggests some caution is needed in promoting this new agenda. When older workers are welcomed, discrimination reduces and experience is valued, proving that there are clear benefits to increasing workforce participation.

But these changes are also likely to see new forms of inequality, and create new economic pressures that mean many, especially those with fewer skills, those who work in manual labour and those with disabilities, will feel compelled to work in insecure or disappearing jobs.

Both these forces were evident in the transition to a more gender equal workforce. Until recently the inclusion of more women in the workforce led to a decline in the gender wage gap and a change in social norms, which saw reduced gender discrimination. These changes have not yet gone far enough – and on many levels have stalled – but it has been a positive shift.

On the flip side, the rise in the number of double income families has sent house prices up, effectively forcing most families to have two earners. Women have also been concentrated to low paid, casual jobs, and have lacked access to childcare. Rather than changing work so that women are welcomed, much of the change has come from financial pressures that force women (and men) to work in unfriendly environments.

We have to think carefully about the broader changes that come from changing work patterns. Recent research has found that three in 10 older workers face direct discrimination. That is unacceptable, and a key reason why older people don’t stay in the workforce for longer.

Alongside policies to encourage employers to welcome older workers, the government has also been wielding the stick. It will be increasing the age at which we become eligible for the pension to 67. Many white collar, professional workers might welcome this. Many will want to work longer, and those that can’t will be able to access superannuation from 60 to ease out of the workforce.

That’s not the case for many unskilled and manual workers, who will struggle to find work and whose bodies will groan in their traditional jobs. It will mean an increasing divide amongst older households.

Over time, this will only get worse as younger generations – where many workers will never be able to afford a home – will reach retirement age. Better educated and secure workers will continue to work in highly paid jobs, in secure housing, without a mortgage. Others will struggle on in private rentals, casual work and frequent unemployment.

Older people remaining in the workforce is to be welcomed – but doing so for purely economic reasons can be a recipe for poverty and social exclusion. Equality and economic participation can go hand in hand, but this requires addressing both issues simultaneously. We want people to work because they find meaning, purpose and acceptance in what they do – not because they will be evicted if they don’t.

Read more in the series:

There’s no silver bullet solution to Australia’s ageing workforce

Active ageing is a risky labour market strategy

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