Well, in Australia the growing number of retirees is going to place a huge burden on the average tax payer. The lowering of the ratio of tax paying citizens vs retirees means that the population will be facing significant budget restrictions. Inevitably if nothing is done, the government is going to have to cut some services in order to continue to support tax paying and retiree citizins.
"We'll either generate some large unsustainable budget deficits into the second quarter of this century, or else we'll need to reduce government services,"Rudds solution, work harder.
Kevin Rudd
"Australia must take decisive action to drive productivity forward to improve living standards, to deliver better services, while keeping the budget on a sustainable footing and to improve Australia's international competitiveness"Well that just isn't a real solution. Compensate for a failing solution by banging your head against it harder, yeah that'll work...
Kevin Rudd
So, the options seem to be cut services, cut pensions or work harder. There is another option.
The Floating Retirement Age
Well. The Rudd government increased the retirement age from 65 to 67 starting 2014 in hopes of mitigating the upcoming retirement of the baby boomers. It won't be enough. Lets look at the situation from an historic point of view
The retirement age has been 65 for men (we'll exclude women for simplicity) since before 1935. Yet the life expectancy has increased steadily from that point. (based on Centerlink and ABS data)
As you can see there has been a significant change in the dynamic. We are retiring at the same age, yet living longer. So what do we do for the nation and its ability to keep us living longer? We clog up government services until the government is forced to reduce legitimate services to the needy to pay for aged Australians. According to an article in the Journal of Population Research, Australia is projected to approach a life expectancy of around 100 years by 2050. So what's the remedy. We float the retirement age according to life expectancy.
The Float
We have the CSIRO and other firms determine the age at which people no longer are capable of participating in the employment sector, expressed as a margin between the life expectancy extending backwards. For instance, stating that the margin is 15 years tells us that someone who has a life expectancy of 85 should be working until they're 70. While that margin stated here is random, the CSIRO and other firms would be able to state with a reasonable degree of certainty where that margin does lie. It is reasonable to assume that a person who had reached the age of 70 in 1930 is less capable than a person who has reached the age of 70 in today and future years. Medical advancements have made people live not only longer but more meaningful lives. Australia as a nation should be capitalising on on that.
We could go to the extent of reserving low reaction time low cognitive ability jobs for older Australians. Sure, a 70 year old Australian may not be able to be a nascar driver, but they should be able to work as a cashier or a greeter or a telemarketer. The government could institute tax incentives for older Australians who remain in the work force, a lowering of income tax perhaps. A lowering of the hours in an older Australians working week (20 perhaps instead of 40).
Conclusion bit
So there does exist a legitimate problem that an arbitrary raising of the 'pension age' isn't going to fix. Floating the retirement age stops the growing discrepancy between life expectancy and retirement age shown in the graph above. It ensures that Australia gets the optimum amount of output from every Australian and permits the country to continue offering top notch services to its people. While raising the retirement age to 67 is a bandaid solution, floating the retirement age is an ultimate solution. One that doesn't need addressing in 50 years.
Any criticisms, comments, questions, please put them in the comment section.
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