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Mitigating Age Discrimination – It makes economic sense!

Pru Goward Sex Discrimination Commissioner, Age Discrimination: Mitigating Risk in the Workplace Book Launch, Baker & McKenzie, Level 27 AMP Centre 50 Bridge, Street Sydney, Tuesday 6 September 2005

Thank you for inviting me here today.

Although the Australian ethic of the fair go says that discrimination of any kind is wrong. When it comes to sex, race, disability or age discrimination, it’s more than wrong, it’s unlawful.

We tend to think of the consequences for someone who disregards discrimination law in direct terms, for example the provision of an apology, financial compensation or policy change.

But it’s bigger than that. There are flow-on effects.

Age discrimination has repercussions for three of the most significant factors contributing to GDP growth – population, participation and productivity – otherwise referred to by the Treasurer as the “three P’s”.1

Although it is clear that each of these factors are inter-related, let me nevertheless examine each of these “Ps” in turn and what they mean for age discrimination.

First, population. The ageing of the Australian population is a well reported phenomenon, and no doubt you will be familiar with the population projections that the government released in its intergenerational report of 2002-03.

Needless to say, the Australian population will look very different in 40 years time as the baby boomer cohort move into retirement and old age.

This demographic shift will have consequences on the work and family debate.

Simply, as the population ages there will be a greater need for access to family-friendly employment arrangements as both women and men juggle not only the care of children but also the care of ageing parents.

The question of elder care is emerging as one that will affect all workers, regardless of whether they have children. It means no one can say any longer that caring is a woman’s issue.  

We might choose not to have children, but no one can choose not to have parents.

Yes, the traditionalists amongst us might say that women are and should be the primary carers for their children, men need only take a background role, but no one can say that about caring for the folks.

The ageing of Australia is only now beginning to increase the pressure on prime aged workers to work and to work longer hours.

Even allowing for the increased participation of older workers encouraged by the federal Government, the ratio of aged dependents to tax payers is still expected to significantly increase,2 and with that increase pro rata tax burdens will rise.

By 2044-45 one in four people in Australia will be 65 years or over, double today’s figures.3 Formal aged care needs alone are projected to increase by between 180 per cent and 250 per cent of current expenditure by 2044-45.4

Treasury Secretary Ken Henry estimates the tax-to-GDP ratio, on unchanged policy, would rise by 5 or 6 percentage points in order to support our growing population of older workers. That is equivalent to a GST rate of between 22 and 24%, as opposed to the present 10%.5

Ironically - and this is what makes it such a complex area of public policy - ageing is a double-edged sword for Australian families; it is a source of increased pressure to engage in both paid and unpaid work.

The ballooning increase in costs associated with our aging population make the success of this area of public policy critical to the nation’s future wealth and well-being. It is a particularly complex area of public policy.

First, more older people need to work and for longer. Extending employment life into the late sixties and seventies is increasingly necessary for individuals to accumulate sufficient individual retirement savings to finance a lengthy period of old age. Age discrimination acts as a barrier to this goal.

In addition, the taxes paid by younger and older workers alike to fund the aged care needs of those other older Australians who rely on tax payer funded benefits.

As more people live longer in the community, a greater responsibility devolves to community-based services, volunteers and family carers, mostly children and spouses to provide the care.  

Obviously these will be older workers themselves in their late forties and fifties. And we know provision of this care is highly gendered.   Overwhelmingly informal care of the elderly is provided by daughters.

Currently 91.2% of elderly parents receive informal care essentially from daughters, not from sons.6

There can be no doubt of the challenges an ageing Australia throws up for unpaid care.

Our ageing baby boomers are, of course, just one side of the population coin. On the other is our desperately low fertility rate.

Since the total fertility rate dropped below replacement level in 1976, it has, for the most part, been in decline ever since.

Significantly, mothers are ageing. In 2003, babies born to women aged 30 years and over accounted for 51% of the total fertility rate. In that same year there were an estimated 5 million women of childbearing age in Australia but only around 5% of them gave birth. 7

This leads ineluctably to the sandwich generation – women with both teenage children and elderly parents to care for at the same time.

In combination, our fertility rate and ageing population present unprecedented challenges to policy makers, business and society alike.

It is no wonder then that the government is keen for our population to work and to work for longer. The introduction of the Age Discrimination Act last year was, in part, to assist longevity in the working lives of Australians.

Indeed one of the objects of the Act is to “to respond to demographic change by:

This brings me to the second “P”, participation.

There are some major obstacles in achieving maximum workforce participation in Australia. First, the persistently low workforce participation of women over 55 years in Australia. Second, our culture of long hours. And third, a looming skills shortage.

Australia ’s mediocre work force participation rate of 40 per cent for women over the age of 55 is a significant conundrum. For it is exactly this group that the OECD and the federal Government believe should be working more, not less, to add to the country’s total work effort.

Australia’s older women participation rate is slightly lower than Portugal’s, not as low as southern European countries such as Turkey, Italy and Greece but much lower than the wealthy European nations of the north, the United Kingdom and United States. In Sweden, 69.5 per cent of women 55 to 64 years are in paid work.9

Why is it so low? Is it because she is opting out of the workforce early to look after her parents? Or perhaps even HIS parents?  

While a decision such as this may be made based on economic reasons – that is, he earns more, she should be at pains to point out that she has already accumulated significantly less superannuation because she spent so much time either out of the workforce or in part time or casual work, caring for their children. The fate of the sandwich woman is a lifetime spent in and out of casual work that fits around everything else.

Inevitably all Australians need to be more involved in paid work in order to fund their retirement. This is consistent with the need for economic growth but is clearly at odds with the increasing demand for informal elder care.

Let’s also throw into this mix, then, the culture of long hours in Australia. According to a report based on data from the Household, Income and Labour Dynamics In Australia Survey released just two weeks ago, one in five of Australians are working long hours.10

Long hours in this context are defined as regularly working 50 or more hours a week. What was most disturbing about these figures, however, is that for more than half of these people working long hours it was a persistent phenomenon over years, not months.

A long hours working pattern has significant impacts on both our ability to keep working for longer due to the toll on our health and also quite obviously for our unpaid caring responsibilities and personal relationships.

The pressure to maintain long working hours is only likely to increase, particularly for employees in specific skilled industries where skills shortages are being experienced.

Skill shortages occur for a number of reasons:

A skills shortage is already upon us. In 1999 the Government developed the ‘National Industry Skills Initiative’ to look into industries experiencing skills shortages at a cost of $11 million dollars thus far.

The Initiative has produced a skills shortage list and some of the 16 professions listed include childcare workers, civil engineers, accountants, registered nurses, dentists, podiatrists and physiotherapists.

For trades, the situation is slightly worse with 26 trades currently listed including welders, panel beaters, carpenters, plumbers, bricklayers (as anyone who has recently tried to renovate or build will attest to), chefs and hairdressers.

As the population ages and fewer tax payers and workers are born to replace them, the skill shortage appears likely to worsen into the future.

There is no doubt that skills shortage is a significant impediment to business. It serves to remind business that retaining a skilled workforce is, and should be, a number one priority.

In this context, the business case for retaining and supporting mature age workers is mounting. It goes further than cutting staff turnover, it also:

Given the economic imperative to support mature age workers, it is difficult to believe that age discrimination is still a feature of the Australian workplace!

For if we ignore the skills and talent of mature age workers we are bound to limit future productivity.

Which brings me to the third “P”, productivity.

Productivity growth is a major driver of improved living standards.

There can be no doubt that Australia has experienced significant economic growth in recent times. This has been paralleled by similar levels of growth throughout the OECD. This growth, however, has not addressed the problems of widening inequality.

On the positive side, improvements in economic wellbeing have been extraordinary in historical terms over the last 50 years with average real growth in per capita GDP since 1973 effectively doubling living standards every 35 years.

Gains in real incomes have been accompanied by an accumulation of assets that families can use when faced with difficult circumstances – the net worth of average households across the seven major OECD economies ranged between 5 ½ and 7 times their annual disposable incomes.

Life expectancy is increasing at a rate of nearly 2 ½ years per decade with infant mortality dropping by three quarters in the 30 years to 2002.

The average amount of time spent in education has increased by a year per decade to a level of 11 ½ years across all OEDC countries in 2000.

How wonderful to be so rich - this is good news.   But we only have to look at the recent Productivity Commission report on Indigenous Disadvantage12 if we need evidence that the real economic gains of our society are not being equally shared.

The plight of indigenous Australians is evidence of that, culminating in the 17 year gap in their life expectancy compared with the total Australian population.

This widening of inequality in the distribution of market incomes is common to many OECD nations where income inequality is increasing and parts of the population continue to miss out on the benefits of economic growth.

It is clear that these problems cannot simply be addressed by relying on traditional economic policy levers of tax and public transfers, the report claims, if for no other reason that the tax base is becoming increasingly stretched throughout the OECD by the demands of ageing populations.

And again, it is not just the widening inequality which poses a threat to western societies like ours. The challenge is to be able to strategically manage inequality and poverty in such a way that other national challenges are also addressed, such as the impact of ageing on national prosperity or the impact of long working hours on family life mentioned earlier.

Giving a greater emphasis to policies which allow families to balance their paid and unpaid work commitments is obviously the key.

The implantation of such policies will surely encourage continued economic growth.

We cannot ignore the economic imperative driving increased population, participation and productivity. And it is clear that retaining mature age workers is one way to achieve this. Giving employees more flexible options over their work arrangements is another.

The government has come to the party on the first count, introducing the Age Discrimination Act in June last year, making it just over a year old.

It prohibits discrimination on the basis of age in areas of public life including areas of employment, education, accommodation, the provision of goods, services and facilities, the administration of Commonwealth laws and programs, access to premises, selling or other dealings with land and requests for information on which unlawful discrimination might be based.

Under the Act the Commission can:

Since the Human Rights and Equal Opportunity Commission has been responsible for the Act, we have handled over 500 enquiries of age discrimination. This figure suggests that age discrimination is sill prevalent in our society!

And in the last financial year, the Commission received a total of 78 complaints under the Act. The vast majority, 73%, were in the area of employment.

There are presently around 3.2 million mature age workers in Australia, making up approximately a third of all employed people.

They are our future, every bit as much as our younger workers.

They too, must be treasured, nurtured and treated with respect.

  1. The Hon Peter Costello MP Treasurer “The Paths to Increasing Australian Prosperity” Address to the Financial Review Leaders’ Luncheon Sydney 7 August 2002.
  2. “In 2002, the aged to working-age ratio (the proportion if people aged over 65 to people of traditional labour force age, 15 to 64) is 19 per cent. This is projected to rise to almost 41 per cent by 2042.”: Department of the Treasury, Intergenerational Report 2002-03, Budget Paper No. 5 2002-03, May 2002, p 23.
  3. Productivity Commission, Economic Implications of an Ageing Australia, Draft Research Report, Productivity Commission, Canberra, November 2004, p 1.1
  4. Productivity Commission, Economic Implications of an Ageing Australia, Draft Research Report, Productivity Commission, Canberra, November 2004, p xxxix
  5. Ken Henry, Secretary to the Commonwealth Treasury “Work hours set to drop” AFR 30 June 2005.
  6. ABS Disability, Ageing and Carers: Summary of Findings 2004 Cat No 4430.0, p 52.
  7. ABS Australian Social Trends 2005 ‘Recent fertility trends’.
  8. Age Discrimination Act 2004 (Cth) section 3(e).
  9. Organisation for Economic Co-operation and Development, OECD Employment Outlook 2004, pp 303-305.
  10. R. Drago, D. Black & M. Wooden, The Persistence of Long Work Hours, Melbourne Institute Working Paper Series, Working Paper No. 12/05, August 2005, pp 1-2.
  11. Department of Education, Science and Training ‘National Skills Shortage Strategy’.
  12. SCRGSP (Steering Committee for the Review of Government Service Provision) 2005 Overcoming Indigenous Disadvantage: Key Indicators 2005 Productivity Commission Canberra.