By Paul Jarvie (Manager Employment Relations and Safety)
The western world is moving like a slow-motion car crash and we are just starting to see and feel some of the pre-crash damage. We know something is happening, we talk about it but we cannot change one little thing about it.
“The 20th century gave us the gift of longevity – but for what? The longevity revolution forces us to abandon existing notions of old age and retirement. These old social constructs are quite simply unsustainable in the face of an additional 30 years of life.” – Alexander Kalache, President International Longevity Centre.
We are all growing older, living longer and generally are in better overall health, which creates a problem.
- There are more people over 55 than under 15 in NZ.
- NZ Superannuation doesn’t really cover retirees costs.
- 21% of people 51-65 have less than $10,000 saved in Kiwisaver.
- The Kiwisaver opt out rate (June 2022) for over 55’s was 13.7%.
- OECD data indicates that New Zealanders are among the worst savers – 26th out of 29 countries.
- Many people could only survive for a month or less without earnings or savings.
- The proportion of people living in their own home is the lowest in almost 70 years.
- Home ownership in Māori and Pasifika people is around 35% and 20% respectively.
- Only 38% of people in the 55-64 age range are mortgage free (2019 stats).
- There is a skills and labour shortage in NZ.
- The cost of living is increasing, along with power prices.
- In 2018 the BNZ’s Financial Futures study found 46% of Kiwi’s plan to keep working after 65. The majority indicated it was because of value and satisfaction, but another 31% said they needed the income.
- Older workers often need to remain at work because they are caregivers for their parents (who are also living longer), their siblings and often their grandchildren.
- There is a constant trend of an increasing older worker participation rate (around 79%) in the work force and an increasing population needing to work.
- Currently in NZ the dependency ratio (working age population vs those over 65) is around 4.5 workers per retiree, this is projected to decrease to 2 workers per retiree.
Michelle Silver, University of Toronto Associate Professor, says: “It’s really important to recognise that retirement is just a phase that was invented, it is not a natural progression or an essential stage of life.”
Historically, the notion of retirement was based on years of schooling, then work, then retirement where you could do all the stuff you always wanted to do. Today’s commentators are now challenging this notion, especially as people are living 20-30 years after they retire.
There are several models of life which redefine and extend the post-work years. In short, the age of 65 is merely a point in time to which the person is now entitled to receive superannuation. It has nothing to do with work or retiring from work.
Research in New Zealand by Clare Hall Taylor found that there were five orientations of grouped trends. These are not definitive narratives but rather a group of similar traits, beliefs, and behaviors.
The five groups are:
| Group | Main points |
|---|---|
| Prosperous enterprisers | Driven, savvy individuals who have achieved a work-life balance. Start winding down work younger but continue longer. |
| Purpose seekers | Strong desire to maintain a purpose in life. Work is a core part of who we are. Will find strategies to continue working. Open to discussion on flexible working. Some can struggle to find pathways to fulfilment and purpose. Need help. |
| Retirement embracers | Counting down to, or celebrating, retirement. Paid employees – feel we are owed a well-deserved rest and escape from stress. |
| Reluctant sloggers | Major life events or setbacks have left us on the back foot. Still building. Can’t press pause. Behaviour and attitudes akin to people in their 40s and 50s. |
| Seasoned survivors | Consistently hard life has left us vulnerable. Own our age – proud to have made it this far. |
What the above data indicates is that employees do not fit into one unique box, but rather have many historical and life issues that frame and describe the person now. This means that employers and Government need to expand their interventions and narratives to accommodate these variations.
Research from the School of Economics Massey University 2013 retirement realities, Claire Matthews, summarises a growing trend.
“While most 65+ are satisfied with their life, little more than half agreed retirement was meeting their expectations. One respondent summed the value of better understanding the realities of retirement for pre-retirees in commenting ‘Would be wiser re savings prior to retirement if I had known what I now know.’”
From NZ Seniors report, 2022. (Database 50 plus and 1002 responses.)
- 20% did not feel financially secure.
- 40% did not feel financially confident in various financial matters.
- 60% felt reducing work commitments prior to retiring was appealing.
- 50% wish they could get more pre retiring support with only around 4% getting support.
- Most pre-retirees do not have a financial plan and only 20% feel prepared.
- 70% feel affordability is the biggest issue, followed by access to health and then amenities.
Those older people who are looking for a job also find it very difficult. As soon as a person’s age is perceived or known, ageism biases can take over. All the myths about older people jump to the forefront and the replies are “we will call you”. Anecdotal evidence would indicate that if you were looking for a job, at 48 or over you would be considered too old, while if you were at work, fellow employees would consider being over 55 years old.
Ageism is alive and well, and also apparent at the other end of the job market. Younger workers struggle with having no experience, no work history or are straight from school.
Interestingly, around 80% of employers had no policies or strategies for this population of employees and accepted that there were barriers to employing older workers. There is also an economic case for fuller working lives.
Research by the National Institute of Economic and Social Research (NIESR) in the UK suggests that if people worked an extra three years this would add up to 3.25% in real Gross Domestic Product (GDP) per year by 2033. In today’s terms, adding 3.25% to 2014 GDP would be equivalent to an extra £55b. In New Zealand, Ministry for Social Development have projected that older worker’s earnings will grow from $4.8bill in 2016 to $13.6bill by 2041.
Contrary to popular myth, the evidence shows that keeping more older people in work actually improves employment prospects for younger generations and has in some cases even increased their wages. There is also a clear business case as the ageing workforce is already starting to cause skill shortages in certain sectors, which will only worsen in future years, if the most experienced workers retire on schedule.
A fuller working life can also give individuals the chance to have the retirement they choose as well as the other social and psychological benefits that working provides. Encouraging later life working is not only good for the economy and good for individuals – and it is also good for business. (A New Vision for Older Workers: Retain, Retrain, Recruit Report to Government by Dr Ros Altmann CBE Business Champion for Older Workers).
Extending people’s working lives in New Zealand is also critical. A birth rate of 2.1 is required to naturally grow the population, and with New Zealand’s at 1.61 (a drop of 23.8%) – coupled with lower fertility rates – there will simply not be any labour flow. These birth rates will put large strains on Governments to fund retirement plans, plus other age-related services such as health and transport now and well into the future.
Put simply, New Zealand has run out of workers. This is not unique to us and is occurring all around the world. We have, over the last decade or so, relied on immigration to backfill this shortfall, however this to has been turned off initially due to the COVID pandemic, and more recently by Government policy to employ more New Zealanders, and at a higher pay rate.
We have seen some easing of the immigration rules to address chronic labour and skills shortages within some sectors and the current immigrant numbers are increasing due to Government loosening entry requirements, but why not make the most of who we do have here? This combination of ageing population driven by longevity is causing an imbalance where there are fewer workers for every retiree.
The question then becomes how can a smaller working population fund not only superannuation but also the extra costs of health care, transport, income supplements, housing etc?
Retirees returning to work is gaining momentum, though. The drivers for this include the cost of living and that they couldn’t afford to retire at the same time companies were restructuring and letting people “go”. Whenever you have a mass exodus from a company you lose knowledge. Sometimes you need fresh blood to get new ideas but sometimes you need to get things done quickly, and that is where you need those with more knowledge and experience. We see older workers with specific skills being called back by former companies to plug knowledge gaps.
Investing in older workers is well worth it. They already know your business and have huge amounts of business IP and knowledge. Research also shows that older workers are more than able and capable of learning new skills and ways of work, they just may need a little more time and training.
Providing some flexibility around work and working is a game changer and is already happening. As in all cases, the employer and the employee need to understand each other’s needs and values to best find a solution. The simple answer may be to increase the age of entitlement. Many countries have or are moving down this route. The standard retirement age of 65 is now closer to 67. Some countries are even contemplating 69 or even 72 (Denmark) by 2050.
“The OECD is recommending that governments increase pension ages to ensure the national pension plan are both affordable and adequate. This is occurring in 28 of the 35 OECD countries. Bold action is required to break down the barriers to engaging or re engaging older workers .”
The reality is that retirement is a construct that is only about 100 years old. It was introduced to help older and aged workers live with some dignity given their long and hard-working life. But the world has changed since then. We are living longer; work is not as arduous; and we are healthier.
Older people will need to work longer. Businesses will need to retain and re-skill older workers because there are no new employees coming into the market; Governments providing products and services for more and more older people by fewer employees poses some major issues; and older workers contribute to the economy and will add to Government income through taxes and spend.
All of this means employers need to be open-minded to retain and recruit older workers. They should provide or broker financial capability training for their staff. The return of the investment is around 4:1. Also, engage with staff before they think about making plans to move on or retire. The question should be around “what do I need to do to assist you to stay working for us?”
Offer ongoing training courses/programmes to help ensure employees maintain their employability and look at greater flexibility for returning older employees. The notion of doing some work and then doing some recreational or volunteering work fits well with older, currently retired, employees.
Older workers need to be recognised for their ongoing contribution, and valued for their experience and knowledge – they have plenty of offer and employers are urged to retain and recruit them, especially now.
