As elsewhere, New Zealand faces major challenges in successfully managing the trend known as ‘population ageing’ (Jackson, 2007), illustrated at Figures 1 and 2. Although structurally younger than its OECD counterparts, half a century of declining birth rates and increasing longevity mean that the New Zealand population will soon contain more elderly (65+ years) than children (0-14 years) – a crossover expected to occur in just ten years (Statistics New Zealand, 2012). This ‘medium case’ projection assumes the birth rate remaining close to its current level (declining to 1.96 by 2021 and 1.90 by 2036), longevity continuing to increase but at a slightly slower rate, and a constant average net international migration gain of 12,000 per year from 2015.
Accompanying these trends are internal shifts in the age structure affecting the prime working age population (15-64 years), where the number of people at and approaching labour market ‘entry age’ (15-24 years) is declining rapidly vis-à-vis the number approaching the retirement zone (55-64 years). It is critical that any discussion relating to older workers pays equal attention to the trends at younger ages. Over the next five years the number of school leavers (15-19 years) will decline by approximately 20,000, and by a further 8,000 in the following five years (Statistics New Zealand, 2012).
The combined outcome of the trends will see the ratio of people at labour market ‘entry’ to ‘exit’ age fall from its current 1.3 today, to just one for one by 2021. A sizeable but short-term influx of youthful labour market entrants will then arrive at labour market entry age, the legacy of the recently born ‘baby blip’. However by then the largest of the Baby Boom cohorts will be approaching the retirement zone. The prime working age population – defined here as 15-64 years – is expected to shrink from its present 66.0 per cent of the total population, to around 60.0 per cent by 2031 (Jackson, 2011).
New Zealand’s likely labour and skill shortages (Department of Labour, 2011) will be exacerbated by population ageing being further advanced in counterpart countries, increasing competition for migrants – including New Zealand’s own young (McPherson, 2012, p. 4). A salutary message is that over the next 20 years, the number of people aged 65+ in the 58 More Developed Countries will grow by almost 100 million, while the numbers aged 0-64 years will shrink by 41 million (United States Census Bureau, n.d.).
All else remaining equal, New Zealand’s structural ageing will generate a growing and potentially problematic fiscal gap between government revenue to fund public services such as superannuation and health care, and demand for them (Bascand, 2012; Ministry of Social Development, 2011). This is especially so given New Zealand’s current universal superannuation, with the age of entitlement at age 65 irrespective of financial or employment situation (Hurnard, 2005). One important change that would offset much of this gap – a shift to a longer work life – is already occurring in New Zealand, as it is elsewhere; albeit it must be noted that New Zealand is among a handful leading the trend (Hurnard, 2005).
As population ageing unfolds, the relative deficit of younger workers and increased competition for workers of all ages is almost certain to reinforce this trend (McPherson, 2012). However, the situation remains poorly understood, with many older workers continuing to face discrimination and untimely redundancy (Alpass & Mortimer, 2007, pp. 30-31; Wilson & Kan, 2006; McPherson, 2012), and seemingly few appropriate HR policies and practices yet in place (EEO Trust, 2008).
This report reviews the literature on workforce participation at older ages, as an element of New Zealand’s retirement income framework. It begins with a review of recent trends in older age (55+ years) employment, followed by some implications of these trends for income and savings. Factors that form barriers and enablers to extending the working life are then reviewed. The report concludes with a review of options for increasing the rates and quality of New Zealand’s older workforce participation.