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Column - New Zealand's Ageing Non-Workforce

New Zealand's Ageing Non-Workforce
Keith Rankin's Thursday Column


Massey University History Professor David Thomson, in his Winter Lecture (University of Auckland, 27 July), described a little-appreciated reality; that people over 45 in New Zealand and other developed countries are less likely to be doing paid work than ever before, despite becoming relatively more numerous. As the age of eligibility for a public pension rises, the average age of retirement continues to fall. People aged 45-64 can no longer be regarded as the financial bedrock of our society.

Twentieth century policymaking has been predicated on the assumption of "full employment", which was taken to mean that around 95% of men aged 25-60 should be in regular paid employment of 20 hours or more per week. That high employment consensus also came to mean that perhaps 90% of women aged 25-60, excluding those caring for pre-school children, should be likewise employed.

The underlying assumption behind this expectation is that, if these employment figures are not being achieved, then people are either unemployed or are responding to perverse incentives to not work. Hence, the western political consensus has been to focus on training workers who would otherwise be structurally unemployed. And on removing any alleged incentives to choose welfare over work.

While the rhetoric of the welfare lifestyle has not explicitly focused on the middle-aged, if there is any truth to that rhetoric, then that truth must be taken to apply to them, for they are quite conspicuously doing less paid work than society expects them to be doing.

Since the adoption of a neoliberal policy framework in the 1980s the assumption that a society made up of nuclear families would be able to make long-term financial commitments on the basis of stable fulltime employment income has actually intensified. Political leaders, from Jenny Shipley to Tony Blair, see our problems in the 1990s as largely due to a diminishing work ethic, and not to a fundamental change in the demand for labour.

The reality is rather different from these mainstream perceptions. This new reality has been both accentuated and retarded by neoliberal micro-reforms (such as the 1991 Employment Contracts Act) and classical macroeconomic policies (such as monetarist anti-inflation policies and the renewed commitment to balancing the budget).

"Retirement" for men in New Zealand and other comparable countries now begins at age 45. From around 1980, there has been a significant increase in the number of men and women over 45 who are not employed.

The causes of this phenomenon appear to be two.

First, there has been a casualisation of employment generally, which means more individual contracts, and more short-term task-oriented contracts. This is largely but not totally due to laws that treat the labour market just like any commodity market. And it is due in large part to the loss of influence of the trade unions that gave workers the bargaining power required to create long duration jobs.

The social imperative of maintaining stable full employment has been replaced by a view that the market always knows best how to allocate scarce resources, and that the "scarcity" of labour will ensure full employment. People who believe that the market knows best believe that the lack of employment for older persons is, in large part, due to excessive minimum wages. We must infer that the free marketers expect 50-year-olds to work for $5 per hour. That's hardly going to remove the problem of financial insecurity that today's middle-aged citizens are facing.
The second cause is technology. New technologies have created a number of new employment opportunities (eg call centres).

Further, it has often been middle-aged persons who have created businesses that utilise information technology. Nevertheless, the more general truth is that the rising productivity of labour, made possible by technological change, has permanent and irreversible effects on employment. In particular, technological change has made labour - even skilled labour - into a much less important factor of production than it was in the heyday of mass-production manufacturing.

Ironically, the introduction of neoliberal economic reforms has slowed down the growth of labour productivity (as a recent report by Wellington economist Brian Philpott reveals), so in this sense, the loss of jobs arising from raised productivity in New Zealand has been less than in many other countries. New Zealand has suffered the trauma of labour market decimation, but without getting the dividends that are apparent in countries like Australia and Ireland.
The challenge that David Thomson set his audience was to not necessarily treat the end of the 35-40 year working lifespan as a negative.

Neoliberal policies that create part-time impermanent McJobs (and casual, poorly remunerated, self-employment for older workers) while concentrating wealth into the bank accounts of the top five percent of income recipients are socially damaging and need to be changed.

Nevertheless, the bigger truth is that the labour market - the world of paid work - is going to be a much less important part of modern capitalist economies in the future. That is the logically necessary consequence of long-run productivity growth. The challenge for older persons is to find increasing fulfilment and contribution outside of the paid workforce. The challenge to society is to ensure that 45-64 year-olds can continue to act as our social bedrock despite their lesser participation in paid work.

The proportion of national income paid out as wages and salaries is falling. Various forms of property income are increasing as a share of the total. Thus, the challenge for any developed economic society is to find ways of distributing non-labour income much more equitably than it has been distributed in the 1990s.

We need to think of benefits as a form of property income - arising from intangible public domain assets for which we are collectively responsible - rather than as a transfer of labour incomes from the workforce to the non-workforce. We need to think more about property, in all its forms, and less about paid work and the work ethic.
Our growing ranks of middle-aged non-workers are not going to have ready access to private investment income to make good their lost labour income. Hence, our initial focus has to be on the development of public property rights and of payments to individuals on the basis of the commercial (eg TVNZ) and public domain assets (eg the knowledge, culture, the environment, legislation, institutions, roads, and the Internet) that we own collectively.

Our populations are ageing. Yet it is unlikely that all our diminished supply of young people will be fully committed to paid work next century, let alone our healthy older citizens. The challenge is to recognise that increased labour productivity is a symptom of economic success, not of economic failure. It means we can have more for less.
We can achieve equitable social outcomes without having to have everyone aged 25 to 70 in either fulltime paid work or childraising (or both). And we can learn to give recognition to the important non-market contributions that 45-64 year-olds can and do make to their families, communities and societies.

ENDS

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