We are working less while living longer

The ageing of our society raises a host of difficult issues, most of which are studiously avoided by our current crop of populist political leaders. So while they’re building up the courage to confront some ugly economic realities of the ageing of our society, I’d like to add another consideration. It’s a set of numbers that aren’t often discussed but which add another dimension to the problems of ageing.

First, a quick recap on the ageing numbers. Australians aged 65 and over are the fastest growing age group in the country. There will, in the next 20 years, be another 2.8 million of them. Part of the reason is that we’re living longer, as life expectancy grows. Living longer is something we all wish for, but we’re yet to seriously work out how we can afford it.

Here’s the sobering picture which we all need to understand. Keep this in mind the next time some new medical advancement is announced which means we’ll likely all live a little longer still.

Take someone (the following numbers are based on males) who was born at the turn of the last century, around 1900. Their life expectancy was on average only 51 years of age. They went to school but mainly left school by the time they were 14, or even sooner. Then it was straight to work. With an average life expectancy of 51 years, most pretty much died on the job after working for 37 years. ‘Retirement’ was something largely unheard of, and certainly not something funded by welfare: families looked after their elderly until death. This generation spent, on average, 73% of their life in work.

Jump ahead to someone born in 1950 – a classic ‘boomer.’ Their life expectancy by now averaged 66 years. They attended school and many left at age 14, and retired at around 60. This gave them 6 years of ‘retirement’ and 46 years of work. They spent 69% of their life at work.

Jump again to 1975 and life expectancy rose to 69 years of age. But people born in this era were more likely to stay at school until say 17, to finish high school. They retired at around 60 and had 9 years of retirement before death. This generation spent 43 years at work – less than the previous generation – or 62% of their life.

And now to the millennials. Born in 2000, they can expect to live to 76. They will be at school and probably post school studies (and staying at home) to around 22, maybe longer if you throw in a gap year. If they still retire at age 60, they will have 16 years of retirement. They will work for only 38 years or just 50% of their life.

We have gone from generations who spent much of their life working (and thus supporting themselves and paying taxes) to a coming generation who, by living longer and staying as dependents for longer, will only spend half their life at work.

What is our plan for funding a life where half of that life is outside work? Even today, we are confronting a wave of retirees with minimal superannuation balances, certainly insufficient to fund their way into commercial retirement living or aged care housing. The majority of retirees, even today, will rely on the pension to some extent.

Coming generations are working less and - thanks to idiotic levels of housing affordability - postponing entry into the housing market, if at all. They are even postponing children, with the average age at childbirth rising somewhat. This generation will have had compulsory super for most of their working lives, but those working lives will only be 50% of their time on the planet. And they may not be retiring with a home that is owned outright, but retiring instead with a mortgage. Or no home at all.

So Australia, tell me this: if we are to preserve our standards of living and quality of life, what’s our financial strategy for doing so? By working for falling proportions of our time on earth, we are going to struggle to fund our own future retirement – let alone pay sufficient taxes to maintain infrastructure and provide funds for pension support for the many who have been unable to fund their retirement. Do we simply suggest that seniors have to work longer? This is about the extent of any wisdom from Canberra in recent years. But try telling that to a 60 year old on the job market. There are only so many Bunnings jobs to go around. 

It strikes me that longer lifespans is a double edged sword. While we may collectively want to celebrate the idea of living longer on this earth, we need to have a very serious discussion about how on earth we’re going to afford it.