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One of the issues raised in "All the f words for Babyboomers" was the impact of an ageing population. This article from the Dept. of Labour examines this question in more depth:

Population ageing: where it will it take us?

By the middle of this century, one in four New Zealanders will be aged 65 or older, compared with one in eight today.

That will have a major impact on our workforce.

We’re facing some new challenges

* New Zealand’s population is ageing, as are those of most developed countries. Life expectancy increased by an average two years per decade during the 20th Century. Fertility (after a mid-century surge) has fallen to below generally accepted replacement levels. What’s more, within 10 years the first of the baby-boomers will reach retirement age.
* New Zealand has adapted to significant demographic changes in the past, but this transition – from a rapidly growing population to a slower growing and rapidly ageing population – is something we haven’t dealt with before.

Slower workforce growth is likely.

Because of lower fertility rates, the main working-age population (those aged from 15 to 64) will grow more slowly and will probably begin to contract after about 2020. Just how much that affects our workforce will depend in part on future trends in labour force participation. As life spans increase, people may choose to continue working into old age. Yet availability to undertake paid work may decline as some people choose to care for elderly relatives.

And it won’t just be our problem. Over the next 25 years, the working-age population of Europe is projected to fall by almost 50 million. That will most likely mean increased competition for skilled labour, as global immigration policies become more permissive. The implications of this for New Zealand are discussed further in our Global Labour Flows paper.

Retaining older workers will be critical.

A fall in the labour force also has the potential to reduce the rate of economic growth. In general, we’ll want to encourage people to remain economically active later in life. Productivity growth (growth in output per worker) may also offset the fall in the number of workers, but there is no guarantee this will happen.

As it becomes harder to recruit new workers, employers may invest in more technology and/or develop ways of holding on to older workers for longer. Many older workers, while still willing to work, may like greater job flexibility. Options for employers include offering part-time work or phased retirement, or bringing back retirees as contractors.

Maintaining workforce attachment will be increasingly important, as, thanks to the ageing of the general population, older people will make up a growing proportion of the working-age population. Between now and 2051, the number of older people (those aged 45-64 years) is expected to rise from about 35% to nearly 45% of the working-age population. Another way of appreciating the change is to map the change in the ‘bulge’ of potential workers. In 2001, this bulge was concentrated in the middle years of life; by 2051, it will be in the later years.

Implications of an ageing workforce.

The demographic shift means that we’ll have to rely more on mid- and late-career workers to meet skill demands. This has both advantages and disadvantages.

On the one hand, older workers are likely to have more workforce experience and therefore higher productivity. The performance of workers does not appear to be significantly impaired by age. What’s more, as the baby boomers approach retirement, they will enjoy higher levels of health and vitality than previous generations.

On the other hand, a higher proportion of older workers lack qualifications. Further, since many of the skills possessed by older workers have been acquired on the job, they may be specific to particular occupations. This potentially constrains the ability of older workers to adapt to changes in the labour market and technology. Thus, not all skills, and therefore the workers who possess them, will be sought after equally.

Making the most of our people.

Currently, many older job seekers face difficulties in finding work. Some report discrimination by employers in recruitment or access to training. However, it is quite difficult to gauge how widespread this problem really is in New Zealand. Certainly, it has been true that older workers have a much tougher time finding another job when they become unemployed. Making maximum use of the workforce will require breaking down the negative stereotypes that surround age.

As the number of young workforce entrants (those aged between 15 and 24 years) declines, training and education for people already in the workforce is likely to become more important. Acquiring skills will be an ongoing process, rather than a process that ends before work begins. This will require a willingness on the part of both employers and employees to invest in life-long learning.

Higher dependency ratios.

The ageing population also raises the concern that the growing number of retirees will increase the burden on the working population that supports them.

A frequently used measure of the potential burden imposed by population ageing is the dependency ratio, which refers to the number of children (0-14 years) and elderly people (65 years and over) relative to the number in the working-age population. Although the number of retirees will rise considerably over the next few decades, the falling number of dependent children will offset the impact to some extent.

These changes in the dependency ratio are clear. By 2051, it is likely that the population share of those 65 years and older will more than double, while the youngest share of the population will contract by nearly one-third. The dependency ratio is the sum of the dependent shares relative to the working age share of the population.

These trends translate into a higher dependency ratio. The dependency ratio currently stands at 0.53: that is, for every 100 people of working age (those between 15 and 64 years of age), there are 53 people younger or older. The dependency ratio is projected to dip to 0.50 in 2011 before rising to about 0.71 in 2051, when for every 100 people of working age, there will be 71 people younger than 15 and older than 65.

The rising dependency ratio could lower our per capita GDP growth rate. Therefore, productivity gains will be important – both to maintain the economy’s growth rates and to support the growing fiscal burden of more people in retirement. Investment in people’s skills will become increasingly important in this context.

However, it is worth noting that dependency ratios are a crude measure of the dependency burden. Many people of working age are not economically active, while some older people may choose to continue working. With improving health and longevity, the number of people working past retirement age is likely to increase.

Further information

* Papers presented at the 1997 Population Conference [external link] contain a wealth of relevant information on historical trends and future developments.

* Population estimates and projections can be found on the Statistics New Zealand website.

* The Equal Employment Opportunities Trust [external link] has commissioned research into the situation of mature job seekers. They also offer resources on the employment of older workers.

* The New Zealand Institute for Research on Ageing [external link] at Victoria University promotes multi-disciplinary research into ageing.



Source: Department of Labour