Population ageing has become a serious issue for developed and developing countries as it has changed the economic structure of those countries. Consequently, the number of employment and total workforce experience this impact directly (King 2018). Due to increasing number of aging population, the dependency ratio of a country can increase significantly while savings ratio may decrease further and this in turn can affect revenue and expenditure of the government adversely. As a result, the concerned economy can experience slower economic growth and lower productivity. Thus, to mitigate those economic phenomenons, the government of Australia has increased its retirement age to 77 (Schofield et al. 2017). However, this policy has some limitations and this report is going to analyse those negative outcomes, which Australia has experienced after increasing retirement age of workforce. Moreover, this report has intended to provide some recommendations to overcome from that adverse situation that the country has experienced after changing its retirement policy.
In Australia, demographic changes have occurred due to two chief reasons, which are, increasing life expectancies and decreasing birth rate. Due to these two outcomes, the age structure of this country has generated unfavourable economic conditions as it has increased dependency ration in the long-run. Dependency ratio is a measurement, which shows the ratio between total number of dependent persons, aged between 0 and 14 and person aged above 65 to the total population, who have age between 15 and 64 of a country (Costantino, Gidding and Wood 2017).
Figure 1: Dependency ratio of Australia
Source: (Tradingeconomics.com. 2018)
Figure 1 has represented dependency ratio of Australia since 2006. This figure has represented that this specified ratio has increased over the year, which means that most of the unemployed people in this country depend heavily on the working people while the number of depended people are higher compare to the number of working population (Tradingeconomics.com. 2018). Hence, to reduce this dependence, the government of Australia has increased retirement age and this in turn has helped the country from two economic perspectives. Firstly, through employing ageing population, total production of Australia has increased and secondly, the government has reduced its pension costs, which have increased due to increasing number of retired person.
Figure 2: Increasing trend of population, aged 65 and above in Australia
Source: (www.aihw.gov.au. 2018)
Figure 2 has represented increasing trend of population, who have age 65 and above. According to this figure, 15% people of the country’s total population has aged 65 and more in 2016 while in 1976, this percentage has remained at 9% (www.aihw.gov.au. 2018). By considering this increasing trend of old population, it can be predicted that in 2056, the country may have 22% old people of its total population and this trend may increase further in future due to improved medical technology of Australia.
Figure 3: Australia’s labour-force participation rate
Source: (Bates et al. 2018)
Figure 3 has represented that labour-force participation rate has increased for people, who have age between 25 and 54 and above while people, aged between 15 and 24 have decreased slightly (Bates et al. 2018).
However, this policy has some negative implications and these can be described precisely with the help of economic concepts.
After implementing policies regarding increasing working age, the economy of Australia has experienced some negative implications. Firstly, total productivity of this concerned country has decreased after the aging population has taken participation on production process of this specified country. Labour productivity represents the amount of output produced for per unit of this factor of production (Börsch-Supan and Weiss 2016). Aging population tends total productivity of Australia towards the negative direction, as old people, aged above 60, may not give proper labour like other young workers. This further can negatively influence total national income of this concerned country. Secondly, delay in retirement may decrease the opportunity of people from other age groups to get jobs. Moreover, immigration has increased in this country and consequently, the number of people seeking jobs has also increased significantly. However, due to increasing number of aged workers, those young people may loss opportunities to achieve their desire jobs (Gullette 2015). Thirdly, old worker has possessed higher job experience compare to the younger one. As a result, the government pay higher amount of remuneration for this person while this amount for a young worker for this similar task is comparatively low. Thus, the cost of government may increase further. Moreover, Australia can experience income inequality due to this discriminating wage structure (Tomasetti and Vogelstein 2015). Fourthly, employing people with higher age may bring a risk factor among employers. For instance, those old age people may remain unable to do any labours jobs or may suffer with various health problems like diabetes and higher blood pressure due to their higher ages. As a result, employers cannot give them extra work pressures like the young age group of working people.
To get rid of from those challenges that have discussed above, the government of Australia can take some steps. For instance, the government can implement various policies to change working structure for people, aged 65 and above, according to their physical strength. For this, cooperation of working committee is also essential. According to this policy, employers can provide jobs like trainers or supervisor to those people for guiding young workers with their working experience. Moreover, the government can influence employers to generate exclusive sob structure for those persons where extra labour is not required. In addition to this, the government may create extra job opportunities for other young people, who are seeking jobs in this country.
Conclusion:
After discussing the entire scenario, it can be said that the increasing population with age 65 and above has generated huge pressure on Australia’s economy. As a result, policymakers of this country have intended to find various ways to reduce negative impacts of this increasing number of dependency ratio though delaying retirement age. However, this policy may generate some negative implications on the country’s economic condition. For instance, it may reduce productivity of this concerned country and also may reduce employment generation for new working groups. Moreover, wage discrimination may also arise within a work field.
References:
Australian Institute of Health and Welfare. 2018. Older Australia at a glance, Australia’s changing age and gender profile Australian Institute of Health and Welfare. [online] Available at: https://www.aihw.gov.au/reports/older-people/older-australia-at-a-glance/contents/demographics-of-older-australians/australia-s-changing-age-and-gender-profile [Accessed 5 May 2018].
Bates, N., Callander, E., Lindsay, D. and Watt, K., 2018. Labour force participation and the cost of lost productivity due to cancer in Australia. BMC public health, 18(1), p.375.
Börsch-Supan, A. and Weiss, M., 2016. Productivity and age: Evidence from work teams at the assembly line. The Journal of the Economics of Ageing, 7, pp.30-42.
Costantino, V., Gidding, H.F. and Wood, J.G., 2017. Projections of zoster incidence in Australia based on demographic and transmission models of varicella-zoster virus infection. Vaccine, 35(48), pp.6737-6742.
Gullette, M.M., 2015. Aged by culture. In Routledge handbook of cultural gerontology (pp. 43-50). Routledge.
King, A.I., 2018. Introduction. In The Biomechanics of Impact Injury (pp. 1-33). Springer, Cham.
Schofield, D.J., Callander, E.J., Kelly, S.J. and Shrestha, R.N., 2017. Working Beyond the Traditional Retirement Age: The Influence of Health on Australia’s Older Workers. Journal of aging & social policy, 29(3), pp.235-244.
Tomasetti, C. and Vogelstein, B., 2015. Variation in cancer risk among tissues can be explained by the number of stem cell divisions. Science, 347(6217), pp.78-81.
Tradingeconomics.com. 2018. Age dependency ratio (% of working-age population) in Australia. [online] Available at: https://tradingeconomics.com/australia/age-dependency-ratio-percent-of-working-age-population-wb-data.html [Accessed 5 May 2018].
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