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2. Advantages and Disadvantages of an Ageing Population


Introduction

There is no doubt that Australia’s population is ageing, therefore it is crucial to investigate what repercussions it will have on the wider community. We seek to determine whether a higher proportion of aged citizens will be beneficial to the Australian community, or a burden in the future. In this section, we will address the advantages and disadvantages of our aging population. By identifying the positive and negatives of the issue, we will then be able to suggest how to solve the problem for the future. 


Advantages of an Ageing Population

The ageing population is often stereotyped as a burden and their detrimental impact on the economy is exaggerated causing their significant societal contributions to be overlooked. More precise analysis and research show that having an ageing population is often advantageous in terms of lower health care costs in later years of life and other beneficial contributions to the community. It appears that associating an ageing population with immense medical and social care expenses is a common misconception. The baby boomer generation has been observed to have better health and is more physically active than preceding generations in Australia (Healy 2004). It has been researched that approximately a quarter of all health related expenses in a person’s life are spent on their last year of life (Wanless 2001) and do not tend to increase with age. Furthermore it is more likely that health care expenditure on the last year of life decreases with age, as the elderly cannot physically endure extensive medical procedures (Graham et al. 2003). Nevertheless, the shift of dependent elderly people from hospitals to residential and nursing homes will minimize health care costs as it transfers the expenditure from health care to social care funds. Since social care is increasingly becoming more privatized, elderly people are less likely to financially burden the government (Healy 2004).


Community contribution

The ageing population also makes positive contributions to the community through their services. As the life expectancy has drastically increased in Australia, most of the baby boomers will retire while they are still physically and mentally healthier than preceding generations, and given appropriate incentives will be willing to work and contribute to tax revenue (Healy 2004). In the past women provided much of the volunteer work in the community, compared to today where woman are in the work force in increasing numbers. At this time when the contribution of volunteer workers is becoming increasingly applicable to our community, many health and welfare agencies are seeking to hire from the growing number of retirees.

Voluntary services are a measure of social capital and an indication of a healthy civil society. It has been commonly observed that majority of volunteers tend to be elderly (Wilkinson and Bittman 2002). Therefore through volunteer services, the elderly substantially minimizes government expenditure on welfare, aid their families with childcare and find satisfaction in providing various other charitable services. The satisfaction of volunteering is very high and reports have shown this (Cummins et al. 2002b). Volunteering is regarded as one measure of social capital and thus an indicator to a healthy civil society.

The older generation are actively involved in the community as being members of clubs, one third of men and one quarter of women aged 55-75 years belong to sporting clubs (Howe and Donath 1997). They also attend musical concerts, theatres and art galleries more frequently than younger people, read more and visit libraries more often. Thus it is probable that the arts and culture will benefit from an older Australia.


Lower crime rate

As a general rule, it is likely that older communities will become more law abiding, since older people are less inclined to commit crimes. The Australian Institute of Criminology (2002) has projected that crime rates will drop by approximately 16% by 2050, when the proportion of the aging population in Australia increases. This indicates that there will be less likely to be crime altogether, resulting in money being saved in prisons and policing costs in the future. This is because most of the baby bombers will be well over 65 and an older community is less likely to commits crimes against property and people.


Familial advantages

Older people tend to play a role in supporting and maintaining informal social networks, which in turn bind communities and families together. Older people are said to be net providers (up to the age of 75 years old). This is due to the fact that they provide childcare, financial, practical and emotional assistance to family members including helping people outside the household with the tasks of daily living.

Grandparents now play an important social role in a time where people tend to have more living parents than children. This benefits grandparents directly whom find that this is an important aspect of their lives and makes them feel fulfilled. Not only does it benefit the grandparents, but also their grandchildren considerably.

In addition, the ageing population gives opportunities for the economy to respond to the needs of the older generation, by creating more jobs. A study on consumerism indicates that the consumer will spend considerably less on non-essential items and substitute to more essential items like spending money on grandchildren, leisure and recreation (Access Economics 2001a).

 

Disadvantage: Increased economic pressure to sustain older generations

The ageing population will have various impacts and in particular the effect it has on economics is something that is being considered very closely by the government, so that they can develop schemes and policies in order to solve imbalances in the economy. The major areas of concern in terms of the impact the ageing population will have on Australia’s economy include:

  • Decreased participation rates (amount of people in the workforce
  • Increased dependency rates (ratio of older people to younger people)
  • Increased fiscal gap (amount of money being spent by government on various sectors)

Decreased participation rates

The Australian Government has made projections that over the next 40 years, the proportion of the Australian population over 65 years will almost double to around 25 per cent, whilst at the same time, growth in the population of traditional workforce age (15-64 years) is expected to slow to almost zero (Australian Treasury 2009). This means the amount of people in the workforce is expected to decrease, and it will remain this way unless the government intervenes. This shortage of workers could lead to wages being pushed up causing wage inflation (Economics Help 2008).


Increased dependency rates



It is clear that with an increase in the proportion of people over the age of 65, there will be a decreased proportion of people of workforce age. This means that there will be more people claiming benefits such as state pensions and less people working and paying income taxes, causing an increase in dependency ratio.

The forecast for dependency ratios represents predictions for dependency ratios by country. It shows that Australia, among other countries, will experience almost a double in ratio over the next 50 years, which will have severe impacts on the working force as they will experience increases in income tax in order to support the increased proportion of older population. When those in work may have to pay higher taxes, this could create disincentives to work and discourage firms to invest, therefore there could be a fall in productivity and growth (Economics Help 2008).


Increased fiscal gap

The fiscal gap represents an imbalance in revenue and expenditure of the government. An older proportion of Australian’s would require the government to increase spending on health care and pensions, whilst older people pay lower income taxes as they are not working. A combination of these factors will have a negative impact on the Australian economy, as it will find itself further in debt.




Chart 10 represents the projections of government spending for the next 40 years for various sectors. It is evident that the health, aged care and age pension spending will increase significantly, whilst other income support and education spending drop.

Evidently, due to the increased proportion of older Australians over the coming decades, the economy will suffer seriously unless the government intervenes with policies and schemes in order to diffuse the potential issues of debt and inflation.


Disadvantage: The Generation Gap and its Implications

The 'baby boomer' period after the war caused a spike in birth rates, and we are now seeing the implications of it on the Australian community. Currently there is a gap between the baby boomer generation and generation Y (those born in the 80s and 90s), leaving a large percentage of the population at the age of retirement, or in their final years of employment. The workforce looks to be hit the hardest this growing rift in generations.



Around Australia, the unemployment rate is at an all-time low, but with the baby boomers exiting the workforce; there will be too many jobs for those who qualify, both in age and experience, to fill. Ultimately the workforce and those who are of working age is rapidly shrinking rapidly. “Currently 66% of the total population is aged 15–64 years but by 2051 it will decline to just 57%” (ABS, 2009). Although there will be endless opportunities, generation Y are seen to be unreliable and unpredictable workers. They are more likely to go travelling or socialize after higher education than gain employment. Australia is a fast advancing and exciting country and younger workers don’t like commitment or to be locked down to a particular job for too long. “In 1959, the Longitudinal Labour Market Study shows an average retention rate of 15 years. Today average retention per job per employee is just 4 years.” (Anderson, 2009) In the same study, 20-24 year olds were three times more likely to change jobs in a year than 40-45 year olds.

The graph above plots the makeup of Australia’s workplace and details future projection, and how things will change in less than a decade. (McCrindle, 2010) in 2020 there will be half as many baby boomers in the workforce, and they will become an economic burden to Australia.

Not only are the physical bodies leaving the workforce, but so is the experience and common sense. Young workers often leave jobs before their full potential is realised and some companies are having difficulties retaining ell trained workers and struggling with the loss of experience that is leaving with the baby boomer generation. “Young promising staff are being promoted early beyond their experience and either succeed and move on too soon, or fail and get stuck or leave.” (Anderson, 2009) There seems to be a shift in working culture, with success being the driving force and the goal of climbing the corporate ladder, without loyalty or accountability.

Our current technological age looks to impact greatly on the workplace, as young workers are technologically savvy and it is a general consensus that the move to the digital medium will be beneficial. But it is feared that this change may leave behind good, honest working habits and even put workers out of a job. Only those with this highest qualification will be chosen and medial task will be left to those without the required education. Not only does age play a huge role, but so does wealth and education. 


Disadvantage: Social Issues Associated with an Ageing Population

There are many social issues associated with the ageing population, including the decline in workforce participation and the increasing burden of disability and ill health in the elderly, of which both will be discussed in this section. These issues need to be addressed immediately by the government as they are going to placing a greater burden on the future of Australia’s economic and health systems.

One of the primary reasons for why Australia’s population is ageing is due to the increased life expectancy of the average Australian to about eighty years or more. Due to the increase in life expectancy, it is expected that many of these ‘older’ Australians (those over the age of sixty-five) are going to experience ill health and disability due to disease. The majority of these illnesses are strongly associated with age such as dementia, as well as chronic diseases, which are defined as diseases that are “prolonged in duration, does not often resolve spontaneously, and is rarely cured completely” (Dept. of Health & Ageing) - this includes cardiovascular disease, cancer and diabetes.

As these ‘older’ Australians are beginning to represent the majority of the population, this is going to be placing a greater burden on Australia’s health care systems. These elderly patients will be spending most of their time in hospitals during their treatment, and it is thought that patients diagnosed with chronic conditions and age related diseases take up most health care provision and expenditure in hospitals (CEDA 2012). A possible solution for reducing the impact of this on Australia’s health system is to focus on the various levels of prevention of these diseases, not only the treatment of the sickness. This includes educating the population about how to reduce risk factors associated with many of these diseases such as poor diet, irregular exercise and smoking. This will significantly reduce the burden of disease on the health care system.

Another social issue that is of great importance is the decline in workforce participation that is strongly associated with the ageing population, as ‘older’ Australians are starting to represent a large proportion of the Australian population. The age of retirement in Australia is sixty-five, and this means that there are going to be increasing numbers of people over this age that won’t continue working past this age. The Australian Bureau of Statistics (ABS 2010) stated on their website that  “as the proportion of the population who are of traditional working age (15-64 years) decreases over the next 40 years, it is projected that economic growth will slow, whilst spending pressures in areas such as health, age pensions, and aged care are projected to rise.” Therefore this is going to have great implications on the future of Australia’s economic system as less people are going to continue working past the traditional working age.

It is estimated that by 2016, 80% of the labour force will be people over the age of 45 (Wesley Mission) - this means that a large proportion of the working labour force will be classified as ‘older.’ Unfortunately, there is strong preference by employers to employ younger workers (NATSEM 1998) despite the fact that ‘older’ workers have more experience and are more likely to have a greater work performance than younger workers. From this evidence, we need to prevent age discrimination from occurring in the work place and encourage so called ‘older’ workers to continue participating in the work force, to ensure that there isn’t too much stress being put on Australia’s economic system in the future. 


Disadvantage: Immigration and Baby Boomers are Contributing to the Ageing Population

Immigration

Recently it has been argued that an increase in immigration levels should be put into place to address population ageing. But it is more likely that immigration will contribute to the ageing population rather than preventing it.

Migrants are predominantly of workforce age. Skilled migrants, who made up 70% of the immigration intake in 2010, tend to be better educated and have better labor market outcomes than the average Australian. Moreover if they are skilled they will raise general skill levels and productivity.

Since World War 2, Australia has been deemed to be a safe and independent nation, inviting migrants to leave their homelands and trouble and relocate. Much like the increase in fertility after the war, such was the same with immigration levels. Although migrants are workforce ready, there is no way to stop them from ageing like the rest of the population. We are now seeing that those migrants who came to Australia after the war are contributing the ageing of our population.

To sustain a stable age bracket, with immigration playing a main role, an increase in intake would have to be seen each year, getting higher and higher in number each year to fill the generation gap. By increasing immigration, ageing will be heightened as there is will be an increase in population and we cannot prevent migrants growing in age too. Therefore in the long run, immigration will put pressure on Australian boarder security, the economy and ultimately have little effect.

 

Baby Boomers

The main issue regarding baby boomers ageing is the strain that the rapidly ageing population will endow upon the economy due to increased government expenditure on medical, pension, housing and aged care services. Since Australia’s labor force (population age between 15-64) is currently not increasing at dramatic rates, it is suggested that there will not be enough members within the workforce to provide the resources and social support required to maintain a standard lifestyle for the aged (Australian Bureau of Statistics, 2006). Furthermore due to the Global Financial Crisis shrinking superannuation funds, many baby boomers will be unable to accumulate enough finances to support themselves into retirement (Productive Ageing Centre, 2012). Therefore more responsibility will fall upon the government to provide for the ageing population and stunt economic growth. It is expected that by 2030 in Australia for every 33 people receiving pension, there will 100 people in the workforce indicating that approximately a third of the population will require financial assistance (Wesley Mission, 2012). It is evident that the baby boomers will continue to age and become highly reliant on an economy that does not have sufficient workers to supply their demands revealing an obvious upheaval in economic balance that has the potential to send Australia into another financial crisis (Productive Ageing Centre, 2012).

Conclusion

The elderly are a crucial part of the commnity and they contribute both knowledge and experience beyond thier years. An aged population puts endless economic stress on the nation, as health care funding and superannuation requires exponential funding, as general living cost continue to rise. With such a large proportion of the population as classified as elderly, it is hard to overlook the long list of disadvatanges.

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