Retirees win but feel like losers

September 2, 2013
man on cruise ship

What I like about my distant relatives who live on the central coast of NSW is that they’re not whinging seniors. They admit that in retirement they have more money than they need. How many retirees, whatever their source of income, acknowledge they have enough? But that’s what the relatives said when we met for lunch. They’d become eligible for a part-age pension and the associated benefits, including cut-price pharmaceuticals, even though they had a good income from a state superannuation scheme. ”Really,” they said with some embarrassment, “we don’t need this money.”

My relatives’ good fortune is not due to a history of high-paid jobs and fancy investment strategies. He worked in TAFE for 30 years as a head teacher; she was mostly a home-maker. Yet they’ve managed, liked many middle-class Australians of their age, to attain a nice home, admittedly outside of Sydney, and to own a rental property, too. They live a comfortable life. Yes, it’s due mostly to hard work and frugality. But it’s also due to government policies favourable to retirees, such as easing eligibility for the pension, and to economic growth.

This federal election we’ve seen older Australians complain of being ignored, or criticising the offerings to them as inadequate. The older and younger generation have been pitted against each other over Tony Abbott’s paid parental leave policy. Many retirees complain they’ll be paying for the policy through its effects on dividend imputation; and Labor’s stirred the pot with advertisements featuring an angry pensioner critical of Abbott’s generosity to working mothers.

Retirees often feel hard done-by in the competition with families and the young for government largesse. But the evidence doesn’t stack up, I’m sorry to tell you. The latest research shows the position is exactly the opposite. Australians 65 and over have been big winners from state and federal spending and tax policies at the expense of the young. The shift was evident in 1984, but has accelerated since 2000. Australia has become a welfare state for the elderly, not the young as it was after World War 11. This is the conclusion of Alan Tapper and his colleagues at Curtin University. They’ve made an exhaustive analysis of the effects of government spending and taxes on household income between 1984 and 2010, using data from the Australian Bureau of Statistics. The result is a paper called Age Bias in the Australian Welfare State.

But wait, I hear, retirees cry: “We’re struggling with electricity bills and cost of living pressures.” A couple with children will say they’re hurting, too. Everyone (except my central coast relatives) will say they feel worse off. You need a more objective measure than “feelings” to assess the impact of policies on living standards. Some elderly people do struggle, and other research points to a rising incidence of relative poverty among pensioners till 2009. That’s when Labor increased the base pension rate and, in one fell swoop, halved poverty among the elderly. Wide disparities among retirees still exist, however. And Dr Tapper’s research is based on averages which tend to disguise these inequalities. Even so, he told me: “The elderly have done very well in the last decade, and they were already pretty well off. On average, public expenditure has treated them favourably compared to families with children, and that’s contrary to the common perception.”

The researchers took into account state and federal spending on pensions, health, education, and so on, as well as the impact of income tax and the GST to arrive at a “final income” for different age groups. The 65+ group, it turned out, has made big gains since 1984. Their “final income” was up $184 a week while for 25-34 year-olds, for example, it was down $109 a week. Even though retirees mostly are empty-nesters and home-owners, their “final income” was nearly as high as the average household’s who may face high housing and childcare costs and pay much more for medicines. The main boost to retirees’ income was through a huge increase in government spending on health, of disproportionate benefit to older people. As well, the 65+ group was paying less income tax in 2010 than the same age group in 1984; couples with dependent children, meanwhile, were paying 50 per cent more.

It’s usually the baby boom generation that’s criticised as greedy and spoilt by government “hand-outs.” Not so, according to Tapper’s analysis in this paper and an earlier one. It’s the boomers’ parents who’ve done best out of government. It started with the pro-family policies of the 1950s and ‘60s: couples with children paid virtually no income taxes, for example, and were helped into home ownership. And as this Inter-war group hit their senior years, governments shifted support from families to the elderly. Lucky them.

The 55-64 age group on the other hand, baby boomers by 2010, went backwards in “final income” over the 26-year survey, down $102 a week. A GFC effect? But despite most being losers, some boomers, I venture, have done nicely from superannuation tax concessions and negative gearing on investment properties.

In any case, as the wave of baby boomers moves into retirement, they’ll stand to gain from the largesse available to the elderly. “Does it make sense to give a lot of money to the elderly to the extent Australians governments do?” Tapper asks. Here’s another thought. There’ll be fewer workers in future to shoulder mounting health and care costs for an ageing population. Will politicians ask more of the elderly, will they be more generous to young families? Not likely, unless the swelling numbers of comfortably-off seniors acknowledge their good fortune, and leave the complaining to people in need.

What do you think? Are most older people comfortably off compared to families? Click Comment.

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