A "how to" guide on seeing the glass half full when we talk about our ageing population

A "how to" guide on seeing the glass half full when we talk about our ageing population

The Government’s putting a positive spin on the impact our ageing population will have on the economy.  

The Ministry of Social Development has released a report – ‘The Business of Ageing’ – which claims an ageing population will bring more opportunity than economic doom and gloom.

The report’s found that by 2035, there will be 1.2 million people aged over 65 – almost double the current figure of 650,000.

Seniors will spend around $65 billion a year in 2051, up from $14 billion in 2011.

Including payments on pensions such as New Zealand Superannuation, investments and GST, they will pay taxes of $17 billion, up from $3.6 billion in 2011.

If you put a dollar value on every hour of voluntary work they did, they’d contribute four times more to the economy.

Furthermore, 65% of men and 55% of women between the ages of 65 and 69 are likely to participate in the labour force by 2051–2061, up from about 45% and 31% respectively today.

The Minister for Senior Citizens Maggie Barry says, “In the future they will stay in the workforce longer, give more of their time to the community, and become a powerful consumer base. Seniors are a positive force for change and should be seen as such.

“Too often we hear our ageing population described as a burden. That attitude is objectionable and completely wrong.”

But is it really?

Reality check  

Figures released by Treasury in its 2013 ‘Affording Our Futures’ report, show government spending on healthcare is projected to grow from 7% of GDP in 2010, to 11% in 2060. Spending on NZ Super is projected to increase from 4% to 8% of GDP over this time.

Yes, tax revenue is expected to increase from 27% to 29% of GDP between 2010 in 2060, but government debt is expected to offset these gains 14-fold.

The Treasury report estimates net government debt will grow from 14% of GDP in 2010, to 198% in 2060.

Following the release of the 2013 report, Treasury Secretary Gabriel Makhlouf told reporters, "If we do not increase taxes, expenses will soon outstrip revenue, leading to persistent deficits.

"We will need to make policy adjustments, either to spending areas or to revenue, or a mixture of both.''

Harnessing the purchasing power of over 65s

While I will leave readers to decide whether to view the glass as half full or half empty, ‘The Business of Ageing’ report does make two points I’m sure we can all agree on. 

Firstly it says, “Businesses will need to better understand this group [over 65s] and the role they will play as consumers in the future. The rapid expansion of businesses signing up to the SuperGold card shows how this market is growing.”

DDB advertising agency chief executive, Justin Mowday, believes businesses aren’t reaching out to this group as effectively as they could.

He says there are a few challenges to targeting this group.

“People’s brand preferences and options are entrenched by the time they get to 50… From 50 on, it is very hard to shake someone out of one brand and into another”, he says.

“Brands are also hesitant to overtly associate with over 65s, because it may polarise other groups they may like to appeal to.

“If you overtly appeal to an over 65-year-old, there will be some younger demographics who instantly decide that brand isn’t for them.”

Nonetheless, Mowday says it is possible to target an older age group and get it right.

He points to a TV ad DDB did for Westpac, where they showed a middle aged man (not quite in the 65 plus age group), trying to relax and enjoy his hard-earned cash, but ending up handing out money to his grown-up kids, grandchildren and parents. 

Mowday received a good response from people who said they really empathised with the poor guy dishing out cash and his stage in life.

In terms of marketing targeted at elderly people, he also raises the point that we can’t discard the ads seemingly aimed at middle-aged people. No 65-year-old thinks they’re old, so will connect with an ad aimed at a 40-year-old.

Hiring and retaining older staff

A second good point the report raises is; “As the traditional ‘working age’ population shrinks, businesses will need to retain and harness older workers’ skills in order to sustain their long-term growth and profitability”.

BusinessNZ chief executive Phil O’Reilly says employers are putting increasingly large efforts into retaining their more elderly staff members, but aren’t doing as well when it comes to harnessing new employees.

“There’s a big recognition now that those workers have skills that are hard to replicate or re-create”, he says.

“It’s not as though there’s a million appropriately qualified young kids out there ready to start. So the idea of retaining talent feels more secure.”

He says the population’s also become fitter and healthier, so older people are more capable staying in employment.

Nonetheless, O’Reilly admits it’s harder to employ a 60 year-old over a 30-year-old, when you’re not certain about their commitment to the workplace and their capacity to deal with the fast-moving and uncertain environments that we’re familiar with in workplaces today.

On the flip side, he says it’s also important for older candidates to demonstrate their skills are still relevant to today’s work place.

He maintains they’re doing this well, having become much more familiar with technology than say 10 years ago.

He says employers who see the benefits of having diversity in the workplace will be more open towards hiring older staff.

“The smart employers are already doing all of this – the banks, insurance companies and large retail employers. It’s a case of making sure we spread this out to those who might not be so sophisticated in their hiring practises.”

O’Reilly says it’s also important to concentrate on the right opportunities, as a 25-year-old is likely to be a more desirable employee for a labouring job than a 60-year-old for example.

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Treasury Secretary Gabriel Makhlouf told reporters, "If we do not increase taxes, expenses will soon outstrip revenue, leading to persistent deficits."
Or IRD could just collect the $6 BILLION the NZ wealthy get away without paying each year. Too hard basket, I guess (and they're all Nat voters and donors, can't go after them).

reduce your expenses then.

collecting more taxes from your revenue base is the dumbest of dumb ideas.
Let me translate what you've just said: "We have to make extra withdraw from the publicly invested capital pool, because we don't have enough money to meet our (Treasuries) immediate needs."

What kind of financial person thinks that _reducing_ the invested resources is going to create future increase in available returns?

Economics (and Business) 001. (not even class level 101). 001, the first and most basic rule - if your expenses are outstripping your revenue from your investment then you MUST reduce expenses.

Removing capital (eg helping yourself to the inventory, stealing from the petty cash, "borrowing from clients and tax/holiday/super funds held in Trust....) NOT going to help dude.

You MUST reduce expenses and develop your revenue to GROW (_increase_ investment). withdrawing the capital to make up for shortfall in revenue.... that is an extreme fail.

Yes, means test the pension, including the value of ALL assets. Why should tax payers pay pensions to asset rich pensioners, especially when a massive tax free capital gain has been made, to their detriment.

With more than 400,000 family and other trusts, including all sorts of variations as to beneficiaries, it would be impossible to means test in NZ in any meaningful or fair way.

How about starting with something feasible and measurable and easy to implement with the current tax structure - and to have a higher tax on pensions for those still working and making above a certain amount of earned income per year (like $50,000). Why should someone still working at a reasonable salary at age 65 get a bonus pension?

Time to end the tax dodge, New Zealand needs some trust busting.

Because Guido, those rich pensioners have been the big taxpayers - actually pay most of the total income tax. And do recall that with working for families etc, a considerable portion of the population pay no net tax at all. They will not hesitate to take the pension however.

No they won't, they'll take more out of the system than they have paid in.

The Pinch: How the Baby Boomers Took Their Children's Future - And Why They Should Give it Back
David Linsay Willetts is a British Conservative Party politician.

Then there's the transfer of private wealth because of the housing. People paying no tax is the boomers failure with immigration.

Guido your not looking at the bigger financial picture here.....how do you think all the infrastructure got here? It certainly wasn't the tooth fairy!

There is no future taken away from children there is a generational transfer of both income and assets overtime.

What you are are proposing is that the future generations should have and expect everything given to them now while the BB'ers who paid for and developed the system and all its infrastructure would have their contribution basically robbed from them at a time when they have the greatest need for support.

The generational transfer *is* Trusts.

We do have to be careful that the legacy capital doesn't require high end servicing, as legacy capital tends to end up boosting the long term inflation costs, making it harder for each generation to utilise working capital.

Things like student loans. Currently it's about $1000 per paper at university. when I started uni back in 87, it was $97 per paper (and the qualification was harder and worth more). that's a large cost for people with no passive income build up to have to recover.
Likewise it's an impossible dream for the unskilled to bridge that gap while working (unless you have a partner who will pay for your living expenses)

There has been underfunding in infrastructure, Boomers didn't build it all:-
Auckland harbour bridge 50's
Auckland Southern Motorway 50's
Auckland airport 1960

Instead we've had user pays for public services.
Now we have 90 minute commutes on the southern motorway,
a drastic under construction in housing, causing housing cost to triple in real terms,
plus other infrastructure problems from mass immigration.

The biggest drain is yet to come in the form of unfunded pensions, last I heard they cost about $400,000 each. So the younger people will inherit the earth when you die? They will be after child bearing age and:-
"The Treasury report estimates net government debt will grow from 14% of GDP in 2010, to 198% in 2060"

Forget it Guido. I've had this debate with notaneconomist. He/she refuses to acknoedge the craziness of providing a generation that have presided over the greatest accumulation of wealth ever known, a non-means tested pension that the next generation simply cannot afford. The young need to mobilise and do something about it.

They should pay the pension to all people because it is a moral hazard and a social/human rights crime to discriminate against people who have been careful and wise - especially when more often than not, it will be the cautious and wise people who are called on to support their foolish and lazy fellows.

Cowboy maybe you're partially right, the government should stop spending the rest of the country's money on Auckland pet projects, or is that not the spending you wanted to stop?

That's one place. there are others.

Point is, if they don't have the revenue under the current situation, pulling it from the private community (via taxes and levies) will make the problem worse (following in Greek footsteps).

The need to cut expenses if they haven't got the revenue to cover their bills.

My own personal opinion: Put all MP and government heads on median wage. effective immediate. Restructure it and make them reapply for their old jobs at the new pay rate. that's what most of the country went through in 1990-2010, but government and gov wages (bureaucratic and elected) just kept swelling.
The new positions would need hard budgets for the job and cap on consultants. Treat it like a growing start-up. Get the right people make them get the work done - no more gravy train for life or palm Greece-ing for "passing your Government Exams" (an old Chinese system - ask about it).

We need to be paying the right price for the best people in the job - not paying the best peoples' wages to people who aren't managing to do the job (within cost).

O'reilly didn't mention that 'commitment' he talks about is a 2-way street -people commit to work longer if workplaces commit to being 'age friendly' , and older people are given the same opportunities to re-skill as their younger counterparts.
If Treasury is truly worried about the affordability of NZ Super , they should be
a. talking to employers about the above , i.e., ways to extend productive working lives - and
b. starting a conversation about how to target NZS to the truly needy -are they doing either? Fat chance.

It gets very hard to reskill older people in the workplace, and also to be frank, there simply isn't the time for the employer to recoup their investment. Some older people manage. Some just can't really be bothered and have little commitment to staying on if they don't like it (the younger people have to far more concerned about their long future and long term career).

When you get old your priorities change. I see this in many Freemason Lodges where they have failed to engage younger Brothers. My own lodge, I am youngest at 46, the next youngest is 75.
The older mind isn't as quick to change and develop new methodologies as the brain has to re-prioritise how it lays down new mental pathways and with an older brain there are many existing pathways to overlay. For a similar reason it becomes more difficult to memorise and access information, with so many other favoured memories tucked away and frequently used - another important factor is that the young brain _wants_ information because it looks forward to how it can use it and how it fits into a world it hopes to take part in (such as new friends and social engagements and advantage). The older brain has seen all these things and they are now internal treasures that it wants to cherish and not overwrite. True, the old person also needs to feel wanted and useful and treated as a decent person but just as much is that it doesn't want to part with the memories of "before" and changing the context removes the mind from that old world; an old world that is just as connected to the values and methodologies of the time and people it cherishes.
This is why myself and others are seeking to pickup the great legacy of the Freemasonry movement and what made it great - and also to identify the secrets that they clearly lost that the movement declined so much world wide. Used to be, that if you were a successful man then you were either Catholic or a Freemason.

the problem with the affordability of NZSuper is the same that has affected low income people, and NZ and the rest of the world in general. It's hardly an isolated case. However it does stem from assumptions made about their financial model (and the legacy in whose footsteps they have copied - in both the decline of Freemasonry AND the unaffordability of social cost.)

Harry Dent does seem to talk a lot of rubbish, but his demographic spending analysis does seem quite plausible. We've seen what happens to a retirement colony - Japan. Despite trashing their currency, they've been fighting a losing battle with deflation for over a decade. Where are we in that picture? All in 100% with real estate, an asset class to which retirees are very well endowed. I wonder if the young will be forced to pay for the elderly whether they like it or not. It might not be through taxes, it'll be through a decade of declining asset prices and ultimately increasing interest rates which will crush those with large amounts of debt? No escape.

Yes, because they stuck with a financial and economic model which is designed around assumptions that their will ALWAYS be inflation and ALWAYS be a growing number of new people entering into the system.

another assumption that catches the human mind, is the assumption that there is a set amount of work to be done. (there is a set amount of labour that can be supplied 24hrs a day - and as a rule it can be broken down as a engineer will divide his measurements ;) but that is the _labour_ and _materials_ (ie budget)...the amount of possible work is only limited by the numbers on the dollars signs (and their value is limited by value to legacy capital).

Speaking directly in Japans case: they simply did not takes steps to prepare for the needs of the old people. The government of the day did not build _free_ hospitals (ie paid for by investments with perpetuities eg through owning pubs or private banks), did not make nearly free accomodation, has not seen that base (food, transport) needs for when they got old would be ready for them. NO, the people and government at the time were too busy fulling their own pockets for the moment, taking taxes out of the "engine room and fuel tank" of the economy to push government projects and wages, playing for their own immediate social position and fashions and households.
Basically they ate the seed rather than planted their crop... such wise olders... why _should_ our young folk show respect, or even sympathy, for the selfishness and shortsightedness of their "wisdom"

Be less worried about the money thing and more worried about being stuck behind them driving on the open road, or behind them in the supermarket checkout queue when they've forgotten how to do the electronic payment thing again.....

That is pretty damned nasty

Well I apologise if it was taken that way. But a lot of talk about superannuation and health costs. I don't see much discussion on other matters that will have more impacts for all. One supermarket I used to go to frequently, it was a common thing to see some oldie asking from help from next in line, or the cashier to enter their PIN for eftpos etc. Frightening exposure to fraud and risk there. Computers and internet and the new ways of doing financial transactions are just another higher risk for oldies who have not grown up with this.

Try spending some nights at the A&E hospital departments on most weekends where you will find younger members of society extracting their dis-proportionate share of the health system in ICE and meth-amphetamine induced rages and ruined states, jumping the queue ahead of everyone else, at enormous cost to the community. No stepping aside and waiting for the halt and the lame and the elderly

Actually, it may be that the aging end of the generation and the growing obesity problem in the younger generation will collide close together in the public health system.

LOL Hamish. So your plan is not to get old. There will come a time you can choose between that or the alternative.

I am an oldie.
Throughout my life i have belonged to unions, and have taken part in strikes and demonstrations.
Today, i am still protesting, not for myself, but for a better future for the young ones.
I belong to a group with 80,000 members and they just did a survey.
Of the 80,000 fighting for a better NZ
75% are over the age of 45
63% are over the age of 50
The younger generation, who are doing all the moaning, wont get off thier backsides.
They just want to moan and look for someone other than themselves to blame.
We, the oldies, are ready to stand alongside of you young ones and fight for better conditions.
But we desperately need your suport.
It is your future, not ours, so grab this oportunity while you can

Would you mind telling us what that group is, I may well be interested in joining something like that myself


This is just one of many groups

This group is probably best because it unites all groups.

I got ripped off by my union, turns out the site union rep was a "company man" and got favours for doing good hatchet jobs, and he had a tight deal going with the union rep.
That was the year that unions became non-compulsory - and I remember some of the tricks that some of them used to play just to keep power and the payments rolling in. Strikes that lasted for long periods just to show muscle, that ended up costing the members way more in lost wages than they ever made in inflation rises. Telling the night shifts one story, then telling the day shift something else to make it easier to get things through. Often going after targets that no-one in the company wanted yet ignoring so of the local stuff was was desperately needed. Getting awards one bargining year, only to lose them the following year.