Lisa Barry and Chris Richardson
In the 1990s Australian living standards surfed our excellent productivity performance. Then, last decade, we slipstreamed the marvellous prices China paid for our commodity exports.
That saw Australia’s income per head lift from 15th in the Organisation of Economic Co-operation and Development nations two decades ago to fifth today. Pretty good, huh? But Australia’s recent productivity performance has been pathetic and commodity prices have spent 2012 in reverse.
So it’s a good time to remember something that Treasury’s intergenerational reports have long made clear: that tapping into Australia’s fast-growing pool of older workers can help fill that gap.
The numbers are big: an extra 3 percentage points on participation among workers aged 55-plus would result in a $33 billion boost to gross domestic product (1.6 per cent extra national income each and every year), while a 5 percentage point lift in participation would add $48 billion to GDP (2.4 per cent of national income). The latter would rank with the gains Australia has achieved from some of the major reforms of times past.
Remember, those gains come on top of an expected $55 billion boost from participation among the over- 55s already factored into Treasury’s latest intergenerational report.
Is this achievable? The good news is that we’re getting many more older workers through a broad increase in participation among people in their 50s and 60s, particularly over the past decade, and a dramatic increase in female participation, which has been lifted by both increased mature age participation in the past decade and increased overall participation by younger women over the past two decades. Indeed, gains in labour force participation since 2000 have tended to outpace expectations for them, particularly among older Australians.
In other words, rapid changes in the structure of the workforce are no longer simply an expectation, they are becoming a reality – one that is already reshaping workplaces. So where to next?
Mature age participation will be vital to Australia’s prosperity, as these older age groups will grow fast at a time when growth among younger age groups will slow.
The good news is that there are a number of reasons to expect continued improvements in mature age participation. First, some additional flow-through of higher participation rates among women can be expected.
Second, increases in the pension age will have an impact, with the age for women increasing to 65 before the age for both women and men rises to 67 by mid-2023.
Third, traditional attitudes to retirement are becoming obsolete as people adjust to big gains in life expectancy. With rising life expectancy and improvements in healthcare and other technology, there is every reason to expect that age will be less of a factor in retirement decisions.
And by staying in employment for longer, older people not only increase their current income but can also save more to support themselves once they do retire. In turn, improving retirement incomes not only raises living standards for future retirees, but can also assist in reducing welfare costs for future governments.
So the potential is great. Yet, frustratingly, government policies – and individual workplaces – have been too slow to encourage these changes. Why? In short, there is a huge myth in play. Today’s managers mistakenly think older workers are less productive and more expensive than younger ones. It almost seems as if, for every year of experience you gain after your 50th birthday, you are perceived as less malleable, less teachable, less hard-working, less reliable, less innovative and less inspiring.
Yet the evidence busts the myth. Volumes of research prove older workers have better skills (especially interpersonal skills), better attendance, are more conscientious, and are better and faster at decision-making.
For example, older employees working fewer shifts have been shown to outperform younger employees on standard shifts.
And while we might assume older workers cost more, in truth any premiums are related to experience – which affects performance. Rather than simply assume that older workers will demand higher wages, the thing to do is present them with the offer and let them decide. The real reason employers seem to prefer younger candidates often has to do with perceptions of leaders who often worry about how to manage older subordinates: how can I lead someone who has more experience, how do I motivate them when they are less concerned about promotions?
Yet managing older workers doesn’t require rocket science. It requires a more collaborative approach that engages their interest.
With employees in the 50-something age group, inviting them to retrain to tackle important new work brings the best results. This has a regenerating impact on employees that boosts their energy levels and drive, effectively re- recruiting the individual, with the resultant potential to keep them on for another three to five years, or even longer. This can be particularly valuable when organisations are juggling operational and growth demands.
Take a leaf from Bunnings’ book – this organisation is powered by passionate people of all ages. Last month Bunnings was named as Australia’s most iconic brand. Is that a coincidence? Hardly.
Lisa Barry (pictured) and Chris Richardson are partners at Deloitte. The Deloitte report will be presented at a Human Rights Commission conference on mature workers in Sydney today.
The Australian Financial Review