New Zealand’s Ministry of Social Development produced a report in 2011 The business of ageing – Realising the economic potential of older people in New Zealand: 2011-2051 (accessible here). It attempted to gauge the economic impact of older people on New Zealand’s economy.
The economics of ageing are usually presented as negative news – there will be more than double the number of pensioners and healthcare costs are expected to follow the same trajectory as pension costs.
The 2011 report provided a lot of detail and analysis. This 2013 report mostly updates the data used in the fuller, earlier version.
Together, they paint a relatively positive view. The expected contributions of older people to New Zealand’s economy are likely to be larger than he 2011 report predicted just two years ago.
“Main areas of difference between the two reports are that in 2011:
“• twenty-six per cent of older people were projected to participate in the workforce in 2031, whereas the 2013 update has revised this to 31 per cent.
“• eight per cent of the labour force was expected to be aged 65 and over in 2031, versus the 2013 figures projects 12 per cent;
“• twenty per cent of older women were projected to be labour market participants while the latest projection is for 28 per cent.”
Putting these people numbers into projections depends on a lot of guesswork but the latest 2013 projections estimate that older people will:
“• make up 12 per cent of the labour force by 2031, up from 3–4 per cent in 2011;
“• have a 31 per cent participation rate by 2031, up from the 19 per cent in 2011;
“• earn about $13.38b by 2051, up from $2.16b in 2011;
“• pay tax on wages and salaries of about $1.65b by 2051, compared with $270m in 2011;
“• pay total tax of $15.26 billion by 2051, compared with $3.48 billion in 2011;
“• contribute an estimated $25.65b in unpaid and voluntary work in 2051, up from $6.58b in 2011;
“• spend about $60.28b in 2051, up from $13.5b. Their food and entertainment spending is projected to increase four-fold.”
PensionReforms notes that part of the reason for this optimistic view of the future economic contribution of the old is that the Tier 1, state pension (‘New Zealand Superannuation’) is universal and is paid without regard for other income or assets from age 65. A large distortionary factor in the work/retirement decisions of older workers is therefore mitigated, by comparison with the patterns in other countries.
PensionReforms also notes that these estimates reinforce work from other countries, showing that the spending old will make a significant contribution to the economy. That’s good news for the young as studies show that the sorts of things that older people want to spend their money on provide job opportunities for the young. (File size 153 KB; 17 pp) 694