Plan for over-65s to ease job crisis

More than 400,000 people over the age of 65 could return to the workforce without losing benefits.

The plan to make it easier for older Australians to work more without losing benefits was promoted by business groups late last but not taken up by the former government.

More than 400,000 people over the age of 65 could return to the nation’s workforce if a proposal to let older Australians work more without losing benefits gets support at this year’s national employment summit.

Jim Chalmers on Sunday said easing the rules around pension eligibility to make it easier for older Australians to work more without losing benefits will be discussed at the summit due before October’s budget.

The idea was promoted by business groups late last year to help ease chronic labour and skills shortages, but not taken up by the former government.

The Australian Chamber of Commerce, Australian Industry Group and the Council of the Ageing on Sunday threw their weight behind the idea, saying that, alongside expanded childcare, it was an “obvious” policy lever to expand the workforce.

Peter Dutton at the weekend called on the Albanese government to double the amount pensioners can earn before their pension payments are reduced. Mr Dutton estimated the policy would benefit about 80,000 pensioners who are currently choosing to work, at a cost of $145m in 2022-23.

ACCI chief executive Andrew McKellar estimated that changes to increase the amount a pensioner could earn could attract at least 400,000 over-65s back into the workforce – or five times Mr Dutton’s estimate.

Mr McKellar said there was “no doubt” that making it easier for pensioners to work more hours without losing payments would be “one of the issues we flag at the employment summit, for sure”.

He said Treasury should undertake the financial modelling to test the cost and benefit of such a scheme, “but our assessment is this should be a very, very cost-effective measure”.

Innes Willox, chief executive of national employer association Ai Group, said policymakers needed to think outside the box to solve “huge labour and skills shortages”.

“One obvious way is greater support through childcare. The other is by allowing mature Australians to work more without being financially punished,” Mr Willox said.

“Tens of thousands of Australians now receiving a pension can potentially make a huge contribution to the workforce with their skills, experience and mentoring. Our policy settings need to move with the times and allowing older Australians to work more is one way of easing the labour pressures on business.

“This will require adjustment to pension settings and work rules. It can’t be that hard.”

Referring to this proposal, the Treasurer said he’d had “good, productive conversations with National Seniors and others about whether or not we can do something here”, but that it would come with a “relatively hefty price tag”.

Dr Chalmers said budget constraints meant “we‘ve got to weigh up all of these ideas and work out where we can get the best bang for buck”, but that he would “like to make this one of the things that’s discussed at our jobs summit” – loosely scheduled to happen in September.

Age and veteran service pensioners can earn $300 a fortnight without affecting pension payments – equivalent to about one day of work a week at the minimum wage. Under the change proposed by Mr Dutton, age pensioners would be able to earn up to $600 a fortnight and still receive the maximum payment.

Pensioners would also continue to accrue unused pension work bonus amounts up to a maximum of $7800, which could exempt future earnings from the pension income test. The qualifying age for the pension will increase from 66 to 67 from July 1.

The proportion of over-65s in the workforce has increased dramatically, from 6.3 per cent in 1980 to 14.4 per cent in February 2020, according to the National Skills Commission. The jump has coincided with the climbing average retirement age, as well as people enjoying longer and healthier lives, more flexible working options and a rise in less physically demanding jobs.

In contrast, New Zealand pensioners can choose to work without it affecting their pensions – a policy that has led to one in four Kiwis aged 65 and over being in the workforce, compared to 10 per cent in 2003.

COTA chief executive Ian Yates said he supported the concept, but said more analysis needed to be done to understand the best way to boost workforce participation among pensioners.

“We think it’s certainly worth exploring, but you need to have some more evidence of what impact it would have,” he said.

Mr Yates said there were also significant issues around ageism and workplace discrimination against older Australians that needed to be addressed.

The collapse in migration and booming pandemic jobs market has left the nation severely short-staffed, as it has in other advanced economies. Unemployment is at a near 50-year low of 3.9 per cent, and there were 423,000 job vacancies in February, according to ABS data. With two-thirds of medium and big businesses saying they can’t find staff, employer groups have been pushing for policies to alleviate chronic worker shortages, including attracting older Australians back into jobs, or to work more hours.