Wednesday, December 01, 2004

What population problem?

In today's Age Ross Gittins works hard to make Australia's ageing population sound like a good thing.

His first point is "population ageing is good news for everyone who prefers living to dying."

Umm, right. Difficult to disagree (I suppose), but it doesn't really add much to what we already know.

But wait:

"The second most important reason for ageing is the marked decline in 'fertility' (births per woman) since the early 1960s. I happen to think this is the worst part of the news. But I'm perfectly capable of giving it a positive spin.
For one thing, having fewer children to support at least makes it easier for the community to support an increased number of old people."

Read that last sentence again, carefully. According to Gittins, fewer children mean the oldies can have all the attention they want. Really? Well perhaps for a short time. Generations following won't have that luxury. No kids = no working adults = no support for oldies.

"For another, it's possible fertility may be stabilising. It hasn't got any lower for five years.
Even if that's true, however, reduced fertility is good news for all those people who hate children and think there ought to be fewer of 'em."

At this point we assume the curmudgeonly old Gittins has his tongue firmly planted in his cheek.

And he continues. It turns out a shrinking workforce is really a good thing:

"... the balance of bargaining power is going to shift from bosses back to workers. Unemployment will be much less of an issue, redundancies will be rare, older workers will be valued and their needs accommodated, and bosses will be trying a lot harder to keep their workers happy."

Power to the people, man! Bring on the grey revolution!

But here comes the bad bit:

"The Productivity Commission estimates that, by the mid-2020s, the rate of growth in real income per person will have almost halved to 1.25 per cent a year."

According to Ross, though, it won't really be that bad because we can take solace in the fact that money doesn't make us happy.

"Studies show that in the rich countries, rising incomes don't lead to greater 'subjective wellbeing'."

Phew, that's a relief.

"... because a higher proportion of the population will be retired, the population will be enjoying a lot more leisure. GDP ignores leisure, but people enjoy and often choose to retire voluntarily."

I'm getting a bit confused now. OK, people will continue to live longer, which I agree is a good thing. People will stay healthy longer, which I also agree is a good thing. But because of the reduced fertility rate we're not replacing our working population sufficiently so we have a shrinking workforce, which Gittins argues is not really a bad thing.

OK, I sort of follow him up to that point.

But if a higher proportion of the population is retired (and it makes sense that they would be), then where's the economic trade-off? It's difficult to believe that volunteer work will make up the difference:

"... thanks to the increase in retirees, the value of volunteer labour will increase over the next 40 years from 1.8 per cent of GDP to 2.2 per cent."

Do we really need more lamington drives and lollipop ladies? (At least we know the lollipop ladies will be redundant.)

And then there's this:

"Finally, there's good news for the young. Though they may be paying a bit more tax to support their oldies, their lifetime real incomes will be substantially higher - maybe 90 per cent higher - than their parents' lifetime incomes."

90 per cent higher? Even though "real income per person will have almost halved to 1.25 per cent a year" by the 2020s?

Check the report out for yourself, and see what other submissions to the Productivity Commission have had to say.

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