A Word from Bill Kaye-Blake, New Zealand Institute of Economic Research principal economist.


Retirement age raising fallacies

The superannuation age question is back on the agenda.

Every few years, we hear that Kiwis need to work past 65 or the country will suffer.

A recent Treasury report estimated future national debt and showed government debt will rise substantially if we let it.

One solution was to raise the age of superannuation from 65 to 67.

The argument seems to have two parts.

First, that two more years of work is such a small thing to ask, and second, that without this small sacrifice, your grandchildren will wear flour sacks and eat gruel.

It’s the horseshoe nail view of superannuation: for want of a year, the Budget is lost.

It’s also wrong.

Here are two more ideas to show you why.

First, robots are coming for our jobs. Consultants such PwC and McKinsey & Co say that 20% to 30% of jobs could be automated in the next 10 to 15 years.

That’s not to say there won’t be jobs to do.

We will automate some things, and people will do other jobs.

But there could still be more unemployed.

We could focus that unemployment on people over 65, and call them retired.

Second, the numbers don’t work.

Quick there in New Zealand?

How many workers are aged 65 or 66?

The answers are roughly million and I don’t know.

There are about 100,000 people in that age band, but Treasury doesn’t say how many are working. It turns out that there are more people unemployed in New Zealand (140,000) than there are in that age band.

So there are already plenty of workers.

Then there’s the cost side.

A rough estimate is that 65 and 66-year-olds collectively receive about $2billion in superannuation.

That sounds like a lot, except it’s less than 1% of the economy.

That’s why Treasury says that raising the retirement age saves the Government only 0.7%.

Underneath the words and graphs, that’s the reality that isn’t given enough weight.

How is saving less than 1% of our total spending going to save our international debt position?

How is keeping this small number of people in the workforce going to save our economy?

The people who want to raise the age of superannuation don’t have good answers.

Here’s a better one: let the machines do the work and we’ll all retire early.