$4K income credit not enough to let all pensioners work: Q&A

As workforce shortages approach 500,000 vacancies in Australia's care system, older Australians are voicing their interest to re-enter paid work if the government would alter the pension payment system.

Aged Care Insite spoke with chief advocate of National Seniors, Ian Henschke, who said we need to rethink the way we structure our workforce.

"You're not going to turn around and suddenly be able to get 500,000 people back into the country to fill these job vacancies," he said.

"We must take the handbreak off the economic system to get the vehicle moving. And I don't believe the $4,000 will be enough to see a marked improvement."

He said allowing pensioners to work more is "not some magic bullet", but it's part of the solution, and "you may well solve up to half of the job situation at the moment".

ACI: Why is it essential to change the way pensioners are allowed to work in Australia? What barriers are they facing?

IH: Well, we know from the National Seniors Survey, done earlier in the year, that 20 per cent of pensioners said they intended now or in the future to work and, of that group, 60 per cent said that they needed the money. That was the main reason.

And they also noted that ageism was one of the big things holding them back, a barrier if you like. The next most significant barrier was the Centrelink system, which requires them to do fortnight reporting, and a lot of paperwork. It also penalises them once they earn more than what they call the 'work bonus', which is around $7,800 a year, which works out at $300 a week.

We've been calling on the government for some time now that pensioners can help fill the job vacancies that we're currently experiencing. In fact, Covid has exacerbated the jobs crisis in Australia, where there are now job vacancies approaching 500,000.

We know that the last ABS figures came out at 480,100 and that late last year, the figure was 390,000. So, we're talking about almost 100,000 additional job vacancies in a year. Clearly, we've got a big problem. And one of the areas where there's the most need is in the care sector. 

The Committee for Economic Development of Australia, CEDA, released a report last year which said there were 17,000 job vacancies in aged care. They updated that figure this year to 35,000. That's just in aged care. But, then, you've got disability, child, and home care. So you would say that many tens of thousands of jobs are required in the care sector. 

If you have job vacancies in an area like hospitality or tourism, that might mean that you can't get a meal at the holiday resort you're staying in, or you might have to wait longer for a cup of coffee. But when you're talking about aged care healthcare and disability care, people are not getting the care they need. And that can be almost life-threatening. We know that from the Royal Commission. It can have quite tragic results when people are not looked after properly.

What was your response to the Jobs and Skills Summit regarding aged care and pensioners wanting to work?

We are reaching out to the government to look beyond this $4,000 initiative, which was welcomed. And it was a good first step because it sends a signal to people to say, "we do want you to work. We'd like you to work more". But the problem is that it's a time-limited measure and is not available immediately.

I believe the bonus will come in December. It has to go through some process, no doubt, with government legislation so that the Social Security Act allows them to earn $11,800 for a pensioner during that period.

That'll be $11,800 for this financial year which, if you think about it, brings it down to less than $1,000 a month. So, we're still looking at under $250 a week, which means that if you get $25 or $30 an hour, it's about one day's work.

And one day's work is not really suitable either for the employee or the employer, because when employers say they want someone to work in home care or aged care, they don't particularly want them just to say, "I can only work one day a week". So, people will respond by saying, "Well, they can work extra days". But when you work an extra day, you lose 50 cents in the dollar from your pension and get taxed on it. So, people start to worry that they will lose their pension entirely or lose the concessions that go with it.

Another matter that the Jobs Summit changed was that the regulations would be altered so that, for the next two years, anyone who works would be able to keep their pension and not have to reapply for the pension. That's a good thing. So, if you like, another signal is given to the labour market, "we want you to work". 

But ultimately, when dealing with people, you've got to make things simple, fair and easy to understand. Even this system being brought in is complicated because you still involve Centrelink. You still involve sitting down with a calculator and working out how much you can earn before you get affected.

The good thing is you're not going to lose your pension for two years, but that still has to be legislated, I understand. There's still all that interlinking with Centrelink, which we know people don't like. And whenever we talk to people involved in working at the moment, they all say that they would work more if Centrelink were out of the way.

What would be a better system for pensioners to be allowed to work more?

What we've proposed to the government is that they bring in a more straightforward system. And one of the options is to recoup the money back through the tax system. So, for example, suppose they're worried about the cost of implementing the pensioner's work scheme. In that case, you could bring in a withholding tax of 32.5 cents in the dollar and put that onto the pension, and then have the person go down to Centrelink and say, "I'm quite happy to work as much as I can, or as much as I'm willing to". And if someone wants to stay on the old pension work bonus, they can and just do their one day a week or two days a week. But if you really want to work and get back into the system and work three, four, even five days a week, you should have the handbreak taken off the system and allow them to do it.

As you know, we're desperately short of workers in aged care because that CEDA report showed that the number of workers needed has doubled in the last year. We also know that, in aged care and in-home care, the average age of the workers is quite high. They're older than the rest of the workforce, and many are in their fifties and sixties.

You could, for example, turn around to someone who's about to reach pension age and say, "if you want to keep working, keep doing it". That would address some of the issues around payment for aged care and home care because those people would be getting their pensions in addition to their wages. In other words, it would make staying in the workforce a little bit more attractive. And we think that might be an essential consideration for people because they would get that little bit of extra and it's almost rewarding working in the sector.

We're saying to the government, "here's an opportunity for you to fix the problem, which is the workforce issue. And that's holding back, particularly home care". I know that the former Minister for Aged Care, Senator Colbeck, did say that one of the big problems they had in their government was finding enough workers to meet the demands for home care packages.

So, you're almost having a negative policy if you don't have the workers because, if you want to keep people out of aged care, as in residential aged care, you've got to be able to provide them with the ability to stay in their own home. That can only be done if you have the workforce capable of looking after people in their own homes, requiring a better-trained and better-paid workforce. So, we're also saying to the government that you could look at mature aged traineeships and get people to be trained and guarantee them of the job and have them work in in-home care. And that proposal is also going to be part of that budget submission as well.

There's an opportunity for mature aged Australians, both those on pension age or in their fifties or sixties, to be trained in this area. And one of the reasons we're suggesting that is because home care providers tell us that some of the best workers are mature aged people, because they've dealt with situations often with their own families where they've cared for someone. So they've almost got that intrinsic ability to be a good employee because of the lived experience.

I think it's a great opportunity for the government to recognise that there is an avenue here to improve, not just aged care and home care, but healthcare, disability care, and child care, because all those caring industries require workers.

You're not necessarily going to find those workers with the amount of input coming in from overseas because the immigration ratio has increased by 35,000. Even if every single one of them were a trained aged care worker, we'd only just meet the demand at the end of the day.

You can see that we're never going to be able to keep up with the demand unless we have some innovative solutions. That's why our suggestion of letting pensioners work is an innovative solution. Still, it's not necessarily very innovative in the sense that it happens in New Zealand, where they have a system over there where people work and pay income tax; very straightforward and very easy to understand. And around 45 per cent of their 65 to 70-year-olds are still in the workforce. And so, you've actually got a very different system there with a high rate of participation.

If you look at Australia, we only have around 3 per cent of pensioners working, and around 14 per cent of the total over 65s working. In New Zealand, 25 per cent of the over 65s are working. So there's a 10 per cent differential there. And if you look at the population of people over 65 in Australia, you'd have many hundreds of thousands, probably around 300,000 or 400,000 extra in the workforce.

Now, they wouldn't all be working full-time. So you're not going to solve the entire jobs crisis with this policy; it's not some magic bullet. But it's part of the solution, and you may well solve up to half of the job situation at the moment. If you look around the world, there are other countries with high workforce participation of mature people. Sweden, Israel, Japan, South Korea and of course, New Zealand, which I think sits at about number two in the world for older worker participation. And because our societies are very similar, I can't see why we couldn't end up having a New Zealand-style participation rate or equivalent.

Why would the Australian government choose not to adopt such a similar participation rate? What do you think are the factors holding them back?

We've had some modelling done by Deloitte Economics, which suggested that you don't have to increase the participation rate very much for it to start not costing the government but being revenue positive for the government.

A report back in 2012 called The Grey Army Advances said that a 5 per cent increase in older worker participation in Australia would add $48 billion, not million, $48 billion, to Australia's gross domestic product. And if you have a tax-to-GDP ratio of roughly 23 per cent, which would be $10 billion.

If we did have policies that were not ageist or not punishing pensioners for working, and we actually encouraged more older people to stay in the workforce, it would be a net benefit to the entire economy. And that's why, right up to the election, we ran a campaign saying, "it's a win for the economy, it's a win for the pensioner and it's a win for business". This is why it's called a triple win. They talk about the triple bottom line.

And, of course, with the borders being closed down and people going back overseas, you're not going to turn around and suddenly be able to get 500,000 people back into the country to fill these job vacancies. And you're not going to be able to train them all; you're not be able to bring in enough immigration.

You have to start looking at alternative things. And if you look at the New Zealand example, you say, "it works quite clearly in New Zealand. Why wouldn't it work here?". So, we're continuing our discussions with the government. We're talking to as many people as possible. And so far, we've had the backing of the opposition, which is quite interesting because the opposition leader, Peter Dutton, originally said he wanted to see a doubling of the work bonus. When we pointed out that that's not necessarily the best policy, he said if the government's prepared to go further, he'd be happy to support it.

So, there is no political impediment to bringing this in. If you look at the groups supporting it, you've got the Farmers' Federation and, the Business Council of Australia, the Australian Chamber of Commerce and Industry.

You've got all of these people talking about solutions and the government has made a step forward by adjusting the work bonus. But you must take the handbreak off the economic system to get the vehicle moving. And I don't believe the $4,000 will be enough to see a marked improvement. I think you'll see some progress because those already working will work more, but they also have to understand what it means. 

You've got to communicate this to the community as well because when it gets to December this year, you have to be able to say to people, "between December and June next year, you're going to be able to earn $12,000 almost without it affecting your pension". How do you get that message out to people? It would help if you almost had a campaign to tell people.

Another option is that you could have some tax credit at the end of the year. And you could also have a system where you rewarded people that worked in the caring industries and segmented that sector off. But ultimately, I think it's better to have a simple system, which is the New Zealand system and maybe bring it into two years. In other words, "we know there's a crisis at the moment. So why not have a two-year trial? You've already got the two years in place where you won't lose your pension. You've already got the two years in place where you don't have to reapply to the pension, and you'll keep your concession guard. So have a two-year trial where you allow people to work as much as they can at an appropriate tax rate".

It's an inappropriate tax rate because if you take 50 cents from the pension and pay income tax, you're almost going down too hard on people. And that's actually what is the handbreak. When we surveyed pensioners, we knew that up to one in five would go back into the workforce if they could get a job.

I think it's a matter of seeing older Australians as an asset, not a liability. And this is all about choice; if they choose to work and the government rewards them better, you will get more people working. If you punish someone too severely from a taxation and penalty point of view, you're bound to find people that will say, "it's hardly worth it". That's what we hear from people; we hear from them all time they would work more if they weren't penalised as much.

And for the people that are currently working and are approaching retirement age?

You've got to bring into account that, as people reach pension age, if they were working in aged care or home care, the human resources people could say to them, "there's new policy coming in with government where you're able to keep working and keep a reasonable part of your income and not be highly taxed. Would you like to continue working?". So, you could, over time, encourage more people to keep working.

I spoke to a university business school professor who said that Australia needs to think about this as a long-term solution because we need more taxpayers in the community. And one of the ways you can get that is by encouraging people to stay in the workforce for longer.

Now, those that want to, who want to retire, and we know that probably 60 per cent to 80 per cent of people wish to stop and not keep working, which is fine. But if you've got 20 per cent to 40 per cent of people that might want to work or keep working as they do in New Zealand, Sweden, Japan, South Korea, and Israel, and we could get up to that level, it would help solve some of these problems. And we also need to respect and train them, pay them, look after them, and treat them as an asset-level liability.

Once you start doing that, it'll be a revolutionary time for this country because we'll start to kill off ageism. After all, you'll have people working alongside each other, one person might be in their sixties or seventies, and the next person alongside them could be a teenager. And I think that would be great for our society as a whole.

How could this help older people from a lower socioeconomic background?

The policy we are advocating for is for those people that fall under the income test. Now, we have a pension system with an income and an assets test. If you fall under the income test, it means you haven't got a lot of assets. These are not people that are extremely well off. We're not talking about people feathering their nest; we're not talking about people rorting the system. We're talking about people, in many cases, who, when they did get to pension age, had very little or no superannuation.

Some of the most recent figures show that around 20 per cent of women have no superannuation when they get to pension age. So, this is a very pro-women policy because it's the women with the lowest amount of superannuation, the women that tend to be living in pension poverty, and the women that actually work in a lot of these industries. So, it's the women that would benefit from this policy. And also, if they worked in child care, it would free up more places for women to return to the workforce. 

I think there's an opportunity there to have what you would call a rethink of the way we structure our workforce in Australia. You might remember that during World War II, they suddenly realised they needed women and brought them into all sorts of jobs. So I'm saying we're in a similar situation now, where they suddenly realise they need mature workers to bring them into all these jobs and back into the workforce.

What would you say to the government, particularly the ministry of Aged Care, to improve the situation?

I know that it's difficult when you're a new government, you come into power, and you've got all these things they've got to deal with. They've got to deal with Covid, the recommendations of the Royal Commission, this job vacancy crisis. And we are on the sidelines saying, "Do this. Do this. Do this". And they're worried about costs to the budget.

We can say to them, because we've had the Deloitte modelling done, that, "you will recoup any costs, and you will start to find that you will get revenue if you let people work", because when they work, they pay income tax. When they get their wages, they will spend it. They'll also pay superannuation contributions tax when they put money into superannuation, and there will be less drain on the system further down the track because people will have savings. 

So, there is a good economic argument for doing this. I believe, as a part of government policy, to try to get one in three people over 65 in the workforce. I think that's a plan that they've got in place. They're hoping to raise the figure from 25 per cent to one in three.

I also think it is a way to fight ageism and create a work environment people of all ages can feel included.

Yes, this is not about forcing people to work. It is about saying, "if you want to work". And that's why I'm saying we should look at people, as they approach retirement age or pension age, and ask them, "would you like to keep working?" And say, "We still value you. We still need you".

We have a society up until now where we've always said, "we need to bring the young people in and push the old people out". That seemed to be what was going on. And you would find that many consultancy firms would come and look at companies who'd say, "it's time to trim the dead wood and let the new green shoots grow". That's the idea. Now, you've got signs up in shops and businesses everywhere saying, "staff wanted". So, if that staff happens to be a 68-year-old woman who wants to work in a childcare centre, it doesn't necessarily have to be a teenager anymore.

It's something that I think we have to do, and I think it will be transformative, just as in the 1960s, women came into the workforce, got equal pay, and became part of it. But there's still residual sexism in the workplace. This solution will not solve ageism overnight. But when you suddenly are working next to someone older; I saw a woman the other day who would've been in her late sixties or early seventies working with a teenager in a McDonald's. And it lifted my heart to think, "that's wonderful". And I've always got many benefits in my working life from talking to people with more lived experience than I have.

Most recently, my dearest friend was a 90-year-old, and I used to love talking to him because he could tell me all sorts of things about life. If you look around and take, for example, the Queen who worked literally until almost the day she died, at 96. You've got people like Sir David Attenborough, who champion the environmental movement at 96. You've got people like Joe Biden, who's 79, you've got Gerry Harvey, who runs Harvey Norman, you've got Rupert Murdoch, you've got Kerry Stokes. So many people who work in media, retail, law and business, as long as they're men, tend to be able to keep working.

So, I think we got the opportunity to bring in a policy that will change our society for the better.

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