Andrew Leigh

My AFR op-ed today looks at proposals to raise the pension age to 70.

Not everyone can work till they’re 70, Australian Financial Review, 27 November 2013

In 2009, the federal government raised the maximum rate of the single age pension by $1600 a year. The next year, Australia’s poverty rate fell by one-fifth.

Few social policies are as tightly targeted as the pension. The decisions to means-test it in the 1930s, and asset-test it in the 1980s were vigorously contested. But they have ensured that this vital part of the social safety net goes where it is needed the most.

Over the past week, there have been calls to increase the pension eligibility age from 67 to 70. Yet those advocating this change seem to have forgotten that low-income workers are more likely to do jobs – like childcare, construction and hairdressing – that involve tough manual labour.

It’s quite a different thing to expect an accountant to carry on their desk job until age 70 than to demand a bricklayer do the same. Sure, there will always be some manual workers who will enjoy working into their seventies. But not everyone in a physical job will want to work until 70.

Not only do low-wage jobs tend to wear out your body faster, but the people who do them tend not to live as long. In a study that Sydney University researcher Philip Clarke and I published in the journal Economic Papers in 2011, we found that the richest 20 percent of the population live on average six years longer than the poorest 20 percent.

Full-rate pensioners tend to be poorer than other retirees. So setting the safety net based on average life expectancy misses the fact that someone who relies on the age pension will not live as long as the typical Australian.

As Nobel Laureate Paul Krugman wrote of a proposal to increase the US social security age: ‘So you're going to tell janitors to work until they're 70 because lawyers are living longer than ever.’ Given that Australians can access tax-free super payouts from age 60, is it really fair to make the poor wait until 70 to get the pension?

Andrew Leigh is the Shadow Assistant Treasurer, and his website is www.andrewleigh.com.