The Inquiry

The Discussion Paper

1.1 This document commences the second stage in the consultation processes in this Inquiry into Commonwealth legal barriers to older persons participating in the workforce or other productive work. The first stage included the release of the Issues Paper, Grey Areas—Age Barriers to Work in Commonwealth Laws (ALRC IP 41), generating 63 submissions.^[1] Both the Issues Paper and this Discussion Paper may be downloaded free of charge from the Australian Law Reform Commission (ALRC) website, <www.alrc.gov.au>. Hard copies may be obtained on request by contacting the ALRC on (02) 8238 6333.

1.2 In releasing this Discussion Paper the ALRC again calls for submissions to build on the evidence base so far established and to inform the final stage of the deliberations leading up to the final Report, which is to be provided to the Attorney-General by the end of March 2013.

The ageing population—a public policy challenge

1.3 Australia’s population is ageing. The Productivity Commission described it as ‘the quiet transformation, because it is gradual, but also unremitting and ultimately pervasive’.^[2] It estimated that by 2044–45, almost one in four Australians will be aged 65 years and over; and in every year between 2012–2028, ‘the aged share of the Australian population is projected to increase by more than 0.35 percentage points—an increase around 4 times the long-term average’.^[3]

1.4 The effect that the ageing of the population may have on ‘economic growth, living standards and the sustainability of government finances’ has been identified as a major public policy concern.^[4] The Productivity Commission described the economic implications of an ageing Australia as ‘far-reaching’:

It will slow Australia’s workforce and economic growth, at the very time that burgeoning demands are placed on Australia’s health and aged care systems. Unless offsetting action is taken, a gap will open between Government revenue and spending that will need to be closed. Every jurisdiction in Australia is affected in different ways, depending on their specific responsibilities and capacity for raising revenue. Population ageing will require new policy approaches at all levels of government.^[5]

1.5 The Productivity Commission also found that ageing pressures were accelerating as the baby boomer generation retires and that ageing ‘will reduce economic growth at the same time that it intensifies demands for public services, such as health, aged care and the age pension’:

With present policy settings, age-related spending will exceed the growth of tax revenue. This will open a fiscal gap equal to around 6½ per cent of GDP by 2044–45.^[6]

1.6 A December 2011 report prepared for the Consultative Forum on Mature Age Participation, Ageing and the Barriers to Labour Force Participation in Australia, stated that the demographic shift in Australia’s population ‘implies a greater role for mature age Australians both economically and in society more generally’.^[7] A report prepared by Deloitte Access Economics for the Australian Human Rights Commission, released on 3 September 2012 (the Deloitte report), estimated the value of mature age participation in economic terms:

An extra 3 percentage points on participation among workers aged 55 and over would result in a $33 billion boost to GDP—or around 1.6% of national income.

A 5 percentage point lift in participation among this group would see around $48 billion in extra GDP—or 2.4% of national income.^[8]

1.7 The report concluded that ‘mature age participation can play a key role in tipping the balance between the number of future retirees and the number of workers available to support them’ and that effective policies aimed at promoting increased workforce participation of older Australians ‘are likely to be among the most cost effective tools available to lift national incomes and living standards in coming decades’.^[9]

1.8 Australia’s present retirement income system is based on three pillars: a means-tested Age Pension; compulsory saving through employer superannuation contributions (the ‘Superannuation Guarantee’); and voluntary superannuation contributions.^[10] If mature age workforce participation is increased, the balance between welfare costs through the Age Pension and related benefits, on the one hand, and superannuation and other retirement savings, on the other, may change:

By remaining in employment longer, older Australians can not only increase their current income, but can also save more to support themselves once they do decide to retire. In turn, improving retirement incomes not only raises living standards for future retirees, but can also assist in reducing welfare costs for future governments.^[11]

1.9 The shifting demographic requires consideration of the policy settings in each area. Asking the ALRC to conduct an inquiry into barriers to workforce participation for mature age persons forms part of the Australian Government’s response to population ageing. The Terms of Reference require consideration of the ‘three pillars’, together with a number of other specific legal areas.

Terms of Reference

1.10 The Terms of Reference^[12] direct the ALRC to consider Commonwealth legislation and related legal frameworks that either directly, or indirectly, impose limitations or barriers that could discourage older persons from participating, or continuing to participate, in the workforce or other productive work, including:

• superannuation law;

• family assistance, child support and social security law;

• employment law;

• insurance law;

• compensation laws; and

• any other relevant Commonwealth legislation exempt under the Age Discrimination Act 2004 (Cth).

Terminology

Older persons

1.11 The Terms of Reference define ‘older persons’ as anyone over the age of 45 years, which is consistent with the definition of ‘mature age worker’ used by the Australian Bureau of Statistics (ABS). Throughout this Inquiry, stakeholders have questioned the accuracy of characterising persons as ‘older’ from the age of 45 years.^[13] The Brotherhood of St Laurence has also noted that the term is a ‘slippery concept’:

Even setting aside individual characteristics, there tend to be considerable differences between the interests and needs of cohorts aged 50–65 and those aged 65–80 or 80–100.^[14]

Barriers to work

1.12 The Terms of Reference focus on Commonwealth law and age-based limitations on, or disincentives to, participation in the workforce or other productive work. The ALRC considers that this requires the identification of:

• limitations on participation;

• disincentives to participation (and incentives to leave); and

• incentives to remain in the workforce.

Other productive work

1.13 The Terms of Reference require the ALRC to consider barriers to participation in the workforce ‘or other productive work’. Under this expanded scope, the ALRC is considering participation in volunteer work. In its 2010 General Social Survey, the ABS found that 38% of the adult population (6.4 million people) had undertaken some voluntary work in the previous 12 months and, of these, the group aged 45 to 54 years reported the highest rate of doing so (44%) and 32.5% were aged 55 years and over.^[15] As noted by Volunteering Australia, the work undertaken by the nearly 2 million volunteers in the plus 55 category ‘represents a significant social and economic contribution to this nation’.^[16]

1.14 Another type of contribution that may be considered ‘productive work’ is ‘informal care’—unpaid care provided by family members.^[17] Such care includes the care of adult children, children with disability, the care of elderly, care of persons with long-term health conditions, the care of spouses and parents, and child care for grandchildren.^[18] The provision of informal care is an important economic and social contribution to Australian society, estimated to be worth over $40 billion annually.^[19] Generally, caring is gendered work, in that it is mainly a contribution made by women. As noted by the Premier’s Council for Women South Australia, statistics indicate that ‘a higher proportion of women than men provide care’.^[20]

1.15 Older persons may also provide unpaid care by raising their grandchildren (or other relatives) when the children’s parents cannot do so.^[21] The ABS notes that, in 2009–10, there were 16,000 Australian families in which grandparents were raising children aged 17 years and younger.^[22] In such circumstances, grandparent care has significant benefits to children, as discussed in Chapter 6.

1.16 In this Inquiry, the ALRC does not examine the legal barriers to older persons providing unpaid care. Such a project is fundamentally different in nature from an examination of the legal barriers to the paid workforce and other formal working arrangements. Consequently, in defining the scope of ‘productive work’ in this Inquiry, the ALRC is focusing on the latter—and examples of more formal working arrangements including volunteering and civic duties.

1.17 Unpaid caring is not only a form of productive work, but also a barrierto participation in the paid workforce. Providing care can have a significant impact on a person’s ability to enter and maintain employment. There is evidence that this impact disproportionately affects women.^[23] As a barrier to employment, unpaid care may also restrict the accumulation of retirement income savings. As noted in Chapter 8, the feminised nature of unpaid care contributes to the ‘gender gap’ in superannuation, whereby women have lower superannuation balances than men.^[24]

1.18 Although unpaid care may constitute a barrier to the paid workforce, it is not a legalbarrier. Consequently, the ALRC does not address caring as a barrier to work in this Inquiry, as this is outside the Terms of Reference. The Premier’s Council for Women South Australia suggested that:

It would be valuable if the ALRC could recommend that informal barriers, such as informal care, should be addressed in some other context. Experiences of older women as carers not only affects their ability to enter the workforce, but also to volunteer, and certainly to undertake civic duties.^[25]

1.19 It is worth noting that, while providing unpaid care may be a barrier to work for older persons, it may at the same time enable the workforce participation of other family members—most notably, when grandparents provide child care for their grandchildren so that the children’s parents can work.^[26] Such care is ‘vital in buttressing intergenerational solidarity’.^[27] It may also reduce the Australian Government’s burden in providing sufficient child care services and related family-assistance benefits to facilitate workforce participation by younger cohorts.

Legal frameworks

1.20 The Terms of Reference direct the ALRC to consider ‘all relevant Commonwealth legislation and related legal frameworks’. In this context, the idea of ‘frameworks’ extends beyond law in the form of legislative instruments to include policy and practice guides, codes of conduct, standards, education, information sharing and other related matters.

Retirement

1.21 The concept of ‘retirement’ is increasingly difficult to define. The Deloitte report refers to the usual division of life cycles into three: ‘childhood, working age and retirement’.^[28] There are difficulties in placing dividing lines between working age and retirement. National Seniors described the ‘emergence of a work-retirement continuum’ as ‘one of the most significant social changes in recent years’:

Increasingly, people no longer work full-time, and then leave the workforce completely, becoming fully retired. For up to 20 years, a person’s level of engagement in the workforce may cycle between periods of no paid work, full-time work and various levels of part-time paid work. Rather than a simple tapering off of work, anecdotal evidence suggests many people work full-time on a seasonal basis (eg tax accountants during the tax season) and then either do not work for extended periods or work part time.^[29]

1.22 The ‘work-retirement continuum’ includes not only a continuum of time in the paid workforce and time out of the paid workforce as people age, but also time out of the paid workforce which cannot be considered as ‘not working’. The recognition of ‘other productive work’ in the Terms of Reference for this Inquiry suggests that the idea of ‘work’ and ‘non-work’ is as blurry as the distinction between ‘work’ and ‘retirement’.

1.23 In addition to the unclear distinctions of work/non-work and work/retirement, the delineation between unemployment and retirement can also be ‘problematic’.^[30] This is particularly the case in industries or sectors where continuous work is not the norm. For example, the industry superannuation fund, Construction and Building Industry Super (Cbus), noted that in the construction industry, employment is often ‘defined by a discrete project’. This may affect older workers’ opportunities for continued employment:

Employees need to be hired and re-hired many times throughout the economic cycle. In a market where physical ability is a significant factor in recruitment, it is probable that younger workers will be preferred over older workers. In normal labour market conditions where there is some excess supply, older workers will be amongst the last to obtain work.^[31]

1.24 A similar experience of work was identified by the Media, Entertainment and Arts Alliance in relation to the workforce it represents:

In the case of performers there is no real notion of retirement. This is due to the nature of the profession including the long periods of unemployment, the inherent value of personal expression that lies at the heart of the profession and the creative requirements for older (and younger) actors in productions. With no obligation to contribute superannuation upon employers these workers are encumbered with additional administrative burdens and costs in organising their own superannuation.^[32]

1.25 Given the difficulties of defining life cycles in clear terms of ‘work’ and ‘retirement’ and the focus of policy reform in terms on ‘productive ageing’, Simon Biggs advocates an emphasis on producing ‘a stretched life course’:

where each part is expanded rather than one—work—dominating the later years. This stretched-ness would also extend to looking at patterns of work-life balance throughout the life course, especially if these can be bought into line with the changing priorities made available by living longer.^[33]

1.26 In this Inquiry the ALRC uses the term ‘retirement income system’ in a general sense, given its common usage in this context, but acknowledges the fluid notion of work in terms of ‘work’ as both paid and unpaid across a lifetime. Notwithstanding this fluidity, in the legal areas examined in this Inquiry, there are certain legislative points or ages that—when reached—enable a person to access retirement income and consequently cease paid work. They are the point, or age, at which a person is eligible for the Age Pension; and the points, or ages, at which a person may (conditionally or unconditionally) access superannuation benefits.

Other inquiries

1.27 In conducting the Inquiry, the ALRC is directed to have regard to the work undertaken by:

• the Advisory Panel on the Economic Potential of Senior Australians including its initial, second and final reports;^[34] and

• the Consultative Forum on Mature Age Participation and any recommendations made in the Forum’s interim report and final reports.^[35]

1.28 In addition, the ALRC is to have regard to:

• the work to be undertaken during 2012 by Safe Work Australia to investigate options to address age discrimination in workers’ compensation legislation; and

• the work being undertaken by the Attorney-General’s Department to consolidate Commonwealth anti-discrimination laws into a single Act.

Consolidation of anti-discrimination laws

1.29 In September 2011, the Australian Government released a discussion paper seeking submissions in relation to the consolidation of Commonwealth anti-discrimination law. The project to consolidate existing Commonwealth anti-discrimination law into a single Act is a key component of Australia’s Human Rights Framework.^[36] Submissions on the issues raised in the discussion paper closed on 1 February 2012 and a draft bill will be released for further public consultation during 2012. At the time of publication of this Discussion Paper, the bill had not yet become available.

1.30 The Age Discrimination Act 2004 (Cth) (ADA) is one of the pieces of legislation being examined as part of the consolidation process. Some of the key issues being considered in the course of the consolidation project that are relevant in the context of this Inquiry, include: the definition of discrimination; the protection of voluntary workers; and exemptions.

1.31 By way of example, s 37 of the ADA provides an exemption in relation to age-based discrimination in the terms and conditions on which an annuity, insurance policy or membership of a superannuation scheme is offered or refused, where the discrimination: is based upon actuarial or statistical data on which it is reasonable for the discriminator to rely; and is reasonable having regard to the matter of the data and other relevant factors; or in a case where no such actuarial or statistic data is available, and cannot reasonably be obtained, the discrimination is reasonable having regard to any other relevant factors. The ALRC is interested in whether this exemption will remain under any consolidated Act, or whether the draft consolidated Act will include a general exemptions provision. In light of the above, the ALRC will consider issues of age discrimination under the ADA or any consolidated Act in more detail following the release of the draft legislation.

Age Pension, tax and superannuation reviews

1.32 Significant reviews have been conducted in relation to superannuation, tax and the Age Pension. In 2008–09 the Australian Government initiated the Australia’s Future Tax System Review, chaired by Dr Ken Henry AC (the Tax Review); the Super Systems Review, chaired by Mr Jeremy Cooper; and the Pension Review, chaired by Dr Jeff Harmer AO.^[37]

1.33 The Tax Review examined the retirement income system, including the superannuation system, as a key part of the ‘tax-transfer system’—the combination of Australia’s tax and social security systems.^[38] The Super System Review addressed the governance, efficiency, structure and operation of Australia’s superannuation system. The Pension Review examined measures to strengthen the financial security of older Australians, carers and people with disability. These reviews made a number of recommendations for reform.

Employment and workers’ compensation reviews

1.34 In July 2012, a review of the Commonwealth workers’ compensation scheme, in particular the Safety, Rehabilitation and Compensation Act 1988 (Cth) was announced. In September 2012, an issues paper was released for consultation as part of the review.^[39] It is expected that the review panel will report to the Australian Government in February 2013. The ALRC expresses a preliminary view with respect to the necessary reforms to Commonwealth workers’ compensation in this Discussion Paper. However, in making recommendations in the final Report, the ALRC will consider the work of Safe Work Australia and the outcome of this review of the Commonwealth workers’ compensation scheme.

1.35 In August 2012, the Australian Government released the final report of the review of the Fair Work Act 2009 (Cth) which examined the extent to which the legislation is operating as intended and areas where the operation of the legislation could be improved consistent with the objects of the Act. The report included a range of recommendations for reform. The Government is currently considering its response.