ACOM105: Analysis of Australia's Aging Population and Economic Effects

This report, prepared for ACOM105, analyzes the economic impact of Australia's aging population. It examines the increasing dependency ratio, the government's response through raising the retirement age, and the resulting effects on productivity, employment opportunities, and wage structures. The report presents findings on demographic changes, labor force participation, and potential implications such as decreased productivity and increased government costs. It also discusses the negative outcomes associated with the policy changes, including reduced job opportunities for younger workers and potential wage inequality. The report concludes with recommendations for addressing these challenges, such as restructuring work for older individuals and creating additional job opportunities for younger people. The study utilizes figures and data from various sources to support its arguments and provides a comprehensive overview of the complex economic landscape shaped by Australia's aging population.

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Executive summary:
This report has tried to focus on the impact of aging population on Australia’s economy. The
country has delayed retirement age for decreasing dependency ratio and retirement costs.
However, this policy further can generate some negative implications on Australia’s economy
by decreasing employment opportunity and so on. Hence, this report has provided some
recommendations as well to reduce those negative implications.

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Table of Contents
Introduction:...............................................................................................................................3
Findings:.....................................................................................................................................3
Discussion:.................................................................................................................................6
Implications on economy after implementing policy:...........................................................6
Recommendations:.....................................................................................................................7
Conclusion:................................................................................................................................8
References:.................................................................................................................................9

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Introduction:
Population ageing has become a serious issue for developed and developing countries
as it has changed the economic structure of those countries. Consequently, the number of
employment and total workforce experience this impact directly (King 2018). Due to
increasing number of aging population, the dependency ratio of a country can increase
significantly while savings ratio may decrease further and this in turn can affect revenue and
expenditure of the government adversely. As a result, the concerned economy can experience
slower economic growth and lower productivity. Thus, to mitigate those economic
phenomenons, the government of Australia has increased its retirement age to 77 (Schofield et
al. 2017). However, this policy has some limitations and this report is going to analyse those
negative outcomes, which Australia has experienced after increasing retirement age of
workforce. Moreover, this report has intended to provide some recommendations to
overcome from that adverse situation that the country has experienced after changing its
retirement policy.
Findings:
In Australia, demographic changes have occurred due to two chief reasons, which are,
increasing life expectancies and decreasing birth rate. Due to these two outcomes, the age
structure of this country has generated unfavourable economic conditions as it has increased
dependency ration in the long-run. Dependency ratio is a measurement, which shows the ratio
between total number of dependent persons, aged between 0 and 14 and person aged above
65 to the total population, who have age between 15 and 64 of a country (Costantino, Gidding
and Wood 2017).

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Figure 1: Dependency ratio of Australia
Source: (Tradingeconomics.com. 2018)
Figure 1 has represented dependency ratio of Australia since 2006. This figure has
represented that this specified ratio has increased over the year, which means that most of the
unemployed people in this country depend heavily on the working people while the number
of depended people are higher compare to the number of working population
(Tradingeconomics.com. 2018). Hence, to reduce this dependence, the government of
Australia has increased retirement age and this in turn has helped the country from two
economic perspectives. Firstly, through employing ageing population, total production of
Australia has increased and secondly, the government has reduced its pension costs, which
have increased due to increasing number of retired person.

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Figure 2: Increasing trend of population, aged 65 and above in Australia
Source: (www.aihw.gov.au. 2018)
Figure 2 has represented increasing trend of population, who have age 65 and above.
According to this figure, 15% people of the country’s total population has aged 65 and more
in 2016 while in 1976, this percentage has remained at 9% (www.aihw.gov.au. 2018). By
considering this increasing trend of old population, it can be predicted that in 2056, the
country may have 22% old people of its total population and this trend may increase further
in future due to improved medical technology of Australia.

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Figure 3: Australia’s labour-force participation rate
Source: (Bates et al. 2018)
Figure 3 has represented that labour-force participation rate has increased for people,
who have age between 25 and 54 and above while people, aged between 15 and 24 have
decreased slightly (Bates et al. 2018).
However, this policy has some negative implications and these can be described
precisely with the help of economic concepts.
Discussion:
Implications on economy after implementing policy:
After implementing policies regarding increasing working age, the economy of
Australia has experienced some negative implications. Firstly, total productivity of this
concerned country has decreased after the aging population has taken participation on
production process of this specified country. Labour productivity represents the amount of
output produced for per unit of this factor of production (Börsch-Supan and Weiss 2016).

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Aging population tends total productivity of Australia towards the negative direction, as old
people, aged above 60, may not give proper labour like other young workers. This further can
negatively influence total national income of this concerned country. Secondly, delay in
retirement may decrease the opportunity of people from other age groups to get jobs.
Moreover, immigration has increased in this country and consequently, the number of people
seeking jobs has also increased significantly. However, due to increasing number of aged
workers, those young people may loss opportunities to achieve their desire jobs (Gullette
2015). Thirdly, old worker has possessed higher job experience compare to the younger one.
As a result, the government pay higher amount of remuneration for this person while this
amount for a young worker for this similar task is comparatively low. Thus, the cost of
government may increase further. Moreover, Australia can experience income inequality due
to this discriminating wage structure (Tomasetti and Vogelstein 2015). Fourthly, employing
people with higher age may bring a risk factor among employers. For instance, those old age
people may remain unable to do any labours jobs or may suffer with various health problems
like diabetes and higher blood pressure due to their higher ages. As a result, employers
cannot give them extra work pressures like the young age group of working people.
Recommendations:
To get rid of from those challenges that have discussed above, the government of
Australia can take some steps. For instance, the government can implement various policies
to change working structure for people, aged 65 and above, according to their physical
strength. For this, cooperation of working committee is also essential. According to this
policy, employers can provide jobs like trainers or supervisor to those people for guiding
young workers with their working experience. Moreover, the government can influence
employers to generate exclusive sob structure for those persons where extra labour is not

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required. In addition to this, the government may create extra job opportunities for other
young people, who are seeking jobs in this country.
Conclusion:
After discussing the entire scenario, it can be said that the increasing population with
age 65 and above has generated huge pressure on Australia’s economy. As a result,
policymakers of this country have intended to find various ways to reduce negative impacts
of this increasing number of dependency ratio though delaying retirement age. However, this
policy may generate some negative implications on the country’s economic condition. For
instance, it may reduce productivity of this concerned country and also may reduce
employment generation for new working groups. Moreover, wage discrimination may also
arise within a work field.

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References:
Australian Institute of Health and Welfare. 2018. Older Australia at a glance, Australia’s
changing age and gender profile - Australian Institute of Health and Welfare. [online]
Available at: https://www.aihw.gov.au/reports/older-people/older-australia-at-a-glance/
contents/demographics-of-older-australians/australia-s-changing-age-and-gender-profile
[Accessed 5 May 2018].
Bates, N., Callander, E., Lindsay, D. and Watt, K., 2018. Labour force participation and the
cost of lost productivity due to cancer in Australia. BMC public health, 18(1), p.375.
Börsch-Supan, A. and Weiss, M., 2016. Productivity and age: Evidence from work teams at
the assembly line. The Journal of the Economics of Ageing, 7, pp.30-42.
Costantino, V., Gidding, H.F. and Wood, J.G., 2017. Projections of zoster incidence in
Australia based on demographic and transmission models of varicella-zoster virus
infection. Vaccine, 35(48), pp.6737-6742.
Gullette, M.M., 2015. Aged by culture. In Routledge handbook of cultural gerontology (pp.
43-50). Routledge.
King, A.I., 2018. Introduction. In The Biomechanics of Impact Injury (pp. 1-33). Springer,
Cham.
Schofield, D.J., Callander, E.J., Kelly, S.J. and Shrestha, R.N., 2017. Working Beyond the
Traditional Retirement Age: The Influence of Health on Australia’s Older Workers. Journal
of aging & social policy, 29(3), pp.235-244.
Tomasetti, C. and Vogelstein, B., 2015. Variation in cancer risk among tissues can be
explained by the number of stem cell divisions. Science, 347(6217), pp.78-81.
Tradingeconomics.com. 2018. Age dependency ratio (% of working-age population) in
Australia. [online] Available at: https://tradingeconomics.com/australia/age-dependency-
ratio-percent-of-working-age-population-wb-data.html [Accessed 5 May 2018].

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