Over-65s ‘could quit to ease unemployment’

New Zealand’s unemployment crunch could be eased by more older workers stepping out of the workforce, one economist says.

Independent economist and speaker Tony Alexander said, faced with an uncertain labour market hitting young people and those on lower incomes particularly hard, some of the increasing number of over65-year-olds still in paid work might choose to resign to make way for others.

‘‘They are, after all, being paid national superannuation. Or they will be first to put their hand up when voluntary redundancy is sought. Some will bring forward their retirement plans. Some won’t want to work because the extra interaction will increase their risk of infection should a new community outbreak occur.’’

He said the effect would probably be less in New Zealand because of its success in controlling the virus.

‘‘Overseas many older workers will feel unsafe returning to work and exposing themselves to virus risk. Nonetheless, shocks like this act as triggers for big changes. People and businesses accelerate long-term plans and catch-up on plans delayed.’’

He said in 1998, only 6 per cent of people aged over 65 were working an hour or more a week. Last year it was 24 per cent, although they still represent only 7 per cent of the total workforce.

‘‘In this case it is impossible to know the numbers in advance, but I would expect a reduction in the proportion of people aged 65 and over who are in the workforce from the 23.7 per cent of the March quarter, back at most toward the 20 per cent to 22 per cent of five or seven years ago.’’

Economist Shamubeel Eaqub said older-age unemployment tended to increase during recessions. ‘‘Partly it’s voluntary because some can fastforward their retirement and partly it’s forced because they cannot get jobs in an intensely competitive market, especially with ageism.’’

ANZ chief economist Sharon Zollner said workers at ‘‘either end of the workforce in demographic terms’’ tended to take a bigger hit when unemployment rose.

‘‘Look at Air New Zealand – some of their redundancies were through early retirement. Makes sense. And generally younger workers, while ‘cheap’, are less likely to have irreplaceable specialist skills.

‘‘Typically one would expect the over-65s may well try less hard to get a new job if they were made redundant. But whether they’ll drop out for altruistic reasons is debatable. As house prices have inexorably risen relative to incomes an increasing proportion of the over-65s still have a mortgage, so the economic imperative to keep working is still there for many.’’

New Zealand Institute of Economic Research principal economist Christina Leung said there were other factors involved.

‘‘Given older people are more likely to keep their investment in the relative safety of fixed income such as term deposits, the recent sharp decline in interest rates will likely mean lower fixed income returns and hence this may actually encourage them to stay in the workforce for longer to ensure a sustainable retirement.’’

‘‘Typically one would expect the over-65s may well try less hard to get a new job if they were made redundant. But whether they’ll drop out for altruistic reasons is debatable.’’

Sharon Zollner ANZ chief economist