Daniel Wild Discussing IPA Pension Work Reform Research On FiveAA Mornings

On March 31, IPA Deputy Executive Director Daniel Wild discussed IPA research on Australia’s worker shortage crisis and the Federal Government’s failure to properly enact effective solutions such as pension, veteran, and student work reform, rather than simply increasing immigration, with Matthew Pantelis on FiveAA Adelaide Mornings.

Below is a transcript of the interview.

Matthew Pantelis:

Well, the Institute of Public Affairs has called on the federal government to go further with pension reform. According to the Bureau of Stats, there are now over 438,000 job vacancies right now in Australia. And around a quarter of businesses in the country are struggling to find workers. The level of job vacancies is 240% up on May 2020. There were reforms late last year, the federal government’s pension work bonus reform, only allowing aged pensioners and veterans to earn $226 a week up from $150 before their benefits start to be reduced by 50 cents in the dollar. So if we are serious about finding people to fill these jobs at the moment, certainly the Institute of Public Affairs is keen for reform to let people get back to work. Daniel Wild is Deputy Executive Director. He joins me now. Daniel, good morning.

Daniel Wild:

Morning, Matthew. Nice to be with you.

Matthew Pantelis:

Thank you for your time. A lot more needs to be done clearly.

Daniel Wild:

Yes. A lot more must be done. In addition to those figures that you just outlined, in South Australia the job vacancies are about double the pre-COVID levels and they’re not going down nearly fast enough, and that’s why we need to have urgent reform to get pensioners, veterans and students back into work. At the moment, only around three out of 100 pensioners or veterans in Australia work. This compares to about 25 out of 100 in New Zealand. Now, this is not because they don’t want to work. We know that about 20% of them want to work if they have the opportunity, but as you identify, there are massive red tape barriers with all the form filling and bureaucracy they have to navigate. Plus they lose 50 cents in the dollar in their benefits once they earn $226 a week, which is only around one and a half days of work per week.

So we have an urgent skills’ shortage across the nation and across South Australia. My concern is what the federal government has been doing is rather than getting Australian workers back into the workforce, they’re doing the lazy and short-sighted option of more migration, which is not what we need at this time when we have a housing shortage. $450 a week rent is the median cost in South Australia and having more migration will put further pressure on that plus our social services, our schools, roads, and hospitals. So the priority must be to Australian pensioners, workers, veterans, and students, getting them into work first.

Matthew Pantelis:

Would you expect that 3% to get as high as 25%? I mean, what level of people would return if they could?

Daniel Wild:

Approximately 20% is the expectation. There was a survey undertaken by the National Seniors Association recently, which found that 20% of pensioners or veterans would like to work if there were different taxation arrangements. For context, that’s around half a million that would come back into the workforce, and the current shortage is around 430,000. So there’s more than enough there to fill the jobs. We just need the right policy levers to get them in there.

Matthew Pantelis:

All right, and would they want to full work, part-time?

Daniel Wild:

Look, it’ll be up to them. This is a question of choice, and what we’re saying is remove the barriers to work. Let Australians choose if they want to go into work. The other point that I’d make is, of course, they’d still be paying income tax. I just want to be clear about that. Just like every other worker, they pay income tax, and that’s very important because we need this revenue to fund our social services and to pay down government debt. We have a trillion dollars of debt at the federal level alone, plus much more at the state level. So the more Australians we get into work, that’s good because it gives them social connection, it gives them a source of esteem getting into the community. Plus it means more revenue for governments, which we need critically at this time.

Matthew Pantelis:

It’s interesting though, I mean the income tax, sure, you’d expect people working would pay income tax, but ultimately then if a retiree, a pensioner heads back into the workforce earns their money, every little bit helps as we know. But they’re paying income tax, essentially they’re paying themselves. So the argument would be, “Well, I can stay home and get paid and not have to go to work.”

Daniel Wild:

Well, that might be the choice of some pensioners for sure, but as I mentioned, a lot of them want to go into work, 20% of them want to work. And there’s a couple of points here. This will be a net benefit for the government’s bottom line because of course they’ll be paying more welfare payments than otherwise would be, but they’d be getting the tax back in. And what we’ve estimated is the current job vacancy rate means there’s about $32 billion in foregone wages every single year. Now, that equates to about $7 billion in foregone income tax revenue at the federal level alone. Plus, as you mentioned, GST, payroll tax and the general spending that then gets pumped into the economy. So there’s a very virtuous circular flow through the economy that happens. And again, this comes back to the choice of getting pensioners, students and veterans back into the workforce.

I just want to make a point not just on pensioners, but on students. We know that at the moment, only about one in two students are working. There’s close to half a million young Australians who are not working, earning or in training of any kind. And this is not just an economic problem, it’s a real social problem because as we know, getting into work is critical to getting the skills you need and learning the life skills to get ahead in life. So it’s urgent that we get our students into work as well as the students, as well as the pensioners and the veterans.

Matthew Pantelis:

All right. So if somebody goes back to work, would you expect any of their pension to be cut? Should any be cut?

Daniel Wild:

No, none of their pension should be cut. This is what they’ve done in New Zealand. Where they’ve said, “Look, we’re not going to take away your pension or entitlements. You can earn as much as you want. You will pay income tax like everybody else.” But that’s key to removing the barrier. I just want to reemphasize this though. So at the moment, if you earn $226 a week, you start losing 50 cents in the dollar, plus you pay income tax on top of that once you’re above the tax-free threshold. So that’s 69 cents. The effective tax rate is 69 cents in the dollar. So this is again, why there’s only three out of a hundred pensioners work where it’s about 25 out of a hundred in New Zealand work who don’t lose their pension payments and who don’t have the same red tape barriers.

Matthew Pantelis:

Are you any better off then taking home 41 cents in the dollar? I suppose you are ultimately, but it’s not a big income, is it?

Daniel Wild:

No, it’s not as much as you’d like, but it is a benefit and a step in the right direction. And like I say, it’s up to the assessment of each individual potential worker, whether they want to do it or not. And also, it depends on how much you’re earning. If you are below the income tax-free threshold, you’re not going to be paying any tax, plus you’ll be getting a boost in terms of your welfare. If you’re earning above the 19,000, you start paying 19 cents. So it depends on how much you’re earning. But again, I think this would be a choice of people on the ground as to what they want to do.

Matthew Pantelis:

Politicians listening to you?

Daniel Wild:

Look, they are, we’ve seen some movements, fairly minor changes by the federal government. They didn’t go far enough, and the jury is in on this, so they only increased it by about $70 a week before you start losing your pension payment. The data that came out yesterday from the Australian Bureau of Statistics shows that this has failed because the job vacancy rate came down by just 1%. So we need a lot more than that. And unfortunately, the federal government, as I say, is pulling the migration lever again. They’re saying we need another 600,000 migrants in our country over the next two years. Now that’s more than the entire size of Tasmania. So yes, we should have migrants, but this is way too much, way too soon. We need the infrastructure to catch up, the housing to catch up. We have a cost-of-living crisis, having that many people enter our country is just going to fuel inflation because it’s too much spending when we’re not generating extra capacity. And I’m concerned that they’re pulling this short-sighted, lazy lever rather than doing the hard yards of economic and social reform to get Australians into jobs first.

Matthew Pantelis:

All right. Daniel, Peters called in with a question for you on this. You happy to take a call?

Daniel Wild:

Sure, I’d love to.

Matthew Pantelis:

Peter, good morning.

Caller:

Good morning. Look, just a question about a person that got back to work. I understand that you’re 65, you are not covered under WorkCover anymore. So what happens to these people that go back into the workforce if they injure themselves at 70 years old? Do they get covered under WorkCover?

Daniel Wild:

That’s a great question, Peter. I’ll be honest with you. I don’t know the ins and outs of the WorkCover situation. If it is, as you’ve suggested then that’s something that needs to be taken into consideration, because of course that’s going to be a concern for the employers and the businesses. So I agree with you. Everything needs to be done to make sure that it’s attractive to employers as much as it is for the pensioners that might want to get back into the workforce.

Caller:

But that doesn’t make it easy for them to go back though. Does it?

Daniel Wild:

Whatever the current arrangements are for workers that are there at the moment should be the case for pensioners who are coming in. So whatever the current rules are for the current workforce should apply to everybody who wants to get back in there.

Matthew Pantelis:

If you’re an employee, you’re an employee. I would’ve thought so. You’d be covered as an employee. So whether you’ve returned as a pension or not, you’d have to be covered surely. But you’re right, I don’t know the ins and outs of that either enough to say conclusively. But thank you Peter and Daniel. Appreciate your time.

Daniel Wild:

My pleasure. Thanks for having me.

Matthew Pantelis:

Daniel Wild there from the Institute of Public Affairs. Their call for the government to go a lot further than what they say were halfhearted pension reforms late last year, which is basically the work bonus that pensioners can now get, which equates to lifting the amount you’re allowed to earn from around $150 per week to $226 per week before benefits start to be reduced by 50 cents in the dollar. You’d have to say it’s a good idea. I mean, we need workers for goodness’s sake, and there’s a lot of people, at least 20% of the retirees who’d happily go back for some extra hours a week. Fifth of retirees, half a million people. Well, that fills every job vacancy in the country, essentially, depending on skills and everything else required, but certainly would give it a huge dent. I mean, we want to get unemployment down, don’t we? Even further than the three or 4% it is currently.

This transcript with Daniel Wild talking on FiveAA from 31 March 2023 has been edited for clarity.