Key findings from model update

Our older population is expected to increase rapidly

New Zealand’s older population (aged 65+) is projected to increase from 819,500 to 1,875,000 over 50 years. The 80+ age band is expected to become the largest age band for people over the age of 65 by 2071.

An interesting feature of the median population projections is the rate of increase for the under-80 age bands. The rate of increase for these age bands levels off from 2041 but experiences a stepped increase across the groups from 2051. This contrasts with the 80+ age band, which is expected to have a steady increase through to 2071.

Figure 1 Median population projection for all older people (aged 65+)

The age-gender distribution for people aged 80+ is projected to shift from a male to female ratio of ~40:60 closer to around a 45:55 ratio by 2071. The remaining age groups have similar 50:50 age-gender distributions and have less of a distribution shift from 2021 to 2071.

Table 1 Summary of population projections for older people (aged 65+)
Median population projection (base 30 June 2020)

More and more older people are part of our workforce

According to this latest set of median labour force projections, we are expected to observe more people aged 65+ remaining in our workforce. Currently, we have 194,700 older people in our workforce, and this is projected to double (increase to 392,400) by 2071. Unsurprisingly, the 65–69 age band will continue to account for much of the overall older workforce through to 2071.

Figure 2 Median labour force projection for all older people (aged 65+)

We are still expecting more males than females to make up our older workforce. The gender distribution of the labour force projections reports the 118,300 older male workforce in 2021 is likely to increase to 236,800 by 2071, and the same proportional increase is seen for females, with 76,400 in 2021 rising to 155,400 by 2071.

Table 2 Summary of labour force projections for older people (aged 65+)

Median labour force projection (base 30 June 2020)

The percentage of older people in the national labour force is projected to increase from 6.7% in 2021 to 10.6% by 2071. This measure follows similar gender trends, with more older males than older females as a proportion of our national workforce (7.6% and 5.6% in 2021, increasing to 11.9% and 9.1% in 2071, respectively).

Figure 3 Older workforce (aged 65+) as a proportion of national workforce, by gender

Our overall participation rates declining

Based on the median projections for both the labour force and older population, the overall labour force participation rates for older people are steadily declining. This initially seems counter-intuitive since the age-specific participation rates are increasing over time. The denominator of the participation rates (projected population increase) grows more rapidly for the 80+ age band over the projected 50 years. This is expected to outgrow the increase in 65–69-year-olds in the workforce relative to their smaller increase in population. As a result, the overall labour force participation rates drop over this period.

Figure 4 Age-specific projected labour force participation rates for older people (aged 65+)



The age-gender-specific participation distribution changes between age bands. The male and female participation rates are comparable for the 65–69 age band but become more disparate for older age bands. This is most clearly seen in the doubling in the difference of the measure for the 80+ age band (consistent across the projection period).

 

Remunerated work and other income expected to quintuple

We have updated the real wage increase multiplier using basic projections from the Salary and Wage Rates series (LCI001AA) released 2021Q2 on Stats NZ’s Infoshare website. This is an improvement from the previous model update and adjusts the base data taken from 2006. Please note that relative values are given in relation to total older population projections.

According to the model output, using the updated real wage increase multiplier, wage and salary (remunerated work) earnings by people aged 65+ are expected to rise from $5.9 billion in 2021 to around $25.6 billion in 2071 (2017$). In relative terms, that is an increase from $7,200 per older person in 2021 to $13,600 per older person in 2071.

Self-employment income is likely to increase from $3.7 billion in 2021 to $15.8 billion by 2071 (2017$). In relative terms, that is an increase from $4,500 per older person in 2021 to $8,500 per older person in 2071.

The largest contribution of income to older people is government transfers, the value of which is projected to quintuple from 2021 to 2071 – from $16 billion to around $79 billion (2017$). In relative terms, that is an increase from $19,600 per older person in 2021 to $42,000 per older person in 2071. Similarly, the value of income from investment and other transfers will increase from $8.5 billion to $42 billion (2017$) across the same period. In relative terms, that is an increase from $10,400 per older person in 2021 to $22,300 per older person in 2071.

Figure 5 Projected income by source for older people (aged 65+)

 

Value of tax paid by older people

Tax paid by older people was calculated based on the average weekly earnings of people aged 65+ for remunerated work (wages and salaries, and self-employment), government transfers, investments and other income. A weighted average for wages and salaries and self-employment was taken into account for the different tax brackets these come under (Inland Revenue, 2021). The GST calculation assumes that all remaining income is spent after income tax is deducted from the total earnings.

The value of all tax paid could rise from $8.95 billion in 2021 to $42.45 billion by 2071 (2017$) based on the calculations and assumptions above. In relative terms, based on the projected older population, that is an increase from $10,900 per older person in 2021 to $22,600 per older person in 2071

Table 4 Projected tax paid by older people (aged 65+)
2017$ Bn

Reviewing the proxy wage for the value of unpaid work

Previous reports have projected the value of unpaid work based on the 2013 carer wage of $16.10 per hour, which has not been re-estimated since. Re-basing the 2013 carer wage into 2017$ or 2021$ affords a value of $17.01 and $18.41 per hour, respectively. This is below the minimum wage at $20.00 per hour as of 1 April 2021. To account for this, we have projected the value of unpaid work using both the 2015 carer wage and the 2021 minimum wages as proxy values.

Table 5 Projected value of unpaid work for older people (aged 65+)
The value of the unpaid work of older people is estimated to rise between $51 and $56.94 billion in the next 50 years. That is an increase from between $13 and $14.31 billion per year in 2021 to between $64 and $71 billion per year by 2071.

Not included in the update of the model is gender participation in unpaid work. The base data used for the projections are from the Time Use Survey of 2008–2009, which places the unpaid work hours disproportionately at 4 hours per day for males and 4.5 hours per day for females.

Additionally, the type of unpaid activities undertaken by older people is not reflected in the model projections. According to the 2018 Census, 79.3% of unpaid activities includes household work and gardening. Voluntary work accounted for less than 20%, and caring for someone else (including ill persons and childcare) accounted for 35%.

Estimating the average annual expenditure of older people

Series updates for the Household Expenditure Survey meant that age-specific cuts were no longer available. Proxy values were obtained using a weighted average of spending by people aged 65+ by household type (couple-only and single-person).

It should be noted that the spending patterns may differ from the actual cohort of people aged 65+, especially regarding housing and household utilities expenditures. Caution is advised when using these proxy values, which are primarily indicative of spending growth but not necessarily spending distribution.

Table 6 Average weekly expenditure by household type of older people (aged 65+)


Table 7 Weighted average annual expenditure of older people (aged 65+)


The total value of expenditures by older people is projected to increase from $29 billion per year in 2021 to $137 billion per year in 2071 in 2017$. Aside from the housing and household utilities outlier, the current spending patterns suggest that foodstuffs, transport, and recreation are the next highest contributors to expenditure.

Figure 6 Projected annual expenditure of older people (aged 65+)

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