Many governments are increasing the retirement age when the pension starts due to ageing populations. As life expectancy has risen, encouraging more people to be productive for longer is no bad thing.
A higher pension age reduces the need for taxation to fund payments that imposes a burden on young workers, which has meant little to Wellington's bureaucrats these past six years. Words like output, efficiency & productivity don't feature in the Windy City. The only word that carries weight there is "equity". Although there's nearly always a trade-off between equity & efficiency, that principle has been dismissed. Your future prosperity - everything - has been sacrificed in the name of equity. The Retirement Commission released a Report in February called "NZ Super: Issues & Options". The Commissioner was reported in OneNews as follows:
“The first question is ‘who does [raising the retirement age] hurt?’” she said. “It's very clear it hurts women, Māori, Pasifika, and manual workers, all for different reasons, and not because any of them are stupid or feckless. We just have different economic lives .. So, without considering how they might be treated to get a more equitable outcome, the blank decision just to raise or not to raise [the age] becomes unhelpful.”
A "feckless" person is someone who is incompetent with no sense of responsibility, lazy or indifferent. How patronizing. Do we need a Commission with an $8 million a year budget to explain to us that the average person in NZ is not stupid or lazy? The Report's conclusion was do nothing - change nothing - maintain the status quo. Upon releasing the NZ Super Report, the Commissioner stated, “Claims that NZ Super is unaffordable are not supported by independent, publicly accessible analysis”. That's not the case - she's reporting a selected group of analyses - whether you believe it is unaffordable or not is an opinion, not a fact. Why, for example, has the UK been increasing its pension age upwards from 65 to 66, rising to 67 years old in 2028? Because the respected analysis of places like the Institute for Fiscal Studies supports such changes due to the unaffordability of keeping the age at 65 years old. How remarkable to argue its best in NZ to do nothing to pensions when the government is currently facing an unprecedented budgetary crisis and that it is one of the largest items of government expenditure that is trending up with the ageing population.
More formally, the first question to ask is not "who does [raising the retirement age] hurt", as the Commissioner suggests. The first question when doing an economic analysis is whether the country will become better off - whether its total output will expand - whether productivity will increase. If so, the next question is to ask who may be the winners and losers. When the total size of the pie gets bigger due to a new policy, then one can often design a system of taxes & transfers whereby the winners compensate the losers, leaving both better off. When the pie is bigger there is more to go around for all - its a matter of identifying the losers and helping them out. For example, the free-trade debate in economics has overwhelmingly shifted to the view that free-trade is a good basis for trade between nations, but that there will be workers in particular industries who will be adversely affected by cheap imports, whereas others may gain due to bigger export markets. So whilst a country like NZ may benefit over-all, there is a strong case to help support those workers in industries who get hurt - not fully reject trade with other countries in favor of becoming a hermit kingdom, which will ultimately just go and hurt everyone.
Why not De-Commission the Retirement Commission, like the Productivity Commission, that also rejected productivity in favor of equity? What a waste of money these Commissions have turned out to be. Every Commission in NZ could be renamed the "Equity Commission", which would be a better descriptor of how they all see their objectives.
Sources:
https://www.1news.co.nz/2024/03/18/is-65-still-the-magic-number-what-to-know-about-nzs-superannuation-debate/
https://assets.retirement.govt.nz/public/Uploads/Policy/TAAO-RRIP-NZ-Super-issues-paper.pdf
https://retirement.govt.nz/news/latest-news/nz-super-is-a-taonga-not-a-burden-retirement-commissioner-seeks-political-accord/
https://ifs.org.uk/publications/future-state-pension
A "feckless" person is someone who is incompetent with no sense of responsibility, lazy or indifferent. How patronizing. Do we need a Commission with an $8 million a year budget to explain to us that the average person in NZ is not stupid or lazy? The Report's conclusion was do nothing - change nothing - maintain the status quo. Upon releasing the NZ Super Report, the Commissioner stated, “Claims that NZ Super is unaffordable are not supported by independent, publicly accessible analysis”. That's not the case - she's reporting a selected group of analyses - whether you believe it is unaffordable or not is an opinion, not a fact. Why, for example, has the UK been increasing its pension age upwards from 65 to 66, rising to 67 years old in 2028? Because the respected analysis of places like the Institute for Fiscal Studies supports such changes due to the unaffordability of keeping the age at 65 years old. How remarkable to argue its best in NZ to do nothing to pensions when the government is currently facing an unprecedented budgetary crisis and that it is one of the largest items of government expenditure that is trending up with the ageing population.
More formally, the first question to ask is not "who does [raising the retirement age] hurt", as the Commissioner suggests. The first question when doing an economic analysis is whether the country will become better off - whether its total output will expand - whether productivity will increase. If so, the next question is to ask who may be the winners and losers. When the total size of the pie gets bigger due to a new policy, then one can often design a system of taxes & transfers whereby the winners compensate the losers, leaving both better off. When the pie is bigger there is more to go around for all - its a matter of identifying the losers and helping them out. For example, the free-trade debate in economics has overwhelmingly shifted to the view that free-trade is a good basis for trade between nations, but that there will be workers in particular industries who will be adversely affected by cheap imports, whereas others may gain due to bigger export markets. So whilst a country like NZ may benefit over-all, there is a strong case to help support those workers in industries who get hurt - not fully reject trade with other countries in favor of becoming a hermit kingdom, which will ultimately just go and hurt everyone.
Why not De-Commission the Retirement Commission, like the Productivity Commission, that also rejected productivity in favor of equity? What a waste of money these Commissions have turned out to be. Every Commission in NZ could be renamed the "Equity Commission", which would be a better descriptor of how they all see their objectives.
Sources:
https://www.1news.co.nz/2024/03/18/is-65-still-the-magic-number-what-to-know-about-nzs-superannuation-debate/
https://assets.retirement.govt.nz/public/Uploads/Policy/TAAO-RRIP-NZ-Super-issues-paper.pdf
https://retirement.govt.nz/news/latest-news/nz-super-is-a-taonga-not-a-burden-retirement-commissioner-seeks-political-accord/
https://ifs.org.uk/publications/future-state-pension
Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.
6 comments:
Where is David Seymore
If we want things to stay as they are, things will have to change." (The Leopard).
Indeed, if New Zealand doesn’t reform its institutions and culture, we will become a failed state, perhaps quite quickly.
Alas, it appears to me as if the economy and society must crash, before the politicians and people will find the courage to change course.
The country currently seems to be unwilling to address extreme-left cultural attitudes, even though these attitudes doom us to collective failure.
Sadly, I fear that things are going to get much worse before they get better. The hard landing is here.
The time for tinkering around the edges is over. The Coalition need to get stuck in. Will they? I doubt it.
We could be doomed? What a tragedy.
Equity drives policy in left-wing, communist and Marxist countries. Ardern pursued this agenda - just look at the dire results in a short 3 year period.
Equity will certainly end NZ's first world status - faster than many might think.
I suspect that there is far more fecklessness (is there such a word?) in the corridors of power than out on the street. This article together with Oliver Hartwich on building consents add yet more support to my view.
My earlier post should have referenced Eric Crampton. Sincere apologies for the error.
Is it time to have the debate “Should our New Zealand Superanuation be means tested?
I don’t regard myself as wealthy but have a comfortable standard of living and wouldn’t be upset if it was means tested for all those receiving it.
Bruce
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